SECURITIES AND
EXCHANGE COMMISSIONWashington,
D.C. 20549 FORM 10-Q/A (Amendment No. 1) [X] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended – June
30, 2012. OR [ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 000-30392 ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC. (Exact name of Company as specified in
its charter)   Florida
 13-4172059State or other jurisdiction of
  incorporation or organization
 (I.R.S. Employer
  Identification No.)
  200 PROGRESS DRIVE, MONTGOMERVILLE, PA,
18936(Address of principal executive offices, including postal code.) (905) 695-4142 and (215) 699-0730
(Registrant's telephone number, including area code)  COMMON STOCK, $0.001 PAR VALUE(Title of class) Indicate by check mark whether
the issuer (1) has filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. YES [X]
  NO [ ] Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files). YES [X]   NO [ ] Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer [ ]
    Accelerated Filer [ ]
    Non-Accelerated Filer [ ]
    Smaller reporting company [X] Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).YES [ ]   NO [X] There were 219,450,447 shares of
the registrant's Common Stock outstanding as of August 13th, 2012


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EXPLANATORY NOTE This Amendment No. 1 to the Form 10-Q Quarterly Report (the "Amendment") amends the Form 10-Q Quarterly Report of Environmental Solutions Worldwide, Inc. for the quarter ended June 30, 2012, originally filed with the U.S. Securities and Exchange Commission on August 13, 2012 (the "Original Form 10-Q"). The purpose of this Amendment is to furnish the interactive data files that comprise Exhibit 101 not previously filed with Form 10-Q Quarterly Report. The Amendment revises the exhibit index included in Part II, Item 6 of the Original Form 10-Q and includes files relevant to Exhibit 101 and includes non-material calculation adjustments to Note 8 - Income Taxes and Note 16 - Loan Payable. Except as described above, the Amendment does not modify or update the disclosures presented in, or exhibits to, the Original Form 10-Q. The Amendment continues to speak as of the date of the Original Form 10-Q. Furthermore, the Amendment does not reflect events occurring after the dates of the Original Form 10-Q.


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PART I. FINANCIAL INFORMATION PAGE
  #Item
  1.
 Financial
  Statements.Consolidated
  Condensed Balance Sheets as of
 F2June
  30, 2012 (unaudited) and December 31, 2011Consolidated
  Condensed Statements of Operations and
 F3Comprehensive
  Loss for the Six and Three Month PeriodsEnded
  June 30, 2012 and 2011 (unaudited)Consolidated
  Condensed Statement of Changes in Stockholders'
 F4Equity
  for the Six Month Period EndedJune
  30, 2012 (unaudited)Consolidated
  Condensed Statements of Cash Flows
 F5for
  the Six Month Periods Ended June 30, 2012 and 2011(unaudited)Notes
  to Consolidated Condensed Financial Statements
 F6-F20(unaudited)Item
  2.
 Management's
  Discussion and Analysis of Financial Conditionand
  Results of Operations
 2Item
  3.
 Quantitative
  and Qualitative Disclosures About Market Risk.
 9Item
  4.
 Controls
  and Procedures
 9PART
  II.
 OTHER
  INFORMATIONItem
  1A.
 RISK
  FACTORS
 11Item
  5.
 OTHER
  INFORMATION
 11Item
  6.
 EXHIBITS.
 12


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ENVIRONMENTAL
  SOLUTIONS WORLDWIDE, INC.CONSOLIDATED CONDENSED BALANCE SHEETSJUNE 30,
 
 DECEMBER 31,2012
 
 2011(Unaudited)ASSETSCurrent
  AssetsCash and
  cash equivalents
 $               78,556
 
 $            1,103,649Accounts
  receivable, net of allowancefor
  doubtful accounts of $217,732 (2011 - $1,398) (Note 2)
 1,538,938
 
 1,204,734Inventory,
  net of reserve of $107,360 (2011 - $223,007) (Note 5)
 2,202,659
 
 2,431,027Prepaid
  expenses and sundry assets
 157,444
 
 295,211Total
  current assets
 3,977,597
 
 5,034,621Property,
  plant and equipment under construction (Note 6)
 356,995
 
 198,416Property,
  plant and equipment, net of accumulateddepreciation
  of $3,882,926 (2011 - $6,867,760) (Note 6)
 1,082,530
 
 1,271,989$            5,417,122
 
 $            6,505,026LIABILITIES
  AND STOCKHOLDERS' EQUITYCurrent
  LiabilitiesAccounts
  payable
 $            1,260,791
 
 $            1,384,972Accrued
  liabilities
 452,266
 
 592,760Redeemable
  Class A special shares (Note 7)
 -
 
 453,900Current
  portion of loan payable (Note 16)
 36,781
 
 -Current
  portion of capital lease obligation (Note 12)
 -
 
 1,241Total
  current liabilities
 1,749,838
 
 2,432,873Long-term
  liabilitiesLoan
  payable (Note 16)
 237,982
 
 -Total
  liabilities
 1,987,820
 
 2,432,873Commitments
  and Contingencies (Note 12)Stockholders'
  Equity (Notes 9 and 10)Common
  stock, $0.001 par value, 250,000,000 (2011 - 250,000,000)shares
  authorized; 219,450,447 (2011 - 219,450,447)shares
  issued and outstanding
 219,450
 
 219,450Additional
  paid-in capital
 56,648,046
 
 56,606,629Accumulated
  deficit
 (53,438,194)
 
 (52,753,926)Total
  stockholders' equity
 3,429,302
 
 4,072,153$            5,417,122
 
 $            6,505,026The accompanying notes are an integral part
  of these consolidated condensed financial statements.F2


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ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.CONSOLIDATED CONDENSED STATEMENTS OF
  OPERATIONSAND COMPREHENSIVE LOSSFOR THE SIX AND THREE MONTH PERIODS ENDED
  JUNE 30,(UNAUDITED)SIX MONTHS PERIOD ENDED JUNE 30,
 
 THREE MONTHS PERIOD ENDED JUNE 30,2012
 
 2011
 
 2012
 
 2011Revenue
 
 $     4,875,705
 
 $     5,100,585
 
 $    2,344,103
 
 $      3,054,847Cost
  of sales
 
 3,199,736
 
 4,584,734
 
 1,456,810
 
 2,492,652Gross
  profit
 
 1,675,969
 
 515,851
 
 887,293
 
 562,195Operating
  expensesMarketing,
  office and general expenses
 
 1,865,510
 
 2,007,565
 
 675,060
 
 1,003,506Restructuring
  charges
 
 -
 
 523,274
 
 -
 
 4,465Research
  and development costs
 
 314,318
 
 333,897
 
 185,770
 
 150,272Officers'
  compensation and directors' fees
 
 311,591
 
 406,986
 
 154,484
 
 195,342Consulting
  and professional fees
 
 135,613
 
 147,456
 
 79,629
 
 72,661Foreign
  exchange loss
 
 43,043
 
 84,719
 
 11,612
 
 24,594Depreciation
  and amortization
 
 115,117
 
 214,505
 
 38,935
 
 94,155Loss on
  impairment of property, plant and equipment (Note 6)
 
 28,945
 
 311,304
 
 -
 
 311,3042,814,137
 
 4,029,706
 
 1,145,490
 
 1,856,299Loss
  from operations
 
 (1,138,168)
 
 (3,513,855)
 
 (258,197)
 
 (1,294,104)Gain on
  deconsolidation of subsidiary (Note 7)
 
 453,900
 
 -
 
 -
 
 -Change
  in fair value of exchange feature liability
 
 -
 
 (578,739)
 
 -
 
 -Interest
  on notes payable to related party
 
 -
 
 (126,850)
 
 -
 
 (92,329)Interest
  accretion expense
 
 -
 
 (3,506,074)
 
 -
 
 (2,456,074)Financing
  charge on embedded derivative liability
 
 -
 
 (485,101)
 
 -
 
 -Gain on
  convertible derivative
 
 -
 
 1,336,445
 
 -
 
 -Bank
  fees related to credit facility covenant waivers
 
 -
 
 (154,205)
 
 -
 
 (47,693)Gain on
  disposal of property and equipment
 
 -
 
 5,583
 
 -
 
 2,033Net
  loss
 
 (684,268)
 
 (7,022,796)
 
 (258,197)
 
 (3,888,167)Other
  comprehensive income:Foreign
  currency translation of Canadian subsidiaries
 
 -
 
 125,957
 
 -
 
 53,693Net
  loss and comprehensive loss
 
 $        (684,268)
 
 $     (6,896,839)
 
