FORM 10-KSB ANNUAL REPORT

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934
(Fee required) for the fiscal year ended December 31, 2000

                                WorldWater Corp.

Nevada                                            33-0123045

(State or other jurisdiction of                   (I.R.S. Identification Number)
Employer corporation or organization)

55 Route 31 South, Pennington, NJ                 08534

(Address of principal executive offices)          (Zip Code)

Issuers telephone number (609) 818-0700

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12 (g) of the Exchange Act: Common Stock,
$0.001 par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports, and
(2) has been subject to such filing requirements for the past 90 days.

Yes |X| No |_|

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part ll of this Form 10-KSB or any amendment to
this form 10-KSB. |X|

The issuers revenue for its most recent fiscal year was $279,531.

On April 12, 2001 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $10,442,762.

As of April 12, 2001 the Registrant had outstanding 32,706,461 shares of Common
Stock and 1,722,166 shares of Preferred Stock.


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                           FORM 10-KSB ANNUAL REPORT

Part l

Item 1. Description of Business

      WorldWater's  mission is to be the leading provider of solar powered water
supply and electricity for emerging nations throughout the world.

      WorldWater  Corporation is a water and power solutions  company  providing
new and powerful solar  technology to developing  nations  throughout the world.
The  Company  fills  a  major  infrastructural  void by  acting  as  contractor,
implementer,   key  equipment   supplier  and  water/power   manager  for  rural
communities,  delivering clean water from deep wells and rivers for drinking and
irrigation.  The proprietary  AquaSafe(TM) and  AquaMax2200(TM) PV water pumping
and solar electric systems provide  economical water supplies and electric power
- at less  cost  than  competing  systems  and in areas  where  such  power  may
otherwise  not be  available.  There are  literally  millions  of such  targeted
communities comprising WorldWater's  international market. The Company's primary
customers  are  developing  countries  which  require  non-traditional  means of
fulfilling  their  energy  and  water  needs.  The  greatest  potential  for  PV
technology  is in  developing  countries  where  roughly 2 billion  people  lack
electricity   and  water.   Each  year  several  billion  dollars  from  various
international,  national and regional sources are spent on water and independent
power projects within the emerging countries.

      WorldWater is unique in that it does not merely solicit and await tendered
contracts  from emerging  market  governments  or  international  agencies,  but
actively  initiates projects by proposing rural water and power solutions to key
decision  makers at the  highest  government  levels.  Once  WorldWater  obtains
recognition and acceptance at the highest levels,  project development  meetings
are held with international  financing agency decision-makers and other national
and  local  level   officials.   After  financing  is  determined,   engineering
assessment,  community  preparation  and  equipment  installation  are effected,
leading to completion of turnkey programs.

      The Company was incorporated in the state of Nevada on April 3, 1985 under
the name of Golden Beverage  Company.  In April 1997, the Company entered into a
reverse merger transaction with WorldWater,  Inc., a Delaware corporation formed
in January 1984. Since the merger  transaction,  the Company,  under the name of
WorldWater  Corp.,  has  been  engaged  exclusively  in  the  solar/water  power
industry. In June of 2000, the Company shareholders voted to change the state of
incorporation  from Nevada to Delaware  which should be in effect May 2001.  The
Company  stock is  publicly  traded on the OTC  Bulletin  Board under the symbol
WWAT.

      The Company maintains production,  servicing and administration  functions
at its plant located at 55 Route 31 South in Pennington, New Jersey 08534.

(a)   Major Customers and Export Sales

      The  Company's  major  customers  continue  to be  national  and  regional
Governments,  their Ministries and Departments  responsible for power and water.
Prior  to  making  a  decision  on  specific  country  priorities,  the  Company
introduced  high  visibility  pilot  projects  in  several  countries  to assess
potential local opportunities.  WorldWater currently has such projects operating
in 17 Countries:  The  Philippines,  Sri Lanka,  Pakistan,  Tanzania,  Ethiopia,
Somaliland, Djibouti, Cape Verde, South Africa, Egypt, Angola, Ecuador, Namibia,
Haiti,  Malawi,  Uganda,  and the USA. Country  priorities are determined by the
size of the potential  opportunity and the Company's  ability to implement water
and  renewable  energy  solutions  in that  market.  Once the  priority  country
decision has been made,  WorldWater  sets up an oversees  market  subsidiary  or
representation and establishes an appropriate local organization. The identified
country priorities include:


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                           FORM 10-KSB ANNUAL REPORT

      Philippines:  The Company has been in the  Philippines  since 1997 when it
delivered  25  solar  pumps  for   installation   by  the  National   Irrigation
Administration (NIA) under the directive of former President Fidel V. Ramos. All
projects in the Philippines have received extensive media coverage ensuring that
WorldWater's  programs are well recognized.  The Philippines  represents a major
opportunity for WorldWater. It's estimated that the public sector totals over $2
billion in market  opportunity.  In February 2000,  WorldWater  (Phils) Inc. was
formed as a wholly owned  subsidiary  of  WorldWater  Holdings Inc. of Delaware,
which is a holding company owned 100% by WorldWater Corp. The Philippine Company
has an  established  and  talented  local  management  team who have  identified
several  projects now in varying phases of  development.  The first phase of the
first project,  is to bring safe drinking water to 150  Municipalities  in Cebu.
This  project  was  launched  in November  1999 with a $235,000  U.S.  Trade and
Development   Agency  (USTDA)  supported   feasibility   study.  The  first  two
municipalities  have recently  issued an order to  WorldWater  for $1.2 million.
This sum and funding of WorldWater systems for the remaining  Municipalities are
being  negotiated with the Philippine  National Bank (PNB),  Development Bank of
Philippines (DBP) and the Land Bank of Philippines.  In addition, the Company is
working on a project with the Cebu Electric Corporation (CEBECO) to supply rural
electrification  to approximately  75,000  households on the island of Cebu. The
pilot  project  valued  at  $250,000  is  estimated  to  start  in June of 2001.
WorldWater is also working with the  Department of Agrarian  Reform (DAR) on the
Solar Power for Agrarian  Reform  Communities  (SPARC)  project to bring potable
water,  irrigation,  and power to rural  Mindanao.  DAR will  obtain a sovereign
guarantee  for the  financing.  The  Director of the  Foreign-Assisted  projects
Office has signed a letter of interest to accept WorldWater  Corp.'s $50 million
loan offer. This project is expected to be implemented in 2002.  Another project
is located in one of the most  depressed  provinces  of the  Philippines  on the
island of Sulu,  where  WorldWater  is now in the process of  conducting a pilot
program to provide solar water  pumping and  electricity  to 1200  persons.  The
second phase of this project is estimated to start in the Summer of 2001.

      Sri Lanka:  WorldWater  is  currently  bidding on a Tender Offer to supply
clean drinking water and  electrification for households in 250 fishing villages
worth $17.33  million.  The second  phase of this project  would be for 200 more
villages in the Northeast  Province worth $15 million.  The third phase would be
for the Port  Authority  worth $10 million.  WorldWater is working with HSBC and
the US ExIm Bank to secure 100% of the project financing. The Company also plans
to provide power and water to 200,000 homes on privately  held tea  plantations.
WorldWater  has  been in Sri  Lanka  since  being  invited  by the  Ministry  of
Fisheries  and Aquatic  Resources in February 1999 to  demonstrate  the AquaSafe
water  pumping  system and SolPower  systems for  officials  on the island.  The
success of that  demonstration  brought  about  WorldWater's  bid on the current
tender  offer.  In this bid,  WorldWater  has formed a Strategic  Alliance  with
Siemens Solar Industries of the U.S.

      Pakistan:  WorldWater has signed a $50 million Memorandum of Understanding
with the Pakistan  Government to use solar energy to bring water and electricity
to rural  Pakistan.  The  Ministry  of Science and  Technology  has now acted on
behalf of the federal  government to implement  this program in 25  communities.
Eventually,  some 30,000 communities are anticipated to be covered.  The Company
has established  relationships with the highest government levels, including the
current Chief Executive,  General Pervez Musharraf.  The Pakistan Government has
created a fund to implement water and power projects. In view of the significant
opportunities  identified in Pakistan and the lack of  competition,  the Company
has established  WorldWater  Pakistan (Pvt.) Ltd. and hired an experienced Chief
Executive.  Another project to be implemented is with the Cholistan  Development
Authority  to combat  the  severe  drought  affecting  that part of the world by
supplying  water for the people and  2,000,000  head of cattle in the  Cholistan
Desert. Parallel with that project, the Company is implementing another contract
signed with the Border Police to supply  AquaSafe pumps and SolPower  lights for
300 outposts in the Cholistan Desert.

      Ethiopia:  One  contract  for  $600,000  was signed in  February,  2001 to
perform hydrogeological  studies in one of the 9 states of the country,  Oromia.
WorldWater engineers and hydrogeologists expect to start the study in the second
quarter of 2001. After  completion in approximately 4 months,  it is anticipated
that the  equipment  phase of the  project  will be signed to install  500 solar
pumps.


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                           FORM 10-KSB ANNUAL REPORT

      Somalia:  WorldWater  has  signed  (October  2000)  and is the  authorized
company  to  be  the  general  contractor  and  to  screen  and  advise  on  all
infrastructural  matters  involving  water and power for the new  government  of
Somalia.   In  addition  to  supplying  its  own  feasibility  studies  and  the
appropriate  equipment for pumping water and lighting  communities,  the company
will  oversee  bidding  and  general  contracting  activities,  including  civil
engineering  projects for the  rehabilitation  of  Mogadishu.  The newly elected
government is raising funds from Islamic governments and financial  institutions
for the reconstruction of its country.

(b)   Products

Solar Water Systems

AquaSafe(TM)

AquaSafe(TM)  photovoltaic  (PV)  pumping  systems use a  proprietary  method of
control to drive  off-the-shelf  AC motors from PV power. AC pumps are low-cost,
require  no  maintenance  and have a long  track  record  of  reliable  service.
AquaSafe(TM)  systems for drinking water and livestock  wells are engineered for
depths to 1,000 feet (300m). Multi-stage stacked impeller submersible pumps give
the flexibility of flow from 5 gallons/min  (20 lpm) to 260  gallons/min  (1,000
lpm). The pumps are sized to power 1 to 50 HP motors.

AquaMax2200(TM)

AquaMax2200(TM)  high  yield  irrigation  pumps take  WorldWater's  AquaSafe(TM)
remote water pumping systems to unprecedented  levels.  For the first time, more
than 2,000 gallons per minute of water for irrigation  using pumps of 2 to 50 HP
and up, can be powered  with solar  energy - anywhere  there is sun.  Irrigating
fields in remote areas require no fuel costs,  no need for regular  maintenance,
generate no noise and no pollution.

SmartCard(TM) Water Meter

The  SmartCard(TM)  water meter  allows  consumers  to buy water with a pre-paid
electronic SmartCard(TM).  After each sale, the meter will deduct the charge and
indicate the balance  remaining on the card, which can be recharged at any local
vendor site with additional cash payment. Designed to be tamper-proof, the meter
discourages wasteful spillage.  Revenue collected from the SmartCard(TM) is used
to pay for the solar water  system.  Generally,  after five years the  community
owns the  system  and has a source of income for the  duration  of the  system's
life, expected to exceed 20 years.

Solar Power(TM) Systems

SolPower(TM)PV  power systems are designed for remote homes, health clinics, and
village community  centers.  The systems produce  electricity for lighting,  TV,
radio,  computers and a host of other uses. The key market for this power system
is in  developing  countries  where those  living  outside  major cities are not
connected to the electrical grid system.

Solar Lighting

SolBrite(TM)

SolBrite(TM), WorldWater's solar charged portable lantern, can be used virtually
anywhere. A PV module charges a high-quality,  maintenance-free battery, located
in the base of the unit, to illuminate a bright fluorescent light.

SolLite(TM)

SolLite(TM)  WorldWater's  solar light  fixture,  was  developed  by  WorldWater
engineers to meet the demands of the marketplace for an affordable light at half
the price of the  competition.  SolLite(TM) also conserves energy using 25% less
power while still achieving the same output.

SolarPal(TM)

Solar  powered  streetlights  offer  totally  automated  lighting  without being
connected to the grid. Energy-efficient, compact, fluorescent lights deliver the
equivalent of incandescent floodlights.


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                           FORM 10-KSB ANNUAL REPORT

(c)   Marketing

      WorldWater's  products are marketed  primarily in developing nations where
there is a large  demand  for  electrical  power  and  clean  water -  literally
billions  of dollars  annually.  The  Company's  marketing  efforts  are largely
concentrated  in  identifying  specific  project  opportunities  that  have  the
potential for long-term  growth and high value,  and  identifying  institutional
sources that are capable and willing to finance these projects.  In general, the
long-term market potential of any emerging country is less predictable  compared
with that of a developed  industrial  country because  emerging  nations present
higher degrees of political and currency risks. WorldWater's marketing goals and
forecasts  are  adjusted  from  time to time  based on new  developments  in any
particular country.

      Because of the economics involved in doing business overseas, WorldWater's
strategy is to seek large  contracts in the range of $500,000 to  $10,000,000 or
more.  Winning  contracts of this  magnitude  can entail months or even years of
development effort in a target market; consequently,  actual sales and operating
income may vary widely from forecasts, either up or down (See (a) above).

      Over the long  term,  however,  the rapid  growth  of the  solar  industry
worldwide,  doubling  to more that $1.5  billion in the  1990's,  is expected by
energy economists to multiply again in worldwide  revenues before the year 2005.
Solar energy will command an  ever-larger  percentage  of total world energy use
and WorldWater solar products can be expected to participate in that growth.

      In addition,  the need and price for water worldwide is growing  annually.
The United Nations  officially  estimates that $8 billion  annually is currently
spent in providing  safe drinking water in developing  countries,  and that $100
billion will be required over the next 5 years. The problem of how to bring safe
drinking  water and  electricity  to the rural  households in need can be solved
with the use of WorldWater's  proprietary  solar  technology.  Solar energy is a
plentiful  resource  that is well suited to the  dispersed  communities  off the
electrical grid.  WorldWater is strongly positioned in both of these solar power
and water markets. See Major Customers, Item 1(a), Description of Business for a
discussion of the Company's  efforts in some of the countries  where the company
is demonstrating viable sales activities and opportunities.

(d)   Market Size

      Over  the  last 15 years  the  photovoltaic  (PV)  industry  has  grown in
revenues  from $2 million to over $1.5 billion.  Advances in PV  technology  and
corresponding  reduction in costs continue to fuel the increasing  demand for PV
power.  As stated  earlier,  the  greatest  potential  for PV  technology  is in
developing  countries where roughly 2 billion people lack electricity and water.
Applications  range from  remote  pumping,  irrigation,  telecommunications  and
lighting,  to  village  size power  production.  Worldwide  PV module  shipments
continue at an accelerating rate. Global shipments of PV modules have risen from
60 Megawatts in 1993 to more than 200 Megawatts in 1999.

      Formal  reports  and market  analyses  of the  countries  that  WorldWater
services are not available.  However, based on estimates by UNDP and World Bank,
to bring safe drinking  water to the 2 billion  people who are without access to
safe  drinking  water and who are targeted for such access by the  international
financial agencies and national and regional Governments will cost approximately
$50 per person,  or $100 billion total.  Although the national and international
agencies  obviously do not have such budgets,  they are making concerted efforts
to involve the private  sector and all levels of  national,  regional  and local
governments  to finance  these top priority  projects with the goal of achieving
full  coverage  by the  year  2004.  These  efforts  include  implementation  of
self-financing businesses similar to WorldWater's pending SmartCard programs.

      A similar size investment of $100 billion is needed to supply electricity.
For  example,  the  Company's  analysis  of  the  remote  power  market  in  the
Philippines,  where 28 of the 2800 inhabited islands have access to electricity,
shows  that a  modest  10%  penetration  by  solar  power  represents  a  market
opportunity of about $1 billion.  The Company has in place a strategy to convert
these vast opportunities into sales.


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                           FORM 10-KSB ANNUAL REPORT

(e)   Marketing Strategies

      As stated, WorldWater's strategic mission is to be the leading provider of
solar powered water supply and electricity for emerging  nations  throughout the
world.

      WorldWater  is marketing  the  AquaSafe(TM)  and  AquaMax2200(TM)  pumping
systems and its other solar products worldwide to both institutional  public and
private markets.

      WorldWater  is unique  among its  competition  in that it does not  merely
solicit and await  tendered  contracts  from  emerging  markets  governments  or
international agencies, but actively initiates projects by proposing rural water
and power solutions to key decision-makers at the highest government levels. The
Company's  founder and  CEO/Chairman  Quentin T. Kelly has established  contacts
with the highest  level  government  executive  and  ministry  officials  in the
Company's  priority  markets,  including  Philippines,  Sri Lanka,  Pakistan and
Somalia.

      This "top down" water and power  solution  strategy is key for  WorldWater
and  differentiates  the Company from its competitors.  Once WorldWater  obtains
recognition and acceptance at the highest levels,  project development  meetings
are held with  national and local level  decision-makers.  After the benefits of
WorldWater's  solar technology are made clear to officials,  demonstrations  and
pilot programs are implemented.  These field demonstrations give decision-makers
a  first  hand  look  at how  the  systems  operate  and  help  to  project  the
effectiveness of the Company's technology for large water and power schemes.

      WorldWater  is also  unique in that it is the only  international  company
that provides a total solution to water and electricity needs by:

      Combining the two  technological  requirements  of solar  engineering  and
water  engineering,  thus  enabling  the Company to more  effectively  implement
turnkey programs;

      Utilizing Company hydrogeologists to find water sources;

      Conducting  site  assessments  for  appropriately  sized water pumping and
electrical systems;

      Installing the Company's proprietary solar products;

      Focusing  on  community   preparation   and  capacity   building  for  the
technology; and

      Arranging 100% project financing.

      Most solar water projects are approached by large corporations as simply a
means to sell  solar  panels  and  community  preparation  - if done at all - is
accomplished by very small local companies.  WorldWater's  competitors have been
unable to match the comprehensiveness of its programs.

      Another key marketing strategy is the utilization of strategic  alliances.
WorldWater,  as a water and power solutions provider, is in an ideal position to
partner  with  major  international   organizations  to  enhance  its  financing
capabilities and with local organizations to enhance implementation.

      One such strategic alliance is with Siemens Solar Industries,  the world's
leading  supplier of solar  modules.  A Memorandum of  Understanding  (MOU) with
Siemens  was signed in April  2000 to bid  together  for a major  ($17  million)
project to supply water and power to 250 fishing villages in Sri Lanka (see item
1(a) Major Customers).  According to the agreement, Siemens Solar supplies solar
panels and technical  expertise and WorldWater  provides its  proprietary  solar
pumping technology, electronics and water engineering.

      WorldWater also works with local  organizations in certain key markets. In
the  Philippines,  WorldWater  has  partnered  with Total  Solutions  Technology
(TSTI), a company that specializes in community  preparation and  implementation
of solar projects.  TSTI has implemented major solar programs in the Philippines
with international financing from Australia and Japan.


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                           FORM 10-KSB ANNUAL REPORT

      WorldWater has a  long-standing  relationship  with the U.S. based Vincent
Uhl Associates for hydrogeological  studies. The two companies have successfully
worked together in a number of markets.  Mr. Uhl and his associates have located
new groundwater sources in Asia, Africa, and the Americas.

      In  addition  to  alliances  with  solar  panel  manufacturers,  community
preparation   organizations,   governmental   agencies,   and   hydrogeologists,
WorldWater  also  works  closely  with  financial  institutions  such as private
investment funds, the U.S. Trade & Development  Agency, the Export-Import  Bank,
World Bank, USAID, and the Asian Development Bank. Given the recognized need for
safe  drinking  water and power in emerging  nations,  organizations  like these
"earmark" funds for such projects in the form of loans, grants, or as guarantees
to  local  banks  for the  purchase  of  WorldWater  technology  and  management
services.

      Domestically,  WorldWater  has  worked  closely  with  Rutgers  university
agro-engineers and Cumberland County College in developing solar drip irrigation
systems for use in fresh and brackish water.

(f)   Research and Development

      Research and Development  expenditures  were $390,357 and $386,936 in 2000
and 1999,  respectively.  A key strategy of WorldWater is to continue developing
innovative,  cutting  edge  products  to meet  water and  electricity  need with
proprietary solar technology. The Company holds a patent on the electronic brain
controller (DC to AC converter) of the AquaSafe(TM) and AquaMax2200(TM) systems.
In addition the company has a patent  pending on the  electronic  "brain"  which
matches pump  performances  with available  solar power input.  Two new products
were introduced this year - the WorldWater solar lantern  (SolBrite(TM)) and the
solar low-power fluorescent lights (see Item 1 (b) Products).

      Other new products under development include: solar water stations,  solar
drip irrigation systems,  and solar brackish drip irrigation systems.  The solar
water  stations  will be a turnkey  water  system that will house in one central
location all needed  technology for the retail dispensing of safe drinking water
to  the  local  populace  who  will  pay  by  custom   WorldWater   debit  cards
("SmartCard").  The WorldWater solar drip irrigation system is in development in
collaboration  with Rutgers  University  agro-engineers.  Comparisons  were made
between  WorldWater's  solar drip  irrigation and  diesel-powered  irrigation to
determine if solar was a technically and economically  feasible option.  Results
have shown that  solar  actually  outperformed  diesel.  Second  tests have been
completed to establish a sizing  guideline to properly size the solar pump given
the crop  type,  how much  land is being  irrigated,  and the depth of the well.
Concurrently, the solar drip irrigation system is being tested in the field in a
joint  venture  with  Cumberland  County  College for use with  brackish  water.
Brackish water, a mixture of fresh and salt, is prevalent throughout most of the
world.