 $      (258,197)
 
 $     (3,834,474)Net
  loss per share (basic and diluted) (Note14)
 
 $                 (0.00)
 
 $              (0.05)
 
 $              (0.00)
 
 $                 (0.03)Weighted
  average number of shares outstanding
  (basic
  and diluted) (Note14)
 
 219,450,447
 
 129,463,767
 
 219,450,447
 
 129,463,767The accompanying notes are an integral part
  of these consolidated condensed financial statements.F3


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ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.CONSOLIDATED CONDENSED STATEMENT OF CHANGES
  IN STOCKHOLDERS' EQUITYFOR THE SIX MONTH PERIOD ENDED JUNE 30,
  2012(UNAUDITED)TotalCommon Stock
 
 Additional
 
 Accumulated
 
 Stockholders'Shares
 
 Amount
 
 Paid-In Capital
 
 Deficit
 
 EquityBalance,
  January 1, 2012
 219,450,447
 
 $             219,450
 
 $       56,606,629
 
 $     (52,753,926)
 
 $  4,072,153Net
  loss
 --
 
 --
 
 --
 
 (684,268)
 
 (684,268)Stock-based
  compensation
 --
 
 --
 
 41,417
 
 --
 
 41,417Balance,
  June 30, 2012
 219,450,447
 
 $             219,450
 
 $       56,648,046
 
 $     (53,438,194)
 
 $  3,429,302The accompanying notes are an integral part
  of these consolidated condensed financial statements.F4


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ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.CONSOLIDATED CONDENSED STATEMENTS OF CASH
  FLOWSFOR THE SIX MONTH PERIODS ENDED JUNE 30,2012
 
 2011(Unaudited)
 
 (Unaudited)Net loss
 
 
 $        (684,268)
 
 $     (7,022,796)Adjustments
  to reconcile net loss to net cashused in
  operating activities:Interest
  accretion expense
 
 
 -
 
 3,506,074Change
  in fair value of exchange feature liability
 
 
 -
 
 578,739Financing
  charge on embedded derivative liability
 
 
 -
 
 485,101Loss
  on disposal of inventory
 
 
 -
 
 507,032Reserve
  on inventory obsolescence
 
 
 107,360
 
 -Depreciation
  of property, plant and equipment
 
 
 294,804
 
 420,182Loss
  on impairment of property, plant and equipment
 
 
 42,674
 
 307,358Interest
  on notes payable to related party
 
 
 -
 
 126,850Stock-based
  compensation
 
 
 41,417
 
 56,381Amortization
  of patents and trademarks
 
 
 -
 
 16,145Provision
  for doubtful accounts
 
 
 213,108
 
 -Gain
  on disposal of property and equipment
 
 
 (13,729)
 
 (5,583)Gain
  on convertible derivative
 
 
 -
 
 (1,336,445)Gain
  on deconsolidation of subsidiary
 
 
 (453,900)
 
 -231,734
 
 4,661,834Increase
  (decrease) in cash flows from operatingactivities
  resulting from changes in:Accounts
  receivable
 
 
 (547,312)
 
 1,226,620Inventory
 
 
 121,008
 
 534,467Prepaid
  expenses and sundry assets
 
 
 137,767
 
 (286,292)Accounts
  payable and accrued liabilities
 
 
 (264,675)
 
 (37,034)Customer
  deposits
 
 
 -
 
 (25,528)(553,212)
 
 1,412,233Net cash
  used in operating activities
 
 
 (1,005,746)
 
 (948,729)Investing
  activities:Proceeds
  from sale of property and equipment
 
 
 13,729
 
 5,419Acquisition
  of property, plant and equipment
 
 
 (148,019)
 
 (33,963)Addition
  to property, plant and equipment under construction
 
 
 (158,579)
 
 -Net cash
  used in investing activities
 
 
 (292,869)
 
 (28,544)Financing
  activities:Proceeds
  from notes payable to related parties
 
 
 -
 
 4,000,000Proceeds
  from loan payable
 
 
 280,787
 
 -Repayment
  of loan payable
 
 
 (6,024)
 
 -Rights
  offering cost
 
 
 -
 
 (373,615)Repayment
  of bank loan
 
 
 -
 
 (1,891,079)Repayment
  of capital lease obligation
 
 
 (1,241)
 
 (2,539)Net cash
  provided by financing activities
 
 
 273,522
 
 1,732,767Net
  change in cash and equivalents
 
 
 (1,025,093)
 
 755,494Foreign
  exchange gain on foreign operations
 
 
 -
 
 (9,819)Cash and
  cash equivalents, beginning of period
 
 
 1,103,649
 
 13,328Cash and
  cash equivalents, end of period
 
 
 $           78,556
 
 $        759,003The accompanying notes are an integral part
  of these consolidated condensed financial statements.F5


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NOTES
TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - NATURE
OF BUSINESS AND GOING CONCERN Environmental Solutions
Worldwide, Inc. (the "Company" or "ESW") through its
wholly-owned subsidiaries is engaged in the design, development, manufacturing
and sales of emissions control technologies. ESW also provides emissions
testing and environmental certification services with its primary focus on the
North American on-road and off-road diesel retrofit market. ESW currently
manufactures and markets a line of catalytic emission control and enabling
technologies for a number of applications. The unaudited consolidated
condensed financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("U.S.
GAAP"), which contemplates continuation of the Company as a going concern. The Company has sustained recurring
operating losses. As of June 30, 2012, the Company had an accumulated deficit
of $53,438,194 and cash and cash equivalents of $78,556. During the year 2011
there were significant changes made to ESW’s business. These changes in
operations, the relocation of the Company’s operations, and the prevailing
economic conditions all create uncertainty in the operating results and,
accordingly, there is no assurance that the Company will be successful in
generating sufficient cash flow from operations or achieving profitability in
the near future. As a result, there is substantial doubt regarding the
Company's ability to continue as a going concern. The Company may require
additional financing to fund its continuing operations. Financing may not be
available at acceptable terms or may not be available at all. The Company's
ability to continue as a going concern is dependent on obtaining additional
financing and achieving and maintaining a profitable level of operations. Effective July 12, 2011, the
Company raised a total of $4 million through the issuance of unsecured
subordinated promissory notes (the “Notes”) to certain shareholders, including
deemed affiliates of certain members of the Board of Directors of the Company.
Proceeds from the Notes funded working capital related to its 2011 sales,
capital investments and other general corporate purposes. Effective May 10,
2011, the Company entered into an Investment Agreement with certain of its
current shareholders and subordinated lenders under unsecured promissory notes
(the “Bridge Lenders") for an aggregate amount of $4 million. As per the
Investment Agreement, the Bridge Lenders agreed to provide a backstop
commitment (the "Backstop Commitment") to a rights offering targeted
by the Company to raise up to $8 million (the “Qualified Offering"). Under
the Backstop Commitment, the Bridge Lenders agreed to purchase any shares
offered in the Qualified Offering that were not purchased by the Company's
shareholders of record, after giving effect to any oversubscriptions. Effective June 30, 2011 the
Company completed its rights offering. The Company's shareholders subscribed to
38,955,629 shares including over subscriptions. Under the Qualified Offering
shareholders subscribed to $4.7 million, which was subscribed for via cash
($1.9 million), and the exchange of principal and accrued interest on the Notes
and the Bridge Loan Notes (approximately $2.8 million). Under the Backstop
Commitment, the Bridge Lenders purchased 27,714,385 shares of Common Stock at
price of $0.12 per share for approximately $3.3 million, of which $2.0 million
was paid in cash and $1.3 million was paid for through the exchange of the
balance of principal and accrued interest due on the Notes. As a result of
these transactions, the Company satisfied its obligations with the Bridge
Lenders and effectively cancelled the Notes effective June 30, 2011. Effective July 18, 2011, ESW’s
wholly-owned subsidiary ESW Canada Inc., paid its senior lender the amount of
$1.5 million (Canadian dollars) from the proceeds of the rights offering to
liquidate the outstanding balance on the bank loan. The senior lender has
discharged all liens, encumbrances and securities against the Company and its
subsidiaries and cancelled the June 30, 2010 demand revolving credit facility
agreement. Effective May 1, 2012 the
Company’s wholly owned subsidiary ESW America Inc. received a $280,787 low
interest loan from The Machinery and Equipment Loan Fund (“MELF”), which is
administered by the Pennsylvania Department of Community and Economic
Development. Proceeds from the loan were used to purchase and upgrade equipment
at the air testing facility. These unaudited consolidated
condensed financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. All adjustments, consisting only of
normal recurring items, considered necessary for fair presentation have been
included in these unaudited consolidated condensed financial statements.  F6