(g)   Manufacturing

      Sub-contractors  currently  manufacture  parts  of  the  AquaSafe(TM)  and
AquaMax2200(TM) systems in the United States. WorldWater will continue to source
materials worldwide, based on quality and cost considerations.

      In the future,  when justified by marketing and  production  requirements,
WorldWater intends to locate  AquaSafe(TM) and AquaMax2200(TM) and other product
assembly sites overseas.  Joint venture  discussions include proposed production
in the  Philippines  and Pakistan  (solar  panel  manufacturing  facilities  for
production  and  sales of solar  products).  Such  projects  will  leverage  the
capacity of WorldWater to obtain local  permits,  finance  production and better
market its products in many of the world's largest and most promising  potential
markets.

      Other prospective joint venture partners are seeking technical  assistance
from WorldWater for developing local manufacturing  capability,  particularly to
produce  the  solar  panels,   with  WorldWater   shipping  in  the  proprietary
electronics.


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                           FORM 10-KSB ANNUAL REPORT

(h)   Patents

      WorldWater has filed and been issued patents and continuations-in-part for
its newly  developed  electronics  systems and has filed for  protections of its
patents in certain key countries including the Philippines outside of the United
States. Thomas McNulty, Sr. and Douglas Williams of WorldWater staff and Quentin
T. Kelly,  Chairman and CEO, together with Princeton  University  engineers have
been issued patents, all of which are assigned to WorldWater.  The Company holds
a  patent  on  the  electronic  brain  controller  (DC to AC  converter)  of the
AquaSafe(TM)  and  AquaMax2200(TM)   systems.  The  Company  also  holds  patent
#5,163,821,  the Solar  Thermal  Powered Water Pump. In addition the company has
another patent pending on the electronic "brain" which matches pump performances
with available solar power input.

(i)   Source and Availability of Raw Materials

      The Company's solar modules are composed of silicon and other photovoltaic
materials.  The chief suppliers of solar modules to WorldWater are Siemens Solar
(see  Item 1 (e)  Marketing  Strategy),  BP  Solar,  Evergreen,  AstroPower  and
Solarex, all based in the US.

(j)   Competitive Conditions Affecting the Company

      WorldWater  Corp.  products  compete  with  both  conventional  and  solar
technologies that bring power to remote areas. The main competitive technologies
are diesel or gasoline  generators and electrical grid extension,  which is very
expensive.

      The cost of  installing  a solar  pump is often less than the cost of grid
extension.  In addition,  resulting  on-going costs of grid electricity make the
use of a solar pump even more  financially  attractive  than  buying and using a
conventional  electric pump. The cost of electric line  extension,  however,  is
usually  subsidized by national  governments and therefore the end user does not
see the  real  cost.  Electric  distribution  companies  on the  other  hand are
beginning  to realize the  financial  unsustainability  of the  subsidized  grid
extensions and are starting to opt for solar pumps.

      The initial  cost of  acquiring a diesel pump is less  expensive  than the
initial cost of a solar pump.  However,  the operations and maintenance  cost of
the diesel pump is very high;  in remote areas,  availability  of fuel and spare
parts is also unreliable. Therefore, when the financing hurdle of paying all the
cost of a solar pump up front is removed,  an end user can pay off the full cost
of the  solar  pump in a few  years  by using  the  savings  otherwise  spent on
operations and maintenance of the diesel pump.

      WorldWater's  proprietary  technology  permits the use of  "off-the-shelf"
Alternate  Current (AC) pumps  opening a whole range of  previously  unavailable
options  for solar  power.  These AC pumps are  widely  available  in  countries
throughout the world,  allowing  replacement pumps and parts to be supplied on a
local basis.  Other forms of solar powered  photovoltaic  (PV) pumping currently
available use less reliable and durable  Direct  Current (DC) pumps or custom AC
pumps  which  are more  costly  and not  readily  available  in most  developing
countries.

      The  Company  believes  that it has a strong  lead in the  markets  it has
developed.  In many regions of the world competitive products are not available.
In  those  markets  where  competition  exists,  the most  commonly  encountered
competitor is Grundfos A/S of Denmark,  a manufacturer of a large range of water
pumps  including a solar pump line.  Their  pumps run off a  specially  wound AC
motor, which requires periodic  maintenance and replacement.  In addition to the
fact that this specialty pumping equipment is significantly  more expensive than
the conventional AC pumps that WorldWater uses, field maintenance of these units
has proven to be  problematic.  Grundfos  units are also  limited in capacity to
about 4 kW. WorldWater  systems can comfortably  operate pumps 5 to 6 times that
capacity.


                                       8
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

      Aero-Environment  of California has somewhat  similar  technology using AC
pumps  but  they are  limited  in size to about 3 HP.  Because  their  technical
approach to the design of the power conditioning components,  they do not have a
viable approach to scale up the power without significant  investments in money,
people and time, which they have not done.

      There are a number of other solar pump companies  including  Solar Jack of
the US, Sun Motor of Canada, Southern Cross of Australia, and Total Energie from
Europe  which  produce DC powered  pumps.  Although DC pumps were the  preferred
choice  in solar  pumping  technology  15 years  ago,  because  of their  higher
efficiency  compared  to AC pumps in the very small  (one to 2 HP) power  range,
field results have shown that their high initial cost,  very high operations and
maintenance  costs,  difficulty of field service and limited  capacity make them
unsuitable for large scale  deployment  today. The efficiencies of AC pumps used
by  WorldWater  today,  in the large size  ranges  required  in the  field,  are
generally better than DC pumps, without all the attendant deficiencies.

(k) Subsidiaries

      100% wholly owned by WorldWater Corp. --
         WorldWater, Inc.
         WorldWater Holdings Inc.
         WorldWater East Africa Ltd.
         WorldWater Pakistan (Pvt.), Ltd.
         WorldWater (Phils) Inc.

(l)   Government Regulations

      Compliance  with  federal,  state,  and  local  provisions  regarding  the
production and discharge of materials  into the  environment is expected to have
no effect on  capital  expenditures,  earnings  and  competitive  position.  The
Company has a program to comply fully with the U.S.  Foreign  Corrupt  Practices
Act.

(m)   Employees

      On December 31, 2000, the company  employed  fifteen people on a full-time
basis. The company also hires consultants on an as-needed basis and has informal
arrangements with two water consulting  companies,  the hydrogeological  firm of
Vincent Uhl Associates and Morehouse  Engineering,  specialists in water pumping
and distribution and waste water treatment. WorldWater is developing a worldwide
capability for installing and  maintaining  its line of products.  In some cases
this  involves  additional  consulting  contracts to evaluate  local water usage
requirements,  find the needed  water  sources,  drill the  necessary  wells and
supply the desired  water  storage  facilities.  It may also involve  training a
local   installation   and  servicing  team  and  supplying   assistance  on  an
as-requested basis.

Item 2. Description of Property

      The Company's  executive office,  manufacturing  facility and research and
development facility are housed in a 12,000 square foot site in Pennington,  New
Jersey. This facility is leased under an operating lease expiring June 14, 2002.
The Company also uses a second facility in Hopewell, New Jersey for conferences,
meetings and  demonstrations  of its products.  This facility is leased from the
Company's CEO on a month-to-month basis (See Item 12).


                                       9
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Item 3. Legal Proceedings

The Company is occasionally  subject to various claims and suits that arise from
time to time in the  ordinary  course of its  business,  including  actions with
respect to contracts  and  intellectual  property.  The Company does not believe
that any current action will have a material  effect on the company's  business,
financial condition or results of operations.

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

None

PART ll.

Item 5. Market for Common Equity and Related Stockholder Matters

(a)   Price Range of Common Stock.

WorldWater  Corp.'s  common  stock is traded on the NASDAQ  Electronic  Bulletin
Board and is listed on the national  Association of Securities Dealers Automated
Quotation  System  (NASDAQ)  under the  stock  symbol  "WWAT".  High and low bid
quotations are listed below:

                                           For the year ended December 31, 2000

                                                   HIGH            LOW

First Quarter ...........................         $1.75           $0.30
Second Quarter ..........................         $1.63           $0.60
Third Quarter ...........................         $1.03           $0.59
Fourth Quarter ..........................         $0.63           $0.34

(b)   Holders of Common Stock

As of April  12,  2001,  the  common  stock  price  was  $0.41  and  there  were
approximately  770  shareholders of record for the Company's  common stock.  The
number of record holders does not include  holders whose  securities are held in
street name.

(c)   Dividends

The Company has not declared or paid,  nor has it any  intention to pay any cash
dividends on its common stock in the foreseeable future.

(d)   Redemption Provisions of Preferred Stock

During 2000 the Company sold  1,111,055  shares of Series A and 611,111 Series B
7% three  year  Convertible  Preferred  Stock at $0.90 per  share.  The Series A
Preferred  Shares are callable at $1.80 if the market bid price remains over the
call level for 20 days.

The Series B Preferred Stock proceeds are intended to be used by the Company for
the initial  operating  requirements of WorldWater  (Phils) Inc., the Philippine
subsidiary wholly owned by WorldWater Corp.  Therefore the conversion  privilege
is  either  into 10% of  WorldWater  (Phils)  Inc.  or into  611,111  shares  of
WorldWater Corp. stock.

The  Company  will pay 7%  dividends  annually on both the Series A and Series B
Preferred  Stock  based on its per  share  value as  determined  by the Board of
Directors  based upon the results of operations  and the financial  condition of
the Company.


                                       10
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

SALES OF RESTRICTED SECURITIES DURING THE FOURTH QUARTER 2000

1. Warrants Exercised

      Two  individuals  exercised  $0.50  Warrants  totaling  $7,500  for 15,000
shares.

2. Equity Investment

      One individual  invested $5,000 in the Company by purchasing 25,000 shares
at $0.20 per share.

Item 6. Management's Discussion and Analysis and Results of Operations

      Certain statements contained in Management's  Discussion and Analysis, and
elsewhere in this annual  report,  concerning  the  Company's  outlook or future
economic  performance  such  as  anticipated   profitability,   gross  billings,
commissions  and fees,  expenses or other  financial  items;  and  conditions of
performance or other matters,  are "forward looking  statements" as that term is
defined  under the Federal  Securities  Laws.  Forward  looking  statements  are
subject to risks,  uncertainties,  and other  factors  which would cause  actual
results to differ  materially from those states in such statements.  Such risks,
uncertainties  and factors include,  but are not limited to, the following:  (1)
there can be no assurance  that the Company will grow  profitably  or manage its
growth,  (2)  risk  associated  with  acquisitions,  (3)  competition,  (4)  the
Company's  quarterly  results  have  fluctuated  in the past and are expected to
fluctuate in the future, (5) the loss of services of key individuals which could
have a material adverse effect on the Company's business, financial condition or
operating results, (6) risks associated with operating in emerging countries.

Background

      WorldWater  Corporation  is a  water  and  power  solutions  company  that
provides proprietary solar pumping and lighting equipment,  water management and
engineering  assessments,  and project  financing to governments and the private
sector of emerging nations.

Results of Operations

Year Ended December 31, 2000 ("Fiscal 2000")
Compared to December 31, 1999 ("Fiscal 1999")

      The net revenues decreased to $279,531 from $526,924 in 1999 primarily due
the lower amount of grant  revenue,  $120,506 in 2000 as compared to $373,527 in
1999. The Company  continued to target its sales efforts towards large contracts
and is involved in ongoing negotiations pending contracts with several countries
(see Item 1(a) Major Customers).

      Cost of sales for the year was $247,710, which reflects the fixed overhead
required to sell into an international market, while retaining experienced solar
industry engineers.

      Research  and  Development  expenses  were  $390,357  in 2000  compared to
$386,936 in 1999, reflecting a continuing effort to introduce new technology and
technological  improvements into the Company's  products (see Item 1(b) Products
and Item 1(f) Research and Development) while maintaining expenses.


                                       11
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

      Marketing,  General and  Administrative  expenses were $1,578,582 in 2000,
compared to  $1,113,871  in 1999,  an increase of 42%. A portion of the increase
can be attributed to compensation  expense  allocated to Marketing,  General and
Administrative.  This expense was incurred  primarily to bring Officers salaries
gradually in line with the current job market.  Rent expense was also  allocated
entirely to Marketing, General and Administrative as compared to being partially
distributed  to Production  overhead in previous  years.  Directors and Officers
Liability  Insurance  was purchased in the year 2000  contributing  to a $24,000
increase  in  insurance  expense.   Legal  and  accounting   expenses  increased
approximately  $20,000  primarily due to the  incorporation of the subsidiary in
the Philippines.  Travel and telephone expenses also contributed to the increase
as  WorldWater  employees  traveled  overseas to pursue  financing and negotiate
pending contracts.

      The Net Loss of $1,704,179  resulted  partially from the marketing process
of proposing,  presenting  and  demonstrating  the  Company's new  technology to
appropriate officials of developing countries and the resultant lag time between
agreements and annual budgeting (see item 1(a) and (c)). The Company's marketing
efforts with its successful feasibility studies was not able to secure contracts
in time to book revenues in 2000.  Management  continues to focus its efforts on
those  countries  among  the  emerging   nations  which  can  assume   financing
arrangements  offered  through the Company's  financing  programs.  Revenues are
anticipated  to  begin  in the  second  half  of  2001,  after  the  appropriate
hydrogeological  and  feasibility  studies  are  conducted,  as a result  of the
contracts negotiated in 2000.

Liquidity and Capital Resources

      Net cash used by all  activities  in 2000 was  $128,071 as compared to net
cash  provided in 1999 of $191,138.  The cash used in operating  activities  was
$1,897,726 compared to $834,504 in 1999. The increase in Marketing,  General and
Administrative  expenses (see Results of Operations) and the paydown of accounts
payable and some  accrued  salaries  are the primary  reasons for the  increased
consumption  of cash.  Accounts  payable and other  accrued  expenses  decreased
$254,511  as  compared  to an  increase  of  $33,409 in 1999.  Accrued  salaries
decreased $72,550 as compared to $13,700 the previous year.

      Several debt holders  converted  their notes into common stock  throughout
the year  resulting in  approximately  $1,106,500  of debt and accrued  interest
being converted.  The Company was also able to raise approximately $465,000 from
the  exercise of  Warrants.  In March the Company  sold  1,111,056  shares of 7%
Convertible Preferred Stock Placement (Series A) through a private placement for
$999,950 at the rate of $0.90 per share.  In  September  another 7%  Convertible
Preferred Stock Placement  (Series B) totaling 611,111 shares with an investment
of  $550,000  at the  rate of $0.90  per  share  was  placed.  Also in 2000,  an
additional $200,000 was raised through a private equity placement.

      The Company paid no federal or state  income taxes in 2000,  and ended the
year with a federal net operating loss carryforward of approximately $9,245,500.

     During  2000  the  Company's  application  to the New  Jersey  Division  of
Taxation and the New Jersey Economic Development  Authority to sell its State of
New Jersey Corporate Net Operating Losses was approved.  The new law was enacted
January 1, 1999 and allows emerging  technology  companies  involved in research
and  development  the  opportunity  to sell their state loss  carryforwards  and
research and  development  credits to profitable  companies in the state for not
less  than 75% of their  net tax  value.  The  Company  was able to sell its Net
Operating  Losses  and  Research  and  Development   credits  for  approximately
$164,000.


                                       12
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Item 7. Financial Statements

      The  financial  statements of the Company,  including  the notes  thereto,
together  with the report of the  independent  public  accountant  thereon,  are
presented beginning at page F-1.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

Not Applicable.

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

Name of Executive Officer          Age               Office

Quentin T. Kelly                    66               Chairman & CEO
James S. Farrin                     64               President & COO
Dr. Anand Rangarajan                51               Executive Vice President
Peter I. Ferguson                   57               Vice President
Terri Lyn Harris                    34               Vice President - Controller
Stephen A. Salvo                    51               Secretary

Name of Director                   Age               Term of Office
                                                       Commenced
Quentin T. Kelly                    66                    1984
Joseph Cygler                       65                    1993
Dr. Martin Beyer                    69                    1995
Dr. Russell Sturzebecker            83                    1997
Rolf Haefeli                        35                    1997
Dr. Davinder Sethi                  51                    1999

Quentin T. Kelly founded  WorldWater in 1984 as a consulting and R&D company and
has been  Chairman  and CEO since then.  Mr.  Kelly was  previously  Director of
Information  Services and  Assistant to the President of  Westinghouse  Electric
Corporation from 1965 to 1971 and subsequently  became President of Kelly-Jordan
Enterprises,  Inc., a publicly-held  leisure products company from 1971 to 1975,
and  then   President  of  Pressurized   Products,   Inc.,   manufacturers   and
international  marketers of specialized water systems and products, from 1976 to
1984.  Mr.  Kelly is an alumnus of Kenyon  College and holds three U.S.  patents
relating  to water  systems.  He has many  years'  experience  in  international
business  relating  to water and power  needs in the  developing  world.  He has
worked on water supply and solar power projects with  governments and several of
the international  assistance agencies (USAID, UNDP and UNICEF among others) and
more than a dozen governments and private contractors throughout the world.

James S. Farrin replaced John Pell as President and Chief  Operating  Officer in
June 2000. Mr. Farrin is former  President of The Mennen Company,  International
Division.  Under his leadership the Division doubled sales and quadrupled profit
in four years.  Mr.  Farrin has extensive  international  experience in consumer
packaged  goods  with  Fortune  500  companies.  He has lived and worked in nine
overseas countries in seventeen years in Asia, Latin America and Europe. He is a
graduate of Princeton University (BA) and Stanford University (MBA).


                                       13
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Dr.  Anand  Rangarajan,  Executive  Vice  President,  started  his career at MIT
(Massachusetts  Institute of Technology) Lincoln  Laboratory.  He is a solar and
water  pump  specialist  with 20 years  experience  in all  aspects of the solar
electric  business and has  pioneered  the  development  of several  proprietary
systems, products and markets which have been installed in over 20 countries. He
has his Ph.D. in Engineering  from  University of Wisconsin and holds patents in
solar energy and pumping systems. He has published technical papers and has been
a featured speaker at National and International conferences.

Peter I.  Ferguson,  Vice  President,  joined  WorldWater in 1989. He previously
served as a Vice President and general  management  executive and accountant for
companies in New York and New Jersey.  He graduated  from Rutgers  University in
Accounting and Management.

Terri Lyn Harris, Vice  President-Controller,  joined WorldWater in 1999 after 3
years of consulting to the Company.  She spent 10 years as the  Controller for a
publicly traded international manufacturing company. Ms. Harris is a graduate of
Ursinus College and holds an MBA from Rider University.

Stephen A. Salvo is a founder and partner of Salvo, Russell,  Fichter and Landau
and is the Company's securities counsel.

Joseph  Cygler has been a Director  of  WorldWater  since  January of 1984 and a
former Vice  President of Marketing  and Executive  Vice-President.  He has been
Chief Executive Officer of the CE&O Group, an organization  assisting  companies
in  operations  management,  since  1986.  Previously  he  was an  executive  at
Kepner-Tregoe,  Inc., an  international  business  consulting firm, an executive
with  Honeywell  Information  Systems,  and  a  marketing   representative  with
International  Business  Machines.  Mr. Cygler has a BS in Engineering  from the
U.S. Military Academy at West Point.

Dr. Martin G. Beyer, a Director of WorldWater and its Consultant - International
Marketing,  was  Secretary-General  of the  Global  Consultation  on  Water  and
Sanitation,  sponsored by the United Nations  Development  Program and the World
Bank,  held in New Delhi,  India in 1990 and attended by over 600 delegates from
115  countries.  Previously,  Dr. Beyer was Senior  Advisor for Water Supply and
Sanitation for UNICEF, Chairman of the United Nations Intersecretariat Group for
Water  Resources,  Chairman of the Advisory Panel to the UNDP/World  Bank global
project for testing and developing of hand pumps,  and Deputy Regional  Director
for UNICEF in the  Americas.  Dr. Beyer has a Ph.D.  degree in Economic  Geology
from the  University of Stockholm and speaks ten  languages,  including  French,
Spanish,  German, Italian and Portuguese.  He was an Advisor to the Company from
1991 and became a Director in 1995.

Dr.   Russell   L.   Sturzebecker,    a   Director   of   WorldWater   and   its
Consultant-International  Health,  is a retired Director of Health and Education
of West  Chester  University  (Pennsylvania).  He is an author and  publisher of
histories  of World War  II-Pacific  Theater and of the Olympic  Games.  He is a
retired  Colonel,  US Air Force,  who accompanied  General  Douglas  MacArthur's
troops in the invasion of the  Philippines and is a close associate of President
Fidel V. Ramos of the Philippines.

Rolf Haefeli, a Director of WorldWater, is President of Haefeli Asset Management
based in Switzerland,  principal  investors in the Company.  He is a graduate in
Environmental Economics from the University of Zurich.

Dr.  Davinder  Sethi,  a Director of WorldWater,  is an independent  advisor and
investor in the fields of information  technologies and finance, with experience
spanning academia,  research,  business and investment banking.  Previously,  he
served as Director and Senior Advisor to Barclays de Zoete Wedd, advising global
providers of information technologies.

                                       14
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Item 10. Executive Compensation

Quentin T. Kelly,  President  and CEO,  had a contract  for an annual  salary of
$42,000.  However Mr. Kelly did not receive his full salary  between  during the
years 1994 -1999 and has  accrued  salary  payments  of $39,750  outstanding  at
December 31, 2000.  He did not receive any other  compensation  or stock options
during the years  1995-1997 but did receive  Incentive  Stock  Options  totaling
37,975 shares for deferred salary in 1996.

Name and Principal Position     Year   Salary   Bonus   Other Annual   All Other
                                                        Compensation    (Prior)

Quentin T. Kelly                2000   $42,000   $0         $0          $35,250
                                1999   $42,000   $0         $0          $0
                                1998   $42,000   $0         $0          $0

Item 11. Security Ownership of certain Beneficial Owners and Management

The  following  tables set forth the number and  percentage of the shares of the
registrant's Common stock owned as of April 12, 2001 by all persons known to the
registrant who own more than 5% of the outstanding number of such shares, by all
directors of the registrant, and by all officers and directors of the registrant
as a group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.