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NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES BASIS OF
CONSOLIDATION The unaudited consolidated
condensed financial statements include the accounts of the Company and its
wholly-owned subsidiaries, ESW America Inc. ("ESWA"), ESW
Technologies Inc. ("ESWT"), ESW Canada Inc. ("ESWC") and
Technology Fabricators Inc. (“TFI”). All inter-company transactions and
balances have been eliminated on consolidation. Amounts in the unaudited
consolidated condensed financial statements are expressed in U.S. dollars. Effective February 3, 2012 BBL
Technologies Inc. (“BBL”), a non-operating subsidiary, filed for bankruptcy in
the Province of Ontario, Canada. At the time of filing, BBL had no assets but
had issued and outstanding redeemable Class A special shares. The Company did
not provide any guarantee in relation to these redeemable Class A special
shares. As a result of BBL’s filing for bankruptcy, the Company lost its
control over BBL and has deconsolidated BBL from the unaudited consolidated
condensed financial statements on the filing date. The Company recorded a
$453,900 gain in the unaudited consolidated condensed statement of operations
and comprehensive loss for the six and three month periods ended June 30, 2012
upon deconsolidation of BBL. ESTIMATES The preparation of unaudited
consolidated condensed financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reported period. Actual results could differ
from those estimates. Significant estimates include amounts for inventory
valuation, impairment of property plant and equipment, share-based
compensation, valuation of the warrants, accrued liabilities and accounts
receivable exposures. ALLOWANCE FOR
DOUBTFUL ACCOUNTS The Company extends unsecured
credit to its customers in the ordinary course of business but mitigates the
associated credit risk by performing credit checks and actively pursuing past
due accounts. An allowance for doubtful accounts is estimated and recorded
based on management's assessment of the credit history with the customer and
current relationships with them. On this basis management has determined that
an allowance for doubtful accounts of $217,732 and $1,398 was appropriate as of
June 30, 2012 and December 31, 2011, respectively. INVENTORY Inventory is stated at the lower
of cost or market determined using the first-in, first-out method. Inventory is
periodically reviewed for use and obsolescence, and adjusted as necessary.
Inventory consists of raw materials, work-in-process and finished goods. PROPERTY, PLANT
AND EQUIPMENT UNDER CONSTRUCTION The Company capitalizes
customized equipment built to be used in the future day to day operations at
cost. Once complete and available for use, the cost for accounting purposes is
transferred to property, plant and equipment, where normal depreciation rates
apply. PROPERTY, PLANT
AND EQUIPMENT Property, plant and equipment are
recorded at cost. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets, generally 5 to 7 years. Maintenance and
repairs are charged to operations as incurred. Significant renewals and
betterments are capitalized.  F7


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IMPAIRMENT OF LONG-LIVED ASSETS The Company follows the
Accounting Standards Codification (“ASC”) Topic 360, which requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the assets' carrying amounts may not be
recoverable. In performing the review for recoverability, if future undiscounted
cash flows (excluding interest charges) from the use and ultimate disposition
of the assets are less than their carrying values, an impairment loss
represented by the difference between its fair value and carrying value, is
recognized. Properties held for sale are recorded at the lower of the carrying
amount or the expected sales price less costs to sell. Management reviewed
certain assets for impairment in the first quarter of 2012 (see Note 6 for
details). PATENTS AND
TRADEMARKS Patents and trademarks consist
primarily of the costs incurred to acquire them from an independent third
party. Intangible assets with a finite life are tested for impairment whenever
events or circumstances indicate that the carrying amount of an asset (or asset
group) may not be recoverable. An impairment loss would be recognized when the
carrying amount of an asset exceeds the fair value of the asset. Patents and trademarks were being
amortized on a straight-line basis over their estimated life of ten years.
Amortization expense for the six month periods ended June 30, 2012 and 2011 was
$0 and $16,145 respectively and amortization expense for the three month
periods ended June 30, 2012 and 2011 was $0. At June 30, 2012 and December 31,
2011, patents and trademarks were fully written down and had $0 carrying value. FAIR VALUE OF
FINANCIAL INSTRUMENTS ASC Topic 820 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. Included in the ASC Topic 820
framework is a three level valuation inputs hierarchy with Level 1 being inputs
and transactions that can be effectively fully observed by market participants
spanning to Level 3 where estimates are unobservable by market participants
outside of the Company and must be estimated using assumptions developed by the
Company. The Company discloses the lowest level input significant to each
category of asset or liability valued within the scope of ASC Topic 820 and the
valuation method as exchange, income or use. The Company uses inputs which are
as observable as possible and the methods most applicable to the specific
situation of each company or valued item. The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities
and loan payable approximate fair value because of their short-term nature or
current market rate for the loan payable with a fixed rate. Per ASC Topic 820
framework these are considered Level 2 inputs where inputs other than Level 1
that are observable, either directly or indirectly, such as quoted prices in
active markets for similar assets or liabilities, quoted prices for identical
or similar assets or liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. Interest rate risk is the risk
that the value of a financial instrument might be adversely affected by a
change in the interest rates. In seeking to minimize the risks from interest
rate fluctuations, the Company manages exposure through its normal operating
and financing activities. REVENUE
RECOGNITION The Company derives revenue
primarily from the sale of its catalytic products. In accordance with Staff
Accounting Bulletin No. 104, revenue is recognized when persuasive evidence of
an arrangement exists, delivery has occurred, the amount is fixed or
determinable, risk of ownership has passed to the customer and collection is
reasonably assured. The Company also derives revenue
(approximately 8.4% and 3.5% of total revenue during the six month periods
ended June 30, 2012 and 2011, respectively) from providing air testing and
environmental certification services. Revenues are recognized upon delivery of
testing services when persuasive evidence of an arrangement exists and
collection of the related receivable is reasonably assured. F8


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LOSS PER SHARE Loss per common share is computed
by dividing the net loss by the weighted average number of common shares
outstanding during the year. Common stock equivalents are excluded from the
computation of diluted loss per share when their effect is anti-dilutive. INCOME TAXES Income taxes are computed in
accordance with the provisions of ASC Topic 740, which requires, among other
things, a liability approach to calculating deferred income taxes. The Company
recognizes deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in its financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. The
Company is required to make certain estimates and judgments about the
application of tax law, the expected resolution of uncertain tax positions and
other matters. In the event that uncertain tax positions are resolved for
amounts different than the Company's estimates, or the related statutes of
limitations expire without the assessment of additional income taxes, the
Company will be required to adjust the amounts of the related assets and
liabilities in the period in which such events occur. Such adjustments may have a
material impact on ESW's income tax provision and results of operations. SHIPPING AND
HANDLING COSTS The Company’s shipping and
handling costs of $20,519 and $32,873 are included in cost of sales for the
three month periods ended June 30, 2012 and 2011, respectively. Additionally,
the Company has recorded recoveries of these costs amounting to $13,496 and
$20,372, which are included in revenues for the three month periods ended June
30, 2012 and 2011, respectively. The Company’s shipping and
handling costs of $47,062 and $57,160 are included in cost of sales for the six
month periods ended June 30, 2012 and 2011, respectively. Additionally, the
Company has recorded recoveries of these costs amounting to $35,997 and $39,701,
which are included in revenues for the six month periods ended June 30, 2012
and 2011, respectively. RESEARCH AND
DEVELOPMENT The Company is engaged in
research and development work. Research and development costs are charged as
operating expense of the Company as incurred. Any grant money received for
research and development work is used to offset these expenditures. For the
three month periods ended June 30, 2012 and 2011, the Company expensed $185,770
and $150,272, net of grant revenues, respectively, towards research and
development costs. For the six month periods ended June 30, 2012 and 2011, the
Company expensed $314,318 and $333,897, net of grant revenues, respectively,
towards research and development costs. For the three month periods ended
June 30, 2012 and 2011, gross research and development expense, excluding any
offsetting grant revenues, amounted to $185,770 and $198,985, respectively, and
grant money amounted to $0 and $48,713, respectively. For the six month periods
ended June 30, 2012 and 2011, gross research and development expense, excluding
any offsetting grant revenues, amounted to $314,318 and $612,609, respectively,
and grant money amounted to $0 and $278,712, respectively. FOREIGN CURRENCY
TRANSLATION The functional currency of the
Company and its foreign subsidiaries is the U.S. dollar. Most of the Company’s
revenue and materials purchased from suppliers are denominated in or linked to
the U.S. dollar. Transactions denominated in currencies other than a functional
currency are converted to the functional currency on the transaction date, and
any resulting assets or liabilities are further translated at each reporting
date and at settlement. Gains and losses recognized upon such translations are
included within foreign exchange gain (loss) in the unaudited consolidated
condensed statements of operations and comprehensive loss. PRODUCT
WARRANTIES The Company provides for
estimated warranty costs at the time of sale and accrues for specific items at
the time their existence is known and the amounts are determinable. The Company
estimates warranty costs using standard quantitative measures based on industry
warranty claim experience and evaluation of specific customer warranty issues.
The Company currently estimates warranty costs as 2% of revenue. As of June 30,
2012 and December 31, 2011, $199,862 and $121,335, respectively, was accrued as
warranty provision and included in accrued liabilities. For the three month
periods ended June 30, 2012 and 2011, the total warranty, service, service
travel and installation costs included in cost of sales were $95,824 and
$13,101, respectively. For the six month periods ended June 30, 2012 and 2011,
the total warranty, service, service travel and installation costs included in
cost of sales were $142,434 and $93,733, respectively. F9