Common Stock

                                           Number of Shares             Percent
Name                                       Beneficially Owned (1)       of Class

Quentin T. Kelly                                2,817,992                 8.7%
George S. Mennen Rev. Trust
  William G. Mennen IV, Trustee                 2,030,000                 6.3%
Joseph Cygler                                     584,300                 1.8%
Dr. Martin Beyer                                  193,000                 **
Dr. Russell Sturzebecker                          146,141                 **
Rolf Haefeli                                      504,978                 1.6%
Dr. Davinder Sethi                                100,000                 **

All Directors and Officers
as a group (10 total)                           4,830,661                14.9%

**Less than 1%

(1) For  purposes of this table,  a person or group of persons is deemed to have
"beneficial  ownership"  of any shares of Common  Stock that such person has the
right to acquire within 60 days of April 12, 2001. For purposes of computing the
percentage of outstanding shares of Common Stock held by each person or group of
persons named above,  any security  which such person or persons has or have the
right to  acquire  within  such a date is  deemed to be  outstanding  but is not
deemed to be outstanding  for the purpose of computing the percentage  ownership
of any other person.  Except community property laws, the Company believes based
on  information  supplied by such persons,  that the persons named in this table
have sole voting and investment power with respect to all shares of Common Stock
which they beneficially own.


                                       15
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Item 12. Certain Relationships and Related Transactions

Included in notes payable and long-term  debt at December 31, 2000 and 1999, are
amounts  payable  to  employees,  directors  and their  immediate  relatives  as
follows:

                                                   2000            1999
                                                   ----            ----

     Directors                                $   3,000       $   4,500
     Employees                                   38,000         110,645
     Immediate relatives                              0          17,000
                                              ---------       ---------
         Total                                $  41,000       $ 132,145
                                              =========       =========

The Company  occupied  space in 2000 and 1999 that is owned by its  Chairman/CEO
and  leased  this  space on a month  to  month  basis.  The  amount  paid to the
Chairman/CEO amounted to $30,000 in 2000 and 1999.


                                       16
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Part IV

Item 13. Exhibits List and Reports on Form 8-K

      None

Signatures

In accordance  with section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

WorldWater Corp.
(Registrant)

By: /s/ Quentin T. Kelly                                    Date: April 12, 2001
--------------------------------------
Quentin T. Kelly, Chairman/CEO

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed below by the  following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated.

Signature                        Title                            Date

/s/ Quentin T. Kelly             Chairman/Chief Executive         April 12, 2001
---------------------------      Office
Quentin T. Kelly

/s/ Terri Lyn Harris             Vice President/Controller        April 12, 2001
---------------------------
Terri Lyn Harris

/s/  Dr. Martin Beyer            Director                         April 12, 2001
---------------------------
Dr. Martin Beyer

/s/ Russell Sturzebecker         Director                         April 12, 2001
---------------------------
Russell Sturzebecker

/s/ Joseph Cygler                Director                         April 12, 2001
---------------------------
Joseph Cygler

/s/ Rolf Haefeli                 Director                         April 12, 2001
---------------------------
Rolf Haefeli

/s/ Dr. Davinder Sethi           Director                         April 12, 2001
---------------------------
Dr. Davinder Sethi


                                       17
<PAGE>


                        WORLDWATER CORP. AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 2000 and 1999


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                           December 31, 2000 and 1999

                                Table of Contents

                                                                      Page
                                                                      ----

Independent Accountants' Report                                       F-2 - F-3

Financial Statements:

    Consolidated Balance Sheet                                        F-4

    Consolidated Statement of Operations                              F-5

    Consolidated Statement of Stockholders' Deficiency                F-6

    Consolidated Statement of Cash Flows                              F-7

    Notes to Consolidated Financial Statements                        F-8 - F-23


                                      F-1
<PAGE>

                         Independent Accountants' Report

To The Board of Directors and Shareholders,
WorldWater Corp:

We have audited the accompanying  consolidated balance sheet of WorldWater Corp.
and subsidiaries as of December 31, 2000 and the related consolidated statements
of operations,  stockholders' deficiency and cash flows for the year then ended.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements  based  on our  audit.  We did not  audit  the  financials
statements  of  WorldWater  (Phils.),  Inc., a  wholly-owned  subsidiary,  which
statements  reflect  total  assets and  revenues  constituting  19 percent and 0
percent, respectively, of the related consolidated totals. Those statements were
audited  by other  auditors  whose  report  has been  furnished  to us,  and our
opinion,  insofar as it relates to the amount included for WorldWater  (Phils.),
Inc., is based solely on the report of other auditors.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance  about  whether  the  consolidated  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 our audit provided a reasonable basis for our opinion.

In our  opinion,  based on our audit and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the financial position of WorldWater Corp. and subsidiaries
as of December  31,  2000,  and the results of their  operations  and their cash
flows for the year then ended in conformity with generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net  capital  deficiency  that  raises  substantial  doubt  about  the
Company's ability to continue as a going concern.  Management's  plans regarding
these  matters  and  future  operations  are  also  described  in  Note  3.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

Civale, Silvestri, Alfieri, Martin & Higgins, LLC
Mercerville, New Jersey
April 12, 2001


                                      F-2
<PAGE>

                         Independent Accountants' Report

To The Board of Directors and Shareholders,
WorldWater Corp:

We have audited the accompanying  consolidated balance sheet of WorldWater Corp.
and subsidiaries as of December 31, 1999 and the related consolidated statements
of operations,  stockholders' deficiency and cash flows for the year then ended.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance  about  whether  the  consolidated  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 our audit provided a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of WorldWater Corp. and
subsidiaries  as of December  31, 1999 and the results of their  operations  and
their cash flows for the year then ended in conformity  with generally  accepted
accounting principles.

DeAngelis & Higgins, LLC
Cranbury, New Jersey
April 11, 2000


                                      F-3
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
       Assets                                                            2000           1999
                                                                         ----           ----

<S>                                                               <C>             <C>
Current Assets:
    Cash                                                          $     67,229    $    195,300
    Accounts receivable, net of allowance for
        doubtful accounts of $10,000 in 2000 and $0 in 1999            106,313         162,061
    Inventory                                                           88,707          81,537
    Prepaid expenses                                                     6,654             500
                                                                  ------------    ------------
       Total Current Assets                                            268,903         439,398
    Equipment and leasehold improvements, Net                          158,123          37,787
    Deposits                                                            14,273           8,384
                                                                  ------------    ------------
       Total Assets                                               $    441,299    $    485,569
                                                                  ============    ============

       Liabilities and Stockholders' (Deficiency)

Current Liabilities:
    Line of Credit                                                $     50,388    $         --
    Notes payable                                                        7,000         126,181
    Notes payable, related parties                                      41,000         112,145
    Current maturities of long-term debt                               163,480         757,736
    Current maturities of long-term debt, related parties                   --          20,000
    Accounts payable                                                   161,040         362,966
    Accrued interest                                                    89,842         407,541
    Accrued salaries                                                   118,950         191,500
    Customer deposits                                                   14,446              --
    Other accrued expenses                                              28,719          95,750
                                                                  ------------    ------------
       Total Current Liabilities                                       674,865       2,073,819
    Long-term debt                                                      20,480         200,000
                                                                  ------------    ------------
       Total Liabilities                                               695,345       2,273,819
                                                                  ------------    ------------
Stockholders' Equity (Deficiency):
    Preferred Stock, 7% Convertible, $.01 par value; authorized
       10,000,000; issued and outstanding at December 31, 2000:
                 Series A  1,111,055 shares                             11,111              --
                 Series B  611,111 shares                                6,111              --
    Common stock, $.001 par value; authorized 50,000,000;
       issued and outstanding 32,330,811 and 27,125,854
       shares at December 31, 2000 and 1999, respectively               32,331          27,126
    Additional paid-in capital                                      10,844,423       7,628,467
    Accumulated deficit                                            (11,148,022)     (9,443,843)
                                                                  ------------    ------------
       Total Stockholders' (Deficiency)                               (254,046)     (1,788,250)
                                                                  ------------    ------------
       Total Liabilities and Stockholders' (Deficiency)           $    441,299    $    485,569
                                                                  ============    ============
</TABLE>

               The Notes to Consolidated Financial Statements are
                     an integral part of these statements.


                                       F-4
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                   For the years ended December 2000 and 1999

                                                       2000          1999
                                                       ----          ----
Revenue:
    Equipment sales                             $    159,025    $    153,397
    Technology Grant                                      --         249,967
    Service Grant                                    120,506         123,560
                                                ------------    ------------
        Total Revenue                                279,531         526,924
                                                ------------    ------------
Cost of Goods Sold                                   247,710         251,717
                                                ------------    ------------
Gross Profit                                          31,821         275,207
                                                ------------    ------------
Operating Expenses:
    Research and development expense                 390,357         386,936
    Marketing, general and administrative
      expenses                                     1,578,582       1,113,871
                                                ------------    ------------
        Total Expenses                             1,968,939       1,500,807
                                                ============    ============
Loss from Operations                              (1,937,118)     (1,225,600)
                                                ------------    ------------
Other Expense (Income)
    Interest expense                                  42,025         108,058
    Loss on sale of marketable securities                 --          32,500
    Interest income                                  (18,008)           (731)
    Foreign exchange gain                             (7,678)             --
    Other                                             29,381         (52,824)
                                                ------------    ------------
        Total Other Expense, Net                      45,720          87,003
                                                ------------    ------------
Net loss before income taxes and extraordinary
  item                                            (1,982,838)     (1,312,603)
Benefit for income taxes                             163,887         475,285
                                                ------------    ------------
Net loss before extraordinary item                (1,818,951)       (837,318)
                                                ------------    ------------
Extraordinary Item
    Gain on extinguishment of debt                   114,772          50,000
                                                ------------    ------------

Net Loss Applicable to Common Stockholders      $ (1,704,179)   $   (787,318)
                                                ------------    ------------

Net Loss Applicable per Common Share:
     Basic                                      $      (0.06)   $      (0.03)
                                                ============    ============
     Diluted                                    $      (0.06)   $      (0.03)
                                                ============    ============

Shares used in Per Share Calculation:
     Basic                                        30,783,796      25,703,423
                                                ============    ============
     Diluted                                      30,783,796      25,703,423
                                                ============    ============

               The Notes to Consolidated Financial Statements are
                     an integral part of these statements.