---



SEGMENT
REPORTING ESW operates in two reportable
segments. ASC 280-10, "Disclosures about Segments of an Enterprise and
Related Information", establishes standards for the way that public
business enterprises report information about operating segments in the
Company’s consolidated condensed financial statements. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. ESW’s
operating segments include manufacturing operations and air testing services
(see Note 13). ESW’s chief operating decision maker is the Company’s Executive
Chairman. RESTRUCTURING
CHARGES In 2011 ESW underwent a
significant restructuring of its operations. ESW recognizes restructuring
expenses as they are incurred. ESW also evaluates the inventory and property,
plant and equipment associated with restructuring actions for impairment. Asset
impairment and accelerated depreciation expenses primarily relate to inventory
write-downs for rationalized products and adjustments in the carrying value of
the closed facilities to the Company’s estimated fair value. In addition, the
remaining useful lives of other property, plant and equipment associated with
the related operations were re-evaluated based on the respective plan,
resulting in the impairment of certain assets. In accordance with ASC
420-10-25-11 costs to terminate an operating lease arise when a lessee will
either: (a) terminate an operating lease; or (b) if it is unable to terminate
the lease, discontinue its use of the asset and continue to make lease payments
over the remaining term of the lease without benefit. When the lease will be
terminated, the lessee should recognize a liability for the cost of terminating
the lease at the time the lease is terminated. If the lease will not be
terminated and the lessee will continue to incur costs under the lease without
future benefit, the lessee should recognize a liability on the cease-use date
(the date the lessee discontinues its use of the asset). In accordance with
paragraphs 420-10-30-7 through 30-9, a liability for the remaining lease
rentals, reduced by actual (or estimated) sublease rentals, would be recognized
and measured at its fair value at the cease-use date. In accordance with
paragraphs 420-10-35-1 through 35-4, the liability would be adjusted for
changes, if any, resulting from revisions to estimated cash flows after the
cease-use date, measured using the credit-adjusted risk-free rate that was used
to measure the liability initially. As disclosed in Note 12, the
Company entered into an agreement with its former landlord for the full release
of any future obligations under the lease agreement. COMPARATIVE
FIGURES Certain 2011 figures have been
reclassified to conform to the current financial statement presentation. NOTE 3 –
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT In June 2011, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2011-5 – “Comprehensive Income – Presentation of Comprehensive Income”. 
This statement removed the presentation of comprehensive income in the
statement of changes in stockholders’ equity.  The only two allowable
presentations are below the components of net income in a statement of
comprehensive income or in a separate statement of comprehensive income that
begins with total net income.  The guidance was effective for interim or
annual reporting periods beginning after December 15, 2011. The adoption of
this ASU had no effect on the Company's unaudited consolidated condensed
financial statements. NOTE 4 - CASH
AND CASH EQUIVALENTS Cash and cash equivalents include
cash and highly liquid investments purchased with an original or remaining
maturity of 90 days or less at the date of purchase. At June 30, 2012 and
December 31, 2011, all of the Company's cash and cash equivalents consisted of
cash.  F10


---



NOTE 5 - INVENTORY Inventory
consists of:  June 30,
 
 December 31,Inventory
 2012
 
 2011Raw
  materials
 $             774,290
 
 $             846,113Work-in-process
 1,414,270
 
 1,705,346Finished
  goods
 121,459
 
 102,5752,310,019
 
 2,654,034Less:
  reserve for inventory obsolescence
 (107,360)
 
 (223,007)Total
 $         2,202,659
 
 $         2,431,027
 NOTE 6 -
PROPERTY, PLANT AND EQUIPMENT Property,
plant and equipment consist of the following:  June 30,
 
 December 31,Classification
 2012
 
 2011Plant,
  machinery and equipment
 $             3,724,990
 
 $             6,294,458Office
  equipment
 152,329
 
 357,717Furniture
  and fixtures
 242,090
 
 449,147Vehicles
 19,468
 
 25,604Leasehold
  improvements
 826,579
 
 1,012,8234,965,456
 
 8,139,749Less:
  accumulated depreciation
 (3,882,926)
 
 (6,867,760)Total
 $             1,082,530
 
 $             1,271,989
 Depreciation
expense recognized in the unaudited consolidated condensed statements of
operations and comprehensive loss was included in the following captions:  For the three month periods endedJune 30,
 
 June 30,Depreciation Expense
 2012
 
 2011Cost
  of sales
 $                 103,432
 
 $                  87,353Operating
  expenses
 38,935
 
 94,156Research
  and development
 -
 
 29,028Total
 $                142,367
 
 $              210,537For the six month periods endedJune 30,
 
 June 30,Depreciation Expense
 2012
 
 2011Cost
  of sales
 $                 179,687
 
 $                163,544Operating
  expenses
 115,117
 
 198,360Research
  and development
 -
 
 58,191Total
 $                 294,804
 
 $                420,095
 F11


---



At
March 31, 2012, the Company recognized an impairment loss for furniture,
fixtures and office equipment located at its Canadian facility. The estimated
recovery from the sale of furniture, fixtures and office equipment is expected
to be nominal and, accordingly, the Company has valued these assets as $0 and
recorded an impairment loss equal to the full amount of their carrying value. The
details of impairment losses recognized are summarized in the following table:  For the three month period endedAsset grouping
 June 30, 2012
 June 30, 2011Plant
  and machinery
 $                          -
 $           180,993Leasehold
  improvements
 -
 93,328Furniture
  & fixtures (Abandonment)
 -
 -Office
  equipment (Held for sale)
 -
 36,983Computer
  hardware (Held for sale)
 -
 -Computer
  software (Held for sale)
 -
 -Total
  impairment loss recognized
 -
 311,304Gain
  on disposal of plant and equipment
 -
 -Total
  impairment loss recognized
 $                          -
 $           311,304
   For the six month period endedAsset grouping
 June 30, 2012
 June 30, 2011Plant
  and machinery
 $                          -
 $           180,993Leasehold
  improvements
 -
 93,328Furniture
  & fixtures (Abandonment)
 1,800
 -Office
  equipment (Held for sale)
 2,132
 36,983Computer
  hardware (Held for sale)
 18,474
 -Computer
  software (Held for sale)
 20,267
 -Total
  impairment loss recognized
 42,674
 311,304Gain
  on disposal of plant and equipment
 (13,729)
 -Total
  impairment loss recognized
 $              28,945
 $311,304
  NOTE 7 -
REDEEMABLE CLASS A SPECIAL SHARES At December 31, 2011, the
redeemable Class A special shares that were issued by the Company's wholly-owned
subsidiary, BBL, without par value, were redeemable on demand by the holder of
the shares, which is a private Ontario Corporation, at $700,000 Canadian
(historically translated to $453,900 at December 31, 2011). On February 3,
2012, BBL filed for bankruptcy and the redeemable Class A special shares were
subsequently cancelled.  F12


---



NOTE 8 - INCOME TAXES As of June 30, 2012, there are
tax loss carry forwards for Federal income tax purposes of approximately
$40,715,966 available to offset future taxable income in the United States. The
tax loss carry forwards expire in various years through 2031. The Company does
not expect to incur a Federal income tax liability in the foreseeable future.
Accordingly, a valuation allowance for the full amount of the related deferred
tax asset of approximately $14,250,588 has been established until realizations
of the tax benefit from the loss carry forwards meet the "more likely than
not" criteria.  Originating
 LossYear
 Carryforward1999
 $               407,6072000
 2,109,7162001
 2,368,3682002
 917,6262003
 637,4582004
 1,621,1752005
 2,276,3302006
 3,336,9642007
 3,378,3552008
 3,348,6942009
 2,927,0962010
 2,269,9872011
 2,212,1732012
 12,904,417Total
 $           40,715,966
  Additionally, as
of June 30, 2012, the Company's two wholly-owned Canadian subsidiaries had
non-capital tax loss carry forwards of approximately $2,844,864 available to be
used, in future periods, to offset taxable income. The loss carry forwards
expire in 2031. The deferred tax asset of approximately $753,889 has been fully
offset by a valuation allowance until realization of the tax benefit from the
non-capital tax loss carry forwards are more likely than not. The reconciliation of the difference
between the income tax provision using the statutory tax rates and the
effective tax rate is as follows:  For the six month periods endedJune 30,
 
 June 30,2012
 
 2011Statutory
  tax rates:U.S.
 35.00%
 
 35.00%Canada
 26.50%
 
 31.00%Income
  (loss) before income taxesU.S.
 $           (12,946,375)
 
 $            (4,544,792)Foreign
 12,262,107
 
 (2,478,004)$                     (684,268)
 
 $            (7,022,796)Expected
  tax recovery at statutory tax rates
 $             (1,281,773)
 
 $            (2,358,611)Differences
  in income taxes resulting from:Depreciation
  and impairment (foreign operations)
 (239,717)
 
 103,041Change
  in fair value of exchange feature liability
 -
 
 202,559Financing
  charge on embedded derivative liability
 -
 
 169,785Stock-based
  compensation
 14,497
 
 19,733Gain
  on  convertible derivative
 -
 
 (467,756)Long-term
  debt interest expense accretion
 -
 
 1,227,126(1,506,993)
 
 (1,104,123)Benefit
  of losses not recognized
 1,506,993
 
 1,104,123Income
  tax provision per unaudited consolidatedcondensed
  financial statements
 $                            -
 
 $
  -
 F13


---



Components of deferred income tax assets are as follows:  June 30,

   

   December 31,2012

   

   2011Property, plant and equipment

   

   $ -

   

   $         488,494Tax loss carryforwards

   

   15,004,477

   

   13,255,07515,004,477

   

   13,743,569Valuation allowance

   

   (15,004,477)

   

   (13,743,569)Carrying value

   

   $ -

   

   $                    -
 Valuation allowances reflect the deferred tax benefits that management is uncertain of the Company's ability to utilize in the future. Based on the Company’s current tax loss position tax benefits to be recognized is more-likely-than-not to be sustained upon examination by taxing authorities. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. The Company will recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the unaudited consolidated condensed statements of operations and comprehensive loss. Accrued interest and penalties will be included within the related tax liability line in the consolidated condensed balance sheets. In many cases the Company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of June 30, 2012:  United States - Federal

   2008 – presentUnited States - State

   2008 – presentCanada - Federal

   2009 – presentCanada - Provincial

   2009 – present
 NOTE 9 - STOCKHOLDERS' EQUITY No stock was issued during the six month period ended June 30, 2012. The following table sets forth a summary of the shares issued on July 15, 2011 as a result of the closing of the rights offering effective June 30, 2011:  Number of Shares

   AmountSubscription receivable at June 30, 2011

   32,143,170

   $ 3,857,180Conversion of notes payable to related parties and related accrued interest

   34,390,418

   4,126,850Conversion of accrued expenses

   136,424

   16,374Reclassification of conversion option liabilities to equity

   -

   2,654,730Conversion of exchange feature liability

   22,500,000

   2,712,600Rights offering costs

   -

   (419,410)Total

   89,170,012

   $ 12,948,324
 Effective November 6, 2011, the Company issued 400,000 restricted shares of common stock to two Board members in connection with restricted stock grants under the 2010 stock incentive plan. F14


---



Effective
November 6, 2011, the Company issued 166,668 restricted shares of common stock
to four Board members in lieu of outstanding board fees. Effective December 31, 2011, the
Company issued 250,000 restricted shares of common stock to five Board members
in connection with restricted stock grants under the 2010 stock incentive plan. NOTE
10 - STOCK OPTIONS AND WARRANT GRANTS STOCK OPTIONS On April 15, 2010, the Board of
Directors (the “Board”) granted an aggregate award of 900,000 stock options to
a former executive officer and former director and one director. The options
vest over a period of three years with an exercise price of $0.65 (fair market
value of the Company's common stock as of the date of grant) with expiry of
five years from the date of award. Effective February 7, 2011, with the
resignation of a director, the unvested portion of the stock options was
cancelled as a result of the resignation. The balance of the stock option
expense of the April 15, 2010 award is as follows:  Stock OptionDate
 ExpenseApril
  15, 2011
 $ 62,127April
  15, 2012
 $ 82,836April
  15, 2013
 $ 20,709
 A summary of option transactions,
including those granted pursuant to the terms of certain employment and other
agreements is as follows:  Stock purchase options
 Weighted average exercise priceOutstanding,
  January 1, 2011
 3,600,000
 $   0.68Granted
 475,000
 $   0.12Expired
  or cancelled
 (500,000)
 $ (0.73)Outstanding,
  December 31, 2011
 3,575,000
 $   0.60Expired
 (2,150,000)
 $ (0.71)Outstanding,
  June 30, 2012
 1,425,000
 $   0.43
 At June 30, 2012, the outstanding
options have a weighted average remaining life of 25 months. All options issued
prior to 2010 have vested, and the April 15, 2010 options vest over a period of
three years, in three equal parts each year. No stock options were granted for
the six month period ended June 30, 2012. The weighted average fair value of
options granted during 2011 was $0.02 and was estimated using the Black-Scholes
option pricing model, using the following assumptions:  2011Expected
  volatility
 111%Risk-free
  interest rate
 0.42%Expected
  life
 1.5 yrsDividend
  yield
 0.00%Forfeiture
  rate
 0.00%
  F15


---



The Black-Scholes option-pricing model used by the Company to calculate options and warrant values was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock purchase options and warrants. The model also requires highly subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the calculated values. At June 30, 2012, the Company had outstanding options as follows:  Number of

   ExerciseOptions

   Price

   Expiration Date100,000

   $1.00

   February 8, 2013250,000

   $0.27

   August 6, 2013600,000

   $0.65

   April 15, 2015250,000

   $0.12

   December 31, 2012225,000

   $0.12

   June 30, 20161,425,000
 Effective November 6, 2011, the Board approved restricted stock grants to 7 Board members under the 2010 stock incentive plan. As per the terms of the grant, each of the 7 Board members will receive 150,000 shares vesting in equal parts on December 31, 2011, December 31, 2012 and December 31, 2013 subject to the execution of the requisite grant agreements. The Board also approved restricted stock grants to 2 Board members for serving as chair to various committees. As per the terms of the grant, each of the 2 Board members will receive 200,000 shares vesting immediately subject to the execution of the requisite grant agreements. Stock-based compensation expense will be recorded as of the vesting terms of the grants. Of the vested shares 650,000 restricted shares of common stock were issued as of December 31, 2011. Effective January 12, 2012, the Board approved a management incentive plan which includes a 10% restricted common equity pool for management. Key participants of this plan will be executive officers and a member of the Company’s Board. Secondary participants will include other management with a trickle down to other core members of the team. The program entails a 5 year vesting program commencing January 2012, with an accelerated vesting schedule for certain participants of the plan. The equity grants are effective subject to the execution of the requisite grant agreements, no agreements have been executed to date. During the six month periods ended June 30, 2012 and 2011, $41,417 and $56,381, respectively, has been recorded in the unaudited consolidated condensed statements of operations and comprehensive loss for stock-based compensation. WARRANTS Warrants issued in connection with various private placements of equity securities are treated as a capital transaction and no income statement recognition is required. A summary of warrant transactions is as follows:  Warrants