                                       F-5
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
                 For the years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                         Additional Additional  Accumulated
                                                                           Paid-In   Paid-In      Other
                                  Common Stock         Preferred Stock     Capital   Capital      Income  Comprehensive  Accumulated
                               Shares    Par Value    Shares  Par Value   (Common) (Preferred)    (Loss)     Deficit       Total
                               ------    ---------    ------  ---------   -------- -----------    ------     -------       -----
<S>                           <C>         <C>                           <C>                     <C>        <C>          <C>
Balance, December 31, 1998    21,984,904  $21,985        --        --   $6,576,591          --  ($20,625)  ($8,656,525) ($2,078,574)
Issuance of common stock
  for cash                     3,346,806    3,347        --        --      721,667          --        --            --      725,014
Issuance of common stock
  for warrants exercised         284,000      284        --        --       54,816          --        --            --       55,100
Debt and accrued interest
  converted to common stock    1,357,397    1,357        --        --      211,043          --        --            --      212,400
Issuance of common stock
  for settlement of asserted
  claims                          15,000       15        --        --        5,985          --        --            --        6,000
Contributed services                  --       --        --        --       20,000          --        --            --       20,000
Issuance of common stock
  for services                   137,747      138        --        --       38,365          --        --            --       38,503
Net loss                              --       --        --        --           --          --    20,625      (787,318)    (766,693)
                              ----------  ------- ---------   -------   ----------  ----------  --------  ------------    ---------
Balance, December 31, 1999    27,125,854   27,126        --        --    7,628,467          --        --    (9,443,843)  (1,788,250)
Issuance of preferred stock
  for cash - Series A                             1,111,055    11,111           --     988,839        --            --      999,950
Issuance of preferred stock
  for cash - Series B                               611,111     6,111           --     543,889        --            --      550,000
Private placement issuance
  costs                               --       --        --        --      (10,000)   (150,000)       --            --     (160,000)
Issuance of common stock
  for cash                     1,000,000    1,000        --        --      199,000          --        --            --      200,000
Issuance of common stock
  for warrants exercised       1,023,667    1,024        --        --      464,117          --        --            --      465,141
Debt and accrued interest
  converted to common stock    2,757,385    2,757        --        --    1,103,745          --        --            --    1,106,502
Issuance of common stock
  for services                    28,340       28        --        --       23,993          --        --            --       24,021
Issuance of common stock
  for options                    338,065      338        --        --       39,423          --        --            --       39,761
Issuance of options for
  services                            --       --        --        --       12,950          --        --            --       12,950
Issuance of common stock
  for WorldWater Inc. shares      57,500       58        --        --           --          --                      --           58
Net loss                              --       --        --        --           --          --        --    (1,704,179)  (1,704,179)
                              ----------  ------- ---------   -------   ----------  ----------  --------  ------------    ---------
Balance, December 31, 2000    32,330,811  $32,331 1,722,166   $17,222   $9,461,695  $1,382,728  $     --  ($11,148,022)   ($254,046)
                              ==========  ======= =========   =======   ==========  ==========  ========  ============    =========
</TABLE>

               The Notes to Consolidated Financial Statements are
                     an integral part of these statements.


                                       F-6
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 For the years ended December 31, 2000 and 1999

                                                             2000         1999
                                                             ----         ----
Cash Flows from Operating Activities:
    Net loss                                            $(1,704,179) $ (787,318)
    Adjustments to reconcile net loss to
       net cash used in operating activities:
           Depreciation                                      36,077      17,187
           Loss on marketable security                           --      32,500
           Gain on extinguishment of debt                        --     (50,000)
           Issuance of options for service                   12,950          --
           Issuance of stock for service                     24,021          --
           Allowance for doubtful accounts                   10,000          --
           Changes in assets and liabilities:
               Accounts receivable                           45,748    (162,061)
               Inventory                                     (7,170)     15,932
               Prepaid expenses                              (6,154)      4,835
               Accounts payable and accrued expenses       (254,511)     33,409
               Accrued interest                              18,042      74,712
               Accrued salaries                             (72,550)    (13,700)
                                                        -----------  ----------
                   Net Cash Used in Operating
                     Activities                          (1,897,726)   (834,504)
                                                        -----------  ----------

Cash Flows from Investing Activities:
    Purchase of equipment and leasehold improvements       (156,413)     (6,706)
    Increase in deposits                                     (5,889)         --
                                                        -----------  ----------
                   Net Cash Used in Investing
                     Activities                            (162,302)     (6,706)
                                                        -----------  ----------

Cash Flows from Financing Activities:
    Proceeds from issuance of long-term debt                 28,460     200,000
    Payments on long-term debt                             (115,500)    (89,414)
    Proceeds from issuance of notes payable                  70,388     400,345
    Payments on notes payable                              (146,301)   (535,600)
    Proceeds from issuance of common stock                  704,960   1,057,017
    Private placement issuance costs                       (160,000)         --
    Proceeds from issuance of preferred stock             1,549,950          --
                                                        -----------  ----------
                   Net Cash Provided by Financing
                     Activities                           1,931,957   1,032,348
                                                        -----------  ----------

Net Increase (Decrease) in Cash                            (128,071)    191,138
Cash and cash equivalents at Beginning of Year              195,300       4,162
                                                        -----------  ----------

Cash and cash equivalents at End of Year                $    67,229  $  195,300
                                                        ===========  ==========

               The Notes to Consolidated Financial Statements are
                     an integral part of these statements.


                                      F-7
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(1)   Formation of the Company

      WorldWater  Corp.  ("Company") was  incorporated in the State of Nevada on
      April 3, 1985 under the name Golden Beverage Company ("Golden").  In April
      1997, the Company completed a reverse acquisition with WorldWater, Inc., a
      Delaware  corporation  formed  in  January  1984 and  changed  its name to
      WorldWater Corp. in June 1997. Pursuant to the acquisition agreement,  the
      Company issued on a  share-for-share  basis 8,141,126  post-reverse  split
      shares of Golden $0.001 par value voting common stock for 8,141,126 shares
      of WorldWater,  Inc.  $0.001 par value voting common stock,  which equaled
      eighty percent (80%) of all WorldWater, Inc. issued and outstanding common
      stock. The remaining  shareholders were offered one share of the Company's
      common  stock for one share of  WorldWater,  Inc.'s  common  stock and are
      reflected as issued and outstanding  common stock of the Company.  Holders
      of  approximately  ninety-one  percent (91%) of WorldWater,  Inc.'s common
      stock agreed to the stock exchange and tendered their shares.

      Prior to the reverse merger transaction described above, the Company was a
      non-operating  publicly held company.  As of the closing date,  all assets
      and  liabilities  of  Golden  Beverage  Company  were  transferred  to  an
      unrelated  entity.  Therefore,  the reverse  acquisition had the effect of
      transferring  the assets and  liabilities  of  WorldWater,  Inc.  into the
      publicly held entity. In consideration  for this, the former  shareholders
      of Golden Beverage Company received 113,501 shares of the Company's common
      stock.

(2)   Summary of Significant Accounting Policies

      Description of the Business

      The Company is a full-service  water  management and solar energy company,
      designing, developing and marketing technology relating to water needs and
      solar power applications. The Company advises and supplies governments and
      industry  throughout the world on solar electric  applications  and on all
      phases of water needs.  The Company's  primary  customers  are  developing
      countries,  which require non-traditional means of fulfilling their energy
      and water needs.

      Principles of Consolidation

      The consolidated  financial statements include the accounts of the Company
      and its controlled subsidiary companies.


                                      F-8
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(2)   Summary of Significant Accounting Policies (continued)

      Use of Estimates

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions  that affect the amounts that are reported in the consolidated
      financial   statements  and  accompanying   disclosures.   Although  these
      estimates are based on  management's  best knowledge of current events and
      actions that the company may undertake in the future,  actual  results may
      be different from the estimates.

      Revenue Recognition

      The Company  recognizes  revenue  when it is  realizable  and earned.  The
      Company reduces revenue for estimated customer returns and allowances. The
      following  are the specific  revenue  policies for each major  category of
      revenue.

      Equipment

      Revenue from equipment sales is recognized when the product is shipped and
      title has passed.

      Service

      Revenue from time and material  service  contracts  is  recognized  as the
      services  are  provided.   Revenue  from  fixed  price  long-term  service
      contracts is recognized  over the contract term based on the percentage of
      service  that are  provided  during  the  period  compared  with the total
      estimated  services to be  provided  over the entire  contract.  Losses on
      fixed price  contracts are recognized  during the period in which the loss
      first becomes apparent. Revenue in excess of billings on service contracts
      is  recorded  as unbilled  receivables  and is  included in trade  account
      receivable.  Billings in excess of revenue that is  recognized  on service
      contracts  are  recorded  as  deferred  income  until  the  above  revenue
      recognition criteria are met.

      Technology Grants

      Technology grants made on the basis of entitlement periods are recorded as
      revenue when entitlement occurs.


                                      F-9
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(2)   Summary of Significant Accounting Policies (continued)

      Income Taxes

      Income tax expense  (benefit) is based on reported  income  (loss)  before
      income  taxes.  Deferred  income  taxes  (benefit)  reflect  the effect of
      temporary  differences  between assets and liabilities that are recognized
      for financial  purposes and the amounts that are recognized for income tax
      purposes.  In accordance with Statement of Financial  Accounting Standards
      (SFAS) No. 109  "Accounting  for Income  Taxes" these  deferred  taxes are
      measured by applying current enacted tax laws.

      Cash Equivalents

      All, highly-liquid  instruments with a maturity at the time of acquisition
      of three months or less are carried at fair value and are considered to be
      cash equivalents.

      Inventory

      Inventory  is  stated at the  lower of cost or  market  determined  by the
      First-In,  First-Out (FIFO) method. Inventory consists mainly of purchased
      system components.

      Equipment and Leasehold Improvements

      Equipment  and  leasehold   improvements  are  carried  at  cost  and  are
      depreciated  for  financial  reporting  purposes  using the  straight-line
      method. Depreciation for income tax purposes is computed using accelerated
      methods.  The  principal  useful  lives  are:  computers  and  information
      equipment,  5 years,  office  furniture,  vehicles,  and test and assembly
      fixtures, 5 to 7 years: leasehold  improvements,  7 years. Upon retirement
      or  disposal,  the asset cost and  related  accumulated  depreciation  are
      removed  from the  accounts  and the net  amount,  less any  proceeds,  is
      charged or credited to income.

      Expenditures  for  maintenance  and repairs are charged  against income as
      incurred. Expenditures, which significantly increase asset value or extend
      useful lives, are capitalized.

      Research and Development Costs

      Research and  development  costs consist of expenses  associated  with the
      basic and applied  research in the sciences and engineering and the design
      and  development  of prototypes and  processes.  Research and  development
      costs are charged to operations when incurred.


                                      F-10
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(2)   Summary of Significant Accounting Policies (continued)

      Long-Lived Assets

      Long-lived  assets  are  comprised  of  equipment.  Long-lived  assets are
      reviewed  for  impairment  whenever  events or  changes  in  circumstances
      indicate that the carrying amount of the asset may not be recoverable.  An
      estimate  of  undiscounted  future  cash  flows  produced  by the asset is
      compared to the carrying amount to determine whether impairment exists.

      Common Stock

      Common stock refers to the $0.001 par value capital stock as designated in
      the company's Certificate of Incorporation.

      Preferred Stock

      Preferred  stock  refers  to  the  $0.01  par  value  preferred  stock  as
      designated in the company's Certificate of Incorporation.

      Net Loss Per Common Share

      Basic  earnings  (net) per  share is based  upon  weighted-average  common
      shares  outstanding.  Dilutive  earnings  per share is computed  using the
      weighted-average  common shares outstanding plus any potentially  dilutive
      securities  including  stock  options,  warrants,  and  convertible  debt.
      Options,   warrants  and  convertible   debt  were  not  included  in  the
      computation  of diluted net loss per common share  because,  the effect in
      years with a net loss are antidilutive.

      Reclassification

      Certain prior year balances have been  reclassified  to conform to current
      year presentation.

      New Accounting Standards

      Standards implemented

      Effective  January 1, 1998, the company  adopted SFAS No. 130,  "Reporting
      Comprehensive  Income"  which  establishes  standards  for  reporting  and
      displaying in a full set of general-purpose financial statements the gains
      and losses not affecting  retained earnings.  The disclosures  required by
      SFAS No. 130 are presented in the Accumulated Other  Comprehensive  Income
      (Loss) section in the Consolidated Statements of Stockholder's Deficiency.


                                      F-11
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

      New Accounting Standards (continued)

      In June 16, 1998, the Financial Accounting Standards Board issued SFAS No.
      133, "Accounting for Derivative Instruments and Hedging Activities".  This
      standard is effective for fiscal years beginning after June 15, 2000. SFAS
      No. 133  establishes  accounting  and reporting  standards for  derivative
      instruments,  including certain derivative  instruments  embedded in other
      contracts, and for hedging activities.  It requires an entity to recognize
      all  derivatives  as either  assets or  liabilities  in the  statement  of
      financials  position and measure instruments at fair value. The Company is
      currently evaluating the impact of this pronouncement and does not believe
      adoption  of SFAS No.  133 will have a  material  impact on the  Company's
      financial statements.

(3)   Going Concern

      These consolidated  financials are presented on the basis that the Company
      will continue as a going concern.  The going concern concept  contemplates
      the  realization  of assets and the  satisfaction  of  liabilities  in the
      normal course of business over a reasonable  length of time. The Company's
      working capital deficit and stockholder's  deficiency  raises  substantial
      doubt  about  the  Company's  ability  to  continue  as a  going  concern.
      Management continues to raise capital through the sale of common stock and
      additional  borrowings.  In addition,  management  is continuing to market
      their  products to  developing  countries  and has  contracts in the final
      stages of financial closure.  However, there can be no assurances that the
      company will be successful in these efforts.  The  consolidated  financial
      statements  do not  include  any  adjustments  that might  result from the
      outcome of this going concern uncertainty.

(4)   Equipment and Leasehold improvements

      Equipment and leasehold  improvements consist of the following at December
      31:

                                                            2000          1999
                                                            ----          ----

Computers                                                 $ 30,117      $ 24,633
Office furniture and equipment                              95,560        37,531
Test and assembly fixtures                                  33,550        33,550
Vehicles                                                    92,900         7,721
Leasehold improvements                                       8,123         8,123
                                                          --------      --------
                                                           260,249       111,558
Less: Accumulated depreciation                             102,126        73,771
                                                          --------      --------
Equipment and leasehold improvements, net                 $158,123      $ 37,787
                                                          ========      ========


                                      F-12
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(5)   Notes Payable

      The Company has outstanding several notes payable in the aggregate amounts
      of $48,000 and $238,326 at December 31, 2000 and 1999,  respectively.  The
      effective  interest  rates on these  notes  range from  0.00% to 10%.  All
      outstanding notes payable are unsecured.

(6)   Line of Credit

      The Company  entered in to a $50,000  Line of Credit with PNC Bank in July
      of 2000 with the personal guaranty of the Chairman/CEO.  The interest rate
      is 10.5% per annum the interest  payment is paid  monthly.  As of December
      31, 2000 the balance due on the Line of Credit was $50,388.

(7)   Long-Term Debt

      Long-term debt consist of the
      following at December 31:                           2000             1999
                                                          ----             ----
      Loans payable to individuals, with
      no stated interest rate or
      maturity date. These
      uncollateralized notes are
      convertible at the rate of $0.495
      per common share for 106,060
      shares of common stock. These
      loans mature at a date six months
      after the closing of the Company's
      first public offering.                            $52,500          $53,500

      Loan payable to an individual
      dated October 14, 1992, with an
      original maturity date of October
      14, 1997, bearing interest at 8.00
      percent per annum. The loan is
      uncollateralized. Payment of
      principal and accrued interest
      were due at maturity. The loan is
      convertible at the option of the
      holder at the rate of $0.40 per
      share for a total conversion
      amount of 125,000 shares of common
      stock.                                             50,000           50,000

      Loan payable to an Investment
      Trust, dated September 28, 1994,
      maturing March 31, 1998, bearing
      interest at 9.00 percent per
      annum. The loan is collateralized
      by inventory and accounts
      receivable. Payment of principal
      and interest were due at maturity.                     --          133,236



                                      F-13
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(7)   Long-Term Debt (continued)

                                                          2000             1999
                                                          ----             ----

      Balance Carryforward                            $ 102,500         $236,736

      Loans payable to individuals dated
      June 28, 1995 through May 30,
      1996. The loans are due upon
      demand and bear interest at 10
      percent per annum. The loans are
      uncollateralized and are
      convertible at the option of the
      holder at the rate of $0.50 per
      common share.                                          --          250,000

      Loans payable to individuals dated
      July 17, 1995 through February 25,
      1997. The loans are due upon
      demand and bear interest at 10
      percent per annum. The loans are
      uncollateralized and are
      convertible at the option of the
      holder at the rate of $0.50 per
      common share for 106,000 shares of
      common stock. In addition, all
      holders were granted 602,965
      warrants for the purchase of
      common stock at the price of $0.60
      per share.                                         53,000          291,000

                                      F-14
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(7)   Long-Term Debt (continued)

                                                          2000             1999
                                                          ----             ----

      Balance Carryforward                             $155,500         $777,736

      Loans payable to certain
      institutions collateralized by
      autos with a net book value of
      approximately $31,500 payable in
      monthly installments of
      approximately $800.                                28,460               --

      Notes payable to an individual
      dated September 24, 1999 Maturing
      on September 23, 2002, bearing
      interest at 8.00 Percent per
      annum. Payment of principal and
      interest due At maturity. The
      uncollateralized note is
      convertible at The sole option of
      the holder at the rate of $0.50
      per share For a total conversion
      amount of 400,000 shares of common
      Stock. The loan holder was granted
      a three year warrant for The
      purchase of shares of common stock
      at the price of $0.75 per share.                       --          200,000
                                                       --------         --------

      Total                                            $183,960         $977,737

      Less current maturities                           163,480          777,737
                                                       --------         --------

      Total long-term debt                             $ 20,480         $200,000
                                                       ========         ========

      The current maturities of long-term
      debt are $11,245 and $9,235 in 2001.

(8)   Income Taxes

      The components of income tax expense (benefit) are as follows:

                                                         2000            1999
                                                         ----            ----
      Federal:
         Current                                       $      --      $      --
         Deferred                                             --             --

                                                       $      --      $      --
                                                       =========      =========

      State:
        Current                                        $(163,887)     $(475,285)
        Deferred                                              --             --
                                                       ---------      ---------

                                                       $(163,887)     $(475,285)
                                                       =========      =========


                                      F-15
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(8)   Income Taxes (continued)

      Total income tax benefit for the years ended is different  from the amount
      computed by  multiplying  total loss before  income taxes by the statutory
      Federal income tax rate of 34%.

      The reason for this difference and the related tax effects are as follows:

                                                     2000        1999
                                                     ----        ----

      Expected tax benefit at 34%                  $633,821   $ 429,285
      State tax benefit before allowance           (406,824)     75,000

      Officer life insurance                             --       4,420

      Change in deferred tax valuation allowance    222,997     508,705
      Sale of state net operating loss and
        Research & Development credit              (163,887)   (475,285)
                                                   --------  ----------
         Income tax benefit                       ($163,887) $ (475,285)
                                                   ========  ==========


      The tax effect of significant items comprising the Company's  deferred tax
      asset are as follows:

                                                    2000        1999
                                                    ----        ----

            Net operating losses carryforwards   $4,252,458  $3,507,905
            Valuation allowance                   4,252,458   3,507,905
                                                 ----------  ----------

            Net deferred tax asset               $       --  $       --
                                                 ==========  ==========


                                      F-16
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(8)   Income Taxes (continued)

      At December 31, 2000,  the Company had net  operating  loss  carryforwards
      (NOL) and  research  and  development  credits  which may be  available to
      offset future Federal and state taxable income,  if any and will expire as
      follows:

<TABLE>
<CAPTION>
                                  Net Operating Loss            Research and Development
         Year Expiring              Carryforwards                      Tax Credits
      Federal     State        Federal           State            Federal        State
      -------     -----        -------           -----            -------        -----
<S>   <C>          <C>          <C>             <C>               <C>            <C>
      2001           --            27,481            --               --            --
      2002           --            14,778            --               --            --
      2003           --            29,505            --               --            --
      2004           --            95,302            --               --            --
      2005           --            94,557            --               --            --
      2006           --           402,684            --               --            --
      2007           --           251,079            --               --            --
      2008           --           641,341            --               --            --
      2009         2001           887,929            --           19,646            --
      2010         2002           912,453            --           15,207            --
      2011         2003           981,193            --           15,387            --
      2012         2004         1,263,193            --           12,923            --
      2013         2005         1,337,702        69,867           20,398            --
      2014         2006           660,000            --           16,100            --
      2015         2007         1,646,357     1,646,357           14,350        10,630
</TABLE>

      In 2000, the Company  applied and was eligible to participate in the State
      of New Jersey's Technology Tax Certificate Transfer Program.  This program
      allowed  the  Company  to  sell a  portion  of its  authorized  state  net
      operating loss and New Jersey research and  development  tax credits.  The
      Company was able to sell  $1,337,757 of its state net  operating  loss and
      $76,221 of its  research  and  development  tax credit and  received a tax
      benefit of $163,887.

      The Tax Reform Act of 1986 (the "Act")  provides for a  limitation  on the
      annual use of NOL and research and  development  tax credit  carryforwards
      that could  significantly  limit the  Company's  ability to utilize  these
      carryforwards.  The Company has experiences and expects in the foreseeable
      future anticipated financing. Accordingly, because tax laws limit the time
      during which these  carryforwards may be applied against future taxes, the
      Company  may not be able to take  full  advantage  of the  attributes  for
      Federal and state income tax purposes.


                                      F-17
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(9)   Stock-Based Compensation Plans

      The Company  provides a stock option  plan,  for the granting of incentive
      stock options to key employees,  directors, officers, key consultants, and
      advisor to the Company. The Company may grant up to 2,780,000 shares, with
      an option term not to exceed ten years.

      Effective January 1999, the Board of Directors approved a reduction in the
      exercise  price on the  493,931  Incentive  Stock  Options  awarded  as of
      December 31, 1998.