   Weighted averageexercise priceOutstanding, January 1, 2010

   -

   $ -Granted

   1,545,000

   $ 0.65Expired or cancelled

   -

   $ -Outstanding, December 31, 2010, and 2011,

   1,545,000

   $ 0.65and June 30, 2012
  F16


---



In 2010, the Company closed a unit offering in the amount of $300,000 per tranche for gross proceeds of $600,000 whereby the Company issued 1,500,000 units. The unit offering was for up to $5 million. The units were in the form of shares of the Company's common stock, at $0.40 per share plus for each share of common stock subscribed to under the unit offer the investor received one warrant exercisable for 1 share of common stock at $0.55; if an Investor Warrant is exercised between the first and second years from issuance, the exercise price will be $0.65. All investor warrants as issued are subject to adjustment in the event of a stock split or similar adjustment by the Company. A commission of 4% of the gross proceeds was paid and 7.5 units for every $100 of the gross proceeds raised were payable for brokers’ fees. No warrants were issued during the six month periods ended June 30, 2012 and 2011. NOTE 11 - RELATED PARTY TRANSACTIONS During the six month period ended June 30, 2012, in addition to fees and salaries; reimbursement of business expenses; transactions with related parties include: •$150,000 related to services provided by Orchard Capital Corporation under a services agreement effective January 30, 2011. On April 19, 2011, the Company's Board ratified a Services Agreement (the "Agreement") between the Company and Orchard Capital Corporation ("Orchard") which was approved by the Company's Compensation Committee. Under the Agreement, Orchard agreed to provide services that may be mutually agreed to by and between Orchard and the Company including those duties customarily performed by the Chairman of the Board and executive of the Company as well as providing advice and consultation on general corporate matters and other projects as may be assigned by the Company's Board as needed. Orchard is controlled by Richard Ressler. Certain affiliated entities of Orchard as well as Richard Ressler own shares of the Company. •Mr. Nitin Amersey who is a director of the Company is listed as a control person with the Securities and Exchange Commission of Bay City Transfer Agency Registrar Inc., the Company's transfer agent. For the six month period ended June 30, 2012, the Company paid Bay City Transfer Agency Registrar Inc. $2,351. In addition to fees and salaries and reimbursement of business expenses, during the six month period ended June 30, 2011 transactions with related parties include: •$4,000,000 issuance of unsecured subordinated promissory notes. •The effect of an exchange feature included in the terms of the Share Subscription Agreement for $3,000,000 of Convertible Debentures issued on March 19, 2010 ("2010 Debentures") and fully converted including interest into 6,007,595 shares of common stock on March 25, 2010. At March 31, 2011 the exchange feature liability related to the convertible debentures was re-valued to $2,280,000 with the change in fair value of exchange feature liability of $578,738 expense recorded in the consolidated condensed statements of operations and comprehensive loss. In March 2010, Orchard invested $1 million in the $3 million convertible debentures offering; of the exchange feature liability $760,000 was attributed to the investment made by Orchard based on their relative contribution to the March 2010 subscription, this amount was transferred to equity as of June 30, 2011. Orchard received 6,333,333 additional shares of Common Stock in conjunction with certain rights under the Prior Subscription Agreements as the Company closed its Qualified Offering on June 30, 2011. •$125,000 related to services provided by Orchard under a services agreement effective January 30, 2011. •Mr. Nitin Amersey who is a director of the Company is listed as a control person with the Securities and Exchange Commission of Bay City Transfer Agency Registrar Inc., the Company's transfer agent. For the six month period ended June 30, 2011, the Company paid Bay City Transfer Agency Registrar Inc. $17,005. NOTE 12 - COMMITMENTS AND CONTINGENCIES LEASES Effective November 24, 2004, the Company's wholly-owned subsidiary, ESWA, entered into a lease agreement for approximately 40,220 square feet of leasehold space at 2 Bethlehem Pike Industrial Center, Montgomery Township, Pennsylvania. The leasehold space houses the Company's research and development facilities and also houses ESW’s manufacturing operations. The lease commenced on January 15, 2005 and was to expire January 31, 2010. Effective October 16, 2009, the Company's wholly-owned subsidiary ESWA entered into a lease renewal agreement with Nappen & Associates for the leasehold property in Pennsylvania. There were no modifications to the original economic terms of the lease under the lease renewal agreement. Under the terms of the lease renewal, the lease term will now expire February 28, 2013. Effective June 30, 2011, ESWA entered into a lease amendment agreement with Nappen & Associates for the leasehold property in Pennsylvania, whereby ESWA has the sole option to extend the expiry of the lease agreement by an additional 3 years if exercised, six months prior to February 28, 2013; there were no modifications to the original economic terms of the lease. F17


---



Effective
December 20, 2004, the Company's wholly-owned subsidiary, ESWC, entered into a
lease agreement for approximately 50,000 square feet of leasehold space in
Concord, Ontario, Canada. The leasehold space previously housed the Company's
executive offices and the manufacturing operations. The renewed lease period
commenced on October 1, 2010 and ended on September 30, 2015. Effective May 1,
2012, the landlord terminated the  lease agreement for the facility. The
Facility had been vacated prior to the lease
termination.   Thereafter effective May 22, 2012, ESWC and its
former landlord entered into an agreement for the full release of any future
obligations under the  lease agreement subject to payment of a
mutually agreed consideration payable through September 2012.   The
agreement provides for a full and complete release of ESWC by the landlord for
the consideration and terms under the lease agreement. The following is a
summary of the minimum annual lease payments:  Year
  Ending December 31,
 Amount2012
  (excluding the six months ended June 30, 2012)
 $      90,4952013
 30,165Total
 $     120,660
 LEGAL MATTERS From time to time, the Company
may be involved in a variety of claims, suits, investigations and proceedings
arising from the ordinary course of our business, breach of contract claims,
labor and employment claims, tax and other matters. Although claims, suits,
investigations and proceedings are inherently uncertain and their results
cannot be predicted with certainty, ESW believes that the resolution of current
pending matters will not have a material adverse effect on its business,
consolidated financial position, results of operations or cash flow. Regardless
of the outcome, litigation can have an adverse impact on ESW because of legal
costs, diversion of management resources and other factors. CAPITAL LEASE
OBLIGATION As of June 30, 2012 and December
31, 2011, the Company’s capital lease obligation amounted to $0 and $1,241,
respectively. NOTE 13 –
OPERATING SEGMENTS The Company has two principal
operating segments, air testing services and catalyst manufacturing. These
operating segments were determined based on the nature of the products and
services offered. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding how to allocate
resources and in assessing performance. The Company’s Executive Chairman has
been identified as the chief operating decision-maker, and directs the
allocation of resources to operating segments based on the profitability and
cash flows of each respective segment. The Company evaluates performance
based on several factors, of which the primary financial measure is net income.
The accounting policies of the business segments are the same as those
described in “Note 2: Summary of Accounting Policies.” No intersegment sales
were made for the six month periods ended June 30, 2012 and 2011. The following
tables show the operations of the Company’s reportable segments:  F18


---



For the three month period ended June 30, 2012Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalRevenue

   

   $ 2,083,458

   

   $ 260,645

   

   $ -

   

   $ 2,344,103Net income / (loss)

   

   $ 422,006

   

   $ 63,109

   

   $ (743,312)

   

   $ (258,197)For the six month period ended June 30, 2012Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalRevenue

   

   $ 4,464,541

   

   $ 411,164

   

   $ -

   

   $ 4,875,705Net income / (loss)

   

   $ (342,884)

   

   $ (450,135)

   

   $ 108,751

   

   $ (684,268)As of June 30, 2012Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalTotal assets

   

   $ 3,437,240

   

   $ 1,424,294

   

   $ 150,175

   

   $ 5,417,122Property, plant and equipmentunder construction

   

   $ 5,138

   

   $ 351,857

   

   $ -

   

   $ 356,995Property, plant and equipment

   

   $ 221,751

   

   $ 860,779

   

   $ -

   

   $ 1,082,530Accounts receivable

   

   $ 1,404,038

   

   $ 134,900

   

   $ 405,413

   

   $ 1,538,938Inventories

   

   $ 2,192,467

   

   $ 10,192

   

   $ -

   

   $ 2,202,659For the three month period ended June 30, 2011Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalSales

   

   $ 2,931,954

   

   $ 122,893

   

   $ -

   

   $ 3,054,847Net loss

   

   $ (804,195)

   

   $ (291,326)

   

   $ (2,792,646)

   

   $ (3,888,167)For the six month period ended June 30, 2011Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalSales

   

   $ 4,922,176

   

   $ 178,409

   

   $ -

   

   $ 5,100,585Net loss

   

   $ (2,478,004)

   

   $ (682,952)

   

   $ (3,861,840)

   

   $ (7,022,796)As of December 31, 2011Catalyst

   

   Air Testing

   

   Unallocated

   

   TotalTotal assets

   

   $ 4,329,986

   

   $ 1,551,848

   

   $ 623,192

   

   $ 6,505,026Property, plant and equipmentunder construction

   

   $ -

   

   $ 198,416

   

   $ -

   

   $ 198,416Property, plant and equipment

   

   $ 328,489

   

   $ 943,500

   

   $ -

   

   $ 1,271,989Accounts receivable

   

   $ 1,028,720

   

   $ 176,014

   

   $ -

   

   $ 1,204,734Inventories

   

   $ 2,393,507

   

   $ 37,520

   

   $ -

   

   $ 2,431,027
  NOTE 14 - LOSS PER SHARE Potential common shares of 1,425,000 related to ESW's outstanding stock options and 1,545,000 shares related to ESW's outstanding warrants, were excluded from the computation of diluted loss per share for the six month period ended June 30, 2012 because the inclusion of these shares would be anti-dilutive. Potential common shares of 3,575,000 related to ESW's outstanding stock options, 1,545,000 shares related to ESW's outstanding warrants, common shares of 66,670,033 from the exchange of unsecured subordinated promissory notes and rights offering and 22,500,000 shares of common stock under the exchange feature liability were excluded from the computation of diluted loss per share for the six and three month periods ended June 30, 2011 because the inclusion of these shares would be anti-dilutive. F19


---



NOTE 15 - RISK MANAGEMENT CONCENTRATIONS
OF CREDIT RISK AND ECONOMIC DEPENDENCE The Company's cash balances are
maintained in various banks in Canada and the United States. Deposits held in
banks in the United States are insured up to $250,000 per depositor for each
bank by the Federal Deposit Insurance Corporation. Deposits held in banks in
Canada are insured up to $100,000 Canadian per depositor for each bank by The
Canada Deposit Insurance Corporation, a federal crown corporation. Actual
balances at times may exceed these limits. Accounts Receivable and
Concentrations of Credit Risk: The Company performs on-going credit evaluations
of its customers' financial condition and generally does not require collateral
from its customers. Three of its customers accounted for 19.5%, 11.4% and
10.6%, of the Company's revenue during the six month period ended June 30, 2012
and 26.9%, 21.0% and 13.1%, respectively, of its accounts receivable as of June
30, 2012. Three of its customers accounted
for 39%, 16%, and 12%, respectively, of the Company's revenue during the six
month period ended June 30, 2011 and 28%, 18%, and 15%, respectively, of its
accounts receivable as of June 30, 2011. For the six month period ended
June 30, 2012, the Company purchased approximately 20.1% and 15.1% of its
inventory from two vendors. For the six month period ended June 30, 2011, the
Company purchased approximately 32.3% and 12.4% of its inventory from two vendors.
The accounts payable to these vendors aggregated approximately $334,575 and
$733,430 as of June 30, 2012 and 2011, respectively. NOTE 16 – LOAN
PAYABLE On April 25, 2012, the Company’s
wholly-owned subsidiary ESWA entered into a Machinery and Equipment Loan Fund
(“MELF Facility”) with the Commonwealth of Pennsylvania for up to $500,000 for
the purchase of equipment and related purchases. Two (2) draw-downs are
permitted under the MELF Facility by ESWA. The first draw down of $280,787
was made under the MELF Facility in connection with equipment purchased by ESWA
on April 25, 2012 (the “Closing Date”).  ESWA may make one (1) additional
draw-down per the terms of the MELF Facility so that the aggregate amount
borrowed under the MELF Facility may be up to $500,000. Terms of the MELF
Facility include initial interest at three (3%) percent per annum, monthly
blended payments of $3,710 and full repayment of the MELF Facility on or before
the first day of the eighty-fifth (85) calendar month following the Closing
Date. As part of the loan agreement, within three years from the Closing Date
ESWA is required to create, or retain, at its current location a certain number
of jobs that is specified in the loan Application. A breach by ESWA in the
creation or maintenance of these jobs shall be considered an event of default
under the MELF Facility. In the event ESWA defaults on any payments, the MELF
Facility may be accelerated with full payment due along with certain additional
modifications including the increase in interest to twelve and one half (12
1/2%) percent. The loan is secured by certain property and equipment and
corporate guarantee of the Company. As of June 30, 2012 and December
31, 2011, the loan payable amounted to $274,763 and $0, respectively. For the
six month period ended June 30, 2012, the Company paid interest amounting to
$1,396 (June 30, 2011 - $0) on the loan and also repaid principal in the amount
of $6,024 (June 30, 2011 - $0). Loan maturities based on
outstanding principal are as follows:  Year
  Ending December 31,
 Amount2012
  (excluding the six months ended June 30, 2012)
 $               15,1922013
 37,2442014
 38,3762015
 39,5442016
 40,746Thereafter
 103,661Total
 $          274,763
  F20


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ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should
be read in conjunction with ESW's consolidated condensed financial statements
and Notes thereto included elsewhere in this Report. This Form 10-Q contains certain
forward-looking statements regarding, among other things, the anticipated
financial and operating results of ESW's business. Investors are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of the date hereof. ESW undertakes no obligation to publicly release any
modifications or revisions to these forward-looking statements to reflect
events or circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. In connection with the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, ESW cautions investors
that actual financial and operating results may differ materially from those
projected in forward-looking statements made by, or on behalf of, ESW. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or achievements
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. This
report should be read in conjunction with ESW's Annual Report on Forms 10-K,
for the year ended December 31, 2011 as filed with the Securities and Exchange
Commission. GENERAL OVERVIEW Environmental Solutions Worldwide
Inc. ("we," "us," "ESW" or the
"Company") is a publicly traded company engaged through its
wholly-owned subsidiaries ESW Canada Inc. (“ESWC”), ESW America Inc. (“ESWA”),
Technology Fabricators Inc. (“TFI”) and ESW Technologies Inc. (“ESWT”),
(together the "ESW Group of Companies") in the design, development,
manufacture and sale of emission technologies and services. ESW is currently
focused on the international medium duty and heavy duty diesel engine market
for on-road and off-road vehicles as well as the utility engine, mining,
marine, locomotive and military industries. ESW also offers engine and after
treatment emissions verification testing and certification services. ESW's focus is to be an
integrated solutions provider to the environmental emissions market by
providing leading-edge catalyst technology as well as best-in-class engine and
vehicle emissions testing and certification services. The Company's strategy is
centered on identifying and deploying resources against its
"sweet-spot" products, where ESW has identified its core competencies
and differentiation in the marketplace. ESW's core geography focus is North
America, and will opportunistically explore business development opportunities
in other markets if accretive to the Company in the short term. By focusing
financial, human and intellectual capital on ESW's core competencies and
markets, the Company is targeting profitable growth in the short term and value
creation for its shareholders over the long term. ESW was incorporated in the State
of Florida in 1987. Our principal executive offices are located at 200 Progress
Drive, Montgomeryville, PA, 18936. Our telephone number is (905) 695-4142 and
(215) 699 0730. Our website is www.cleanerfuture.com. Information contained on
our website does not constitute a part of this 10-Q report. In 2012, ESW continues to focus
on optimizing the Company's operations around its "sweet spots" and
capturing a greater market share in the catalytic converter and emissions
testing markets whilst ensuring steps towards profitable growth. The key
factors that are in ESW's favor are: (a) continued regulatory push for
emissions reductions in the United States, (b) funding available from public
agencies, (c) a market-leading Level III active catalytic converter technology
and an established distribution network in North America, and (d) CARB and EPA
certification and verification capable emissions and durability testing
services. ESW believes that it can improve
and achieve profitability and grow its business by continuing to pursue the
following strategy: • Focus on delivering controlled
and profitable growth to its shareholders. • Provide integrated solutions to
the emissions market by leveraging its product development, testing and
certification services, and distribution and post-sale services capabilities. • Center the Company's sales
strategy around identified "sweet-spots" that will allow
manufacturing efficiency gains and optimized resource allocation. • Educate the end customers and
regulatory agencies about the technology and ensure realistic delivery
expectations. • Enhance customer service
functions. • Work with vendors to optimize
ESW's material buys and lead times. • Constantly review operations,
processes and products under a Continuous Improvement / Performance Based
culture.