      The following summarizes stock options activity and related information:

<TABLE>
<CAPTION>
                                                     Weighted-
                                                      average       Weighted-
                          Exercise                   remaining       average
                          price per        Share    contractual   exercise price
                           Shares         Options   life (years)    per share
                           ------         -------   ------------    ---------
<S>                         <C>           <C>            <C>         <C>
Balance, December 31, 1998  .15           493,931
         Granted            .15-.26       498,373
         Cancelled          .15           (18,000)
         Exercised          .15           (34,000)
                                        ---------

Balance, December 31, 1999  .15-.26       940,304
         Granted            .25-1.00      775,200
         Cancelled          .74            (8,400)
         Exercised          .15          (329,635)
                                        ---------

Balance, December 31, 2000  .15-1.00    1,414,161
                                        =========

Options outstanding as of
      December 31, 2000:    .15           448,365        8           $   .15
                            .25            31,000        8.75            .25
                            .30            50,000        1.75            .30
                            .32           524,000        6.95            .32
                            .26-.38        12,000        8.75            .37
                            .45           112,000        4.75            .45
                            .53-.57       114,396        2.15            .57
                            .59-.63       110,400        9.67            .59
                             1.00          12,000        9.32           1.00
                             ----       ---------                    -------
Balance, December 31, 2000  .15-1.00    1,414,161        6.85        $   .32
                                                                     =======

Options exercisable as of
 December 31, 2000:         .15           448,365                        .15
                            .25            31,000                        .25
                            .30            50,000                        .30
                            .32           524,000                        .32
                            .36-.38        12,000                        .37
                            .45           102,000                        .45
                            .53-.57       102,396                        .57
                            .59-.63        37,800                        .59
                           1.00             8,000                       1.00
                                        ---------                    -------
                                        1,315,561                     $  .30
                                        =========                     ======
 </TABLE>

      The Company  adopted the provisions of Financial  Accounting  Standards No
      123,  "Accounting for Stock-Based  Compensation," that calls for companies
      to measure  Stock  compensation  expense based on the fair value method of
      accounting.  However, as allowed by the Statement, the Company elected the
      continued use of Accounting Principles Board (APB) Opinion 25, "Accounting
      for Stock Issued to  Employees,"  with pro forma  disclosure of net income
      and earnings  (loss) per share  determined as if the fair value method had
      been applied in measuring  compensation  costs.  Had the fair value method
      been  applied,  the  impact  on net loss per  share  for the  years  ended
      December 31, 2000 was approximately $8,000 and was immaterial in 1999.


                                      F-18
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(10)  Warrants

      The Company accounts for transactions with  non-employees,  in which goods
      or services  are the  consideration  received  for the  issuance of equity
      instruments under the fair value based method.

      At December 31, 2000,  warrants to purchase  5,241,553  common  shares are
      outstanding;  771,100  warrants  exercisable  during the year 2001, with a
      strike price of $0.25 - $0.60,  2,170,395 warrants  exercisable during the
      year  2002,  with a strike  price of  $0.10 -  $0.75,  2,300,058  warrants
      exercisable during the year 2003, with a strike price of $0.20 - $1.20.

(11)  Convertible Preferred Stock

      During  2000 the  Company  sold  1,111,055  shares of Series A and 611,111
      shares of Series B 7% three year Convertible  Preferred Stock at $0.90 per
      share.  The Series A Preferred  Shares are callable at $1.80 if the market
      bid price remains over the call level for 20 days.

      The Series B  Preferred  Stock  proceeds  are  intended  to be used by the
      Company for the initial operating requirements of WorldWater (Phils) Inc.,
      the Philippine  subsidiary wholly owned by WorldWater Corp.  Therefore the
      conversion privilege is either into 10% of WorldWater (Phils) Inc. or into
      611,111 shares of WorldWater Corp. common stock.

      The Company will pay 7% dividends annually on both the Series A and Series
      B Preferred  Stock as determined by the Board of Directors  based upon the
      results of operations and the financial condition of the Company.

(12)  Employment and Consultant Agreements

      On June 8, 2000, the Company entered into a one-year employment  agreement
      with the President/Chief Operating Officer ("COO"). Compensation under the
      agreement is $72,000.  The agreement  also  provides,  ten-year  Incentive
      Stock Options  (ISO) to purchase  100,000  shares of the Company's  common
      stock at $0.32  (fifty  cents)  per  share.  The ISO vest  monthly  during
      employment in equal  installments of 8,333 shares per month. The agreement
      provides a covenant not to disclose any proprietary information.

      The  Company  has  employment   agreements  with  the  Chairman  and  Vice
      Presidents. Aggregate compensation under these agreements are $114,000.

      The Company has unpaid  salaries of $118,950  which have been  deferred by
      the officers as of December 31, 2000.

      The Company has agreements  effective  through  December 31, 2005 with its
      Chairman and a senior  executive which provides for an incentive fee of up
      to five percent (5%) on revenues  earned by the Company with an annual cap
      of $250,000 per individual. The Company incurred incentive fee expenses of
      $-0- and $500 in 2000 and 1999, respectively.


                                      F-19
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(13)  Technology Grant

      In 1999 the Company  entered into a recoverable  grant  agreement with New
      Jersey Commission on Science and Technology (Commission).  Under the terms
      of the agreement  the Company was awarded  $249,967  under the  Technology
      Transfer Program for the development and  commercialization of an off-grid
      drip irrigation system powered by photovoltaic  power.  Under the terms of
      the  agreement  the Company is required  to make  royalty  payments to the
      Commission  for a  period  of ten  years  based on the net  income  of the
      product up to the amount of the award.

(14)  Feasibility Study

      During 1999, the Company entered into a contract in the amount of $235,470
      with the Department of the Interior to prepare a feasibility  study on the
      installation of community  water supplies using solar electric  systems in
      Cebu, Philippines. Revenue on this contract are recognized as the services
      are  provided.  At December  31,  2000,  the Company  had  recognized  the
      remaining $111,310 on this contract, $123,560 was recognized in 1999.

(15)  Gain on the Extinguishment of Debt*

      During 1999, the Company recognized as an extraordinary item in the amount
      of $50,000 the gain on the cancellation of a loan  obligation.  Since 1989
      the Company has exhausted all avenues of contacting the debt holder. Based
      on the advice of the Company's  legal counsel it has been  determined that
      the statute of limitations has expired.

(16)  Leases

      The Company leases its  production,  service and  administrative  premises
      under a five-year lease  agreement  expiring June 14, 2002, with a renewal
      option for an additional  five-year period.  The lease requires the lessee
      to pay taxes, maintenance,  insurance and certain other operating costs of
      the  leased  property.  Rent  expense  for 2000 and 1999 was  $57,600  and
      $62,500 respectively.

      The minimum future rental payments under this lease are as follows:

                                      2001                                61,000
                                      2002                                27,500
                                                                        --------

                Total minimum future rental payments                    $ 88,500
                                                                        ========

*     During 2000, the Company recognized as an extraordinary item in the amount
      of $114,772 the gain on the write off of payables as agreed to by the owed
      parties.


                                      F-20
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(17)  Related Party Transactions

      Included in notes payable and  long-term  debt at December 31, are amounts
      payable to employees, directors and their immediate relatives as follows:

                                                        2000               1999
                                                        ----               ----

            Directors                                $  3,000           $  4,500
            Employees                                  38,000            110,645
            Immediate relatives                             0             17,000
                                                     --------           --------
                Total                                $ 41,000           $132,145
                                                     ========           ========

      The Company leased office and laboratory  facilities  from the Chairman of
      the Company on a month to month basis. Lease payments to the Chairman were
      $30,000 for 2000 and 1999.

      In 2000, the Company advanced and expensed $47,792 to a senior  executive.
      The  individual  has pledged his options and future  bonuses as collateral
      for the return of the advance.

      In 2000, the Company paid $50,000 to a related party as commission for the
      private placement of Preferred Stock.

(18)  Marketable Securities Available for Sale

      In 1997, the Company acquired 50,000 shares of Proformix Systems,  Inc., a
      NASDAG traded  company as part of its  settlement  with Royal Capital Inc.
      and recorded these securities as marketable  securities available for sale
      at then market value of $162,500.

      During 1998,  the Company sold 40,000  shares of the stock.  Proceeds from
      the sale were  $80,000  and the Company  recognized  a loss on the sale of
      marketable  securities of $50,000.  These marketable securities are stated
      at fair value with any  unrealized  holding gains or losses  included as a
      component of  stockholders'  deficiency  until  realized.  At December 31,
      1998, the Company had an unrealized holding loss of $20,625.

      During  1999,  the Company  determined  the stock had no market  value and
      recognized a loss of $32,500.

(19)  Risks and Uncertainties

      The Company  markets its products to  developing  nations.  The ability of
      these  customers to order and pay for the Company's  products and services
      is  dependent  on a variety  of  factors  including  government  approval,
      adequate  funding and vigorous  testing  procedures.  Sales to three major
      customers  accounted for 37%, 29%, and 28% of the Company's sales in 2000.
      In 1999,  sales to two major  customers  accounted  for 31% and 21% of the
      Company's sales.


                                      F-21
<PAGE>

                         WORLDWATER CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(20)  Fair Value of Financial Instruments

      The following methods and assumptions were used to estimate the fair value
      of each  class of  financial  instruments  for  which it is  practical  to
      estimate that value.

      The carrying  value of cash and cash  equivalents,  receivables,  accounts
      payable and accrued  expenses  approximate fair value because of the short
      maturity of those instruments. The carrying value of marketable securities
      available for sale is carried at a fair value based upon the quoted market
      prices.  The fair value of the  Company's  debt is estimated  based on the
      current  rates  offered  to the  Company  for debt of the  same  remaining
      maturities and similar  terms.  The estimated fair values of the Company's
      debt instruments are as follows:

                                         Carrying                Fair
                                          Amounts                Value
                                          -------                -----

            2000                        $  231,960             $  231,960
            1999                         1,216,062              1,216,062

(21)  Contingencies

      The Company is occasionally subject to various claims and suits that arise
      from  time to time  in the  ordinary  course  of its  business,  including
      actions with respect to contracts and intellectual  property.  The Company
      does not believe  that any current  action will have a material  effect on
      the company's business, financial condition or results of operations.

(22)  Supplemental Disclosure of Cash Flow Information

                                                     2000               1999
                                                     ----               ----
      Cash paid during the year for:

            Interest                               $  15,960          $  32,971
                                                   =========          =========

            Income taxes (benefit)                 $(163,887)         $(475,285)
                                                   =========          =========

      Supplemental schedule of non-cash investing and finance activities:

      In 2000,  debt holders  converted  $770,761 of debt principal and $335,741
      accrued  interest  (total  of  1,106,502)  into  2,757,385  shares  of the
      Company's common stock at rates between $0.15 - $0.75 per share.

      In 1999, the Company's debt holders converted $1,011,000 of debt principal
      and $272,440 of accrued  interest  (total of  $1,283,440)  into  3,329,073
      shares of the  Company's  common stock at rates  between $0.15 - $0.50 per
      share.

                                      F-22