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ESW has made significant investments in research and development and obtaining regulatory approvals for its technologies. Effective July 16, 2012, the California Air Resources Board (“CARB”) verified the ThermaCat-e Active Level III Plus Diesel Particulate Filter System targeted at EGR engines for retrofit on 1993 through 2009 On-Road engine model years, having engine displacement between 4 and 13 liters and a horse power (HP) rating between 150 to 400 HP. This new CARB Executive Order DE-12-005 extends the range of applications for the ThermaCat product line in step with the changing marketplace demands. On August 23, 2011, ESW received notification from the United States Environmental Protection Agency ("EPA") that the Company's XtrmCat Kit is now certified for 2 stroke, Category 2, marine engines. The certifications are applicable to Electro-Motive Diesel (“EMD”) 710 and 645 engines. The XtrmCat can achieve Tier 0 and Tier I compliance as per 40 CFR 1042 when retrofitted to EMD 710 and 645 engines. ESW is pursuing opportunities to commercialize this technology into the marketplace. ESW's XtrmCat product designed for locomotive, Tier 0, turbocharged EMD 645 and 710 engines was tested at an EPA recognized facility for certification during March and April 2011 along with the marine product together with a partner company. We are exploring opportunities to obtain certifications for the aforementioned locomotive engines. ESW believes that with the additional certifications/verification of the above range of products, ESW will cover a significant portion of the market and give ESW the competitive advantage to be the technology of first choice in retrofit and OEM applications. The cost of developing a complete range of products to meet regulations is substantial. ESW believes that it possesses a competitive advantage in ensuring regulatory compliance by leveraging its testing and research facility in Montgomeryville, Pennsylvania to support its certification and verification efforts. Historically, ESW has also managed to offset some of these development costs through the application of research grants and tax refunds. ESW made the following adjustments to its business in 2011 to improve its operational results in 2012, and continues to improve and adjust its strategy based on demand and business needs. 1) ESW has reviewed and continues to review its costs for inefficiencies and has taken steps to reduce its operating expenses. Key cost reduction initiatives during 2011 included the restructuring of its management team, the termination of certain contracts and the re-negotiation of board and consulting obligations, amongst others. In addition, during the second semester of 2011, ESW reduced its overhead costs by re-locating its Canadian manufacturing operations to its facilities located in Pennsylvania, United States and subsequently terminating its Lease Agreement in May 2012 under favorable settlement and release terms. ESW will continuously revisit opportunities to further streamline the business. 2) ESW is closely monitoring its bill of materials and costing and periodically revises pricing to its dealers to help recover product margins. ESW has also revised its overall commercial policies, including its general terms and conditions and lead time expectations on its products. Changes have also been implemented to ESW's costing and quoting processes, including frequent periodic review of its bill of materials and the proactive negotiation of raw material prices. 3) ESW is focusing on increasing sales volumes on its core "sweet spot" products to reduce production complexities and improve inventory management. ESW is has also implemented new continuous improvement programs such as the cross-functional "Product and Process Review" stream led by ESW's engineering team searching for product, product quality and product development process enhancements. 4) ESW has revisited relationships with critical vendors, in addition to setting up favorable payment plans to reduce the outstanding balances with these vendors. ESW has also secured and continues to secure volume discounts on critical components. ESW has also identified and engaged new vendors in the U.S. for parts supply. In addition, there is a greater focus on outsourcing opportunity for labor intensive parts. 5) ESW has revised and implemented its new warranty policy to ensure that warranty terms and conditions meet industry standards whilst mitigating warranty risks to the fullest extent possible. ESW has also launched a backend website to assist its distributors and installers in day to day operations, training and processes. 6) ESW is in the process of continuously engaging its existing dealers to help better understand ESW's business and product positioning and to strengthen ESW's partnership with its distribution base. ESW is also opportunistically adding new independent emissions focused dealers to enhance the Company’s North American sales coverage.  ESW has made substantial inroad in improving its dealership network through the termination of, and addition of certain dealers in states such as California, New York, Connecticut, New Jersey, Pennsylvania and Florida.


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7) ESW is focusing on increasing
revenue from testing services provided to third parties from its Air Testing
Facility in Montgomeryville, Pennsylvania. ESW’s Air Testing Services in
Montgomeryville, PA continues to see a sizeable increase in business, in line
with ESW’s effort to increase revenues from these operations. As a result from these actions, the Company
is positioned to improve its operational results in 2012. The Company has
reduced inefficiencies in personnel-related costs, manufacturing costs and
other discretionary expenditures that are within the Company's control.The Company has lowered its overhead costs while maintaining its focus on the
sales, marketing and customer service efforts. The changes in the business have
lowered the overall operating costs in the Company and have improved the
Company's overall results in 2012, without affecting the Company's positioning
of its existing products and testing services as well as its efforts to develop
and deliver to market the next generation of leading emissions products and
services.


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COMPARISON
OF THE SIX MONTH PERIOD ENDED JUNE 30, 2012 TO THE SIX MONTH PERIOD ENDED JUNE
30, 2011 RESULTS OF
OPERATIONS The following management's
discussion and analysis of financial condition and results of operations
(MD&A) should be read in conjunction with the MD&A included in ESW's
Annual Report on Forms 10-K, for the year ended December 31, 2011. Revenues for the six month period
ended June 30, 2012, decreased by 4.4 percent, to $4,875,705 from $5,100,585
for the comparable period in 2011. The decrease in revenue is related to
reduced retrofit funding opportunities and lack of enforcement of regulations
by regulatory agencies. The decrease in revenue was offset by increases in
parts sales and sales of military product. Cost of sales as a percentage of
revenues for the six month period ended June 30, 2012 was 65.6 percent compared
to 89.9 percent for the six month period ended June 30, 2011. The reduction in
cost of sales in the current period of 2012 versus 2011 is reflective of the
changes that were implemented in the Company’s operations since February 2011, such
as the streamlining of the Canadian manufacturing operations, ESW’s focus on
optimizing pricing and its materials costs, and the changing product mix with
the growing contribution of the Air Testing Services.  In addition, the
six month period ended June 30, 2011 was negatively impacted by a write-down of
inventory in the amount of $507,032. Consequently, gross margin for the six
month period ended June 30, 2012 was 34.4 percent compared to 10.1 percent for
the six month period ended June 30, 2011. Marketing, office and general
expenses for the six month period ended June 30, 2012 decreased 7.1 percent to
$1,865,510 from $2,007,565 for the same period in 2011. The decrease is
primarily due to: (a) decrease in factory expense of $304,449 resulting from cost
saving initiatives and higher factory overheads applied to cost of sales, (b)
decrease in sales and marketing wages and selling expenses of $24,585, (c) a
decrease in investor relation costs of $44,283 and (d) an offsetting grant of
$75,000 related to a Job Creation Tax Credit from the Pennsylvania Department
of Community and Economic Development. The decreases were offset by: (a) a
provision for uncollectable accounts of $213,108 recorded for two distributors
with whom the Company has a commercial dispute, (b) an increase in
administration salaries and wages of $52,783, (c) an increase in facility
expenses of $26,479 resulting from rent and costs related to the release of the
Canadian facility, and (d) an increase in general administration expenses of $13,892
attributed to hiring expenses for new employees. The Company incurred $0 and
$523,274 as restructuring charges for the six month periods ended June 30, 2012
and June 30, 2011, respectively. The restructuring costs for the first six
months of 2011 consisted primarily of severance, vacation payouts and other
restructuring related agreements. Research and development
("R&D") expenses for the six month period ended June 30, 2012
decreased by $19,579, or 5.9 percent, to $314,318 versus the six month period
ended June 30, 2011. The primary driver of R&D expenses for the six month
period ended June 30, 2012 and June 30, 2011 related to ESW's pursuit of the
verification expansion of its Level III product. ESW benefitted during the
first six month period of 2011 from grant money amounting to $278,712. During
the six month period ended June 30, 2012 there was no grant funding to offset
R&D cost. Officers’ compensation and
directors’ fees for the six month period ended June 30, 2012 decreased by
$95,395, or 23.4 percent, to $311,591 from $406,986 for the six month period
ended June 30, 2011. Included in the June 30, 2012 officers’ compensation and
directors’ fees is $41,417 of stock-based compensation expenses for options
issued in 2010 to a past officer and director. The decrease in fees is mainly
due to changes in executive management and the board compensation structure of
ESW. Consulting and professional fees
for the six month period ended June 30, 2012 decreased by $11,843, or 8.0
percent, to $135,613 from $147,456 for the six month period ended June 30,
2011. The costs are fairly consistent to prior year expenses except for ongoing
monthly accruals for the estimated 2012 annual audit fees as opposed to year
end accruals in 2011. Foreign exchange loss for the six
month period ended June 30, 2012, was $43,043 as compared to a loss of $84,719
for the six month period ended June 30, 2011. This is a result of the
fluctuation in the exchange rate of the Canadian Dollar to the United States
Dollar. Depreciation and amortization
expense for the six month period ended June 30, 2012 decreased by $99,388, or
46.3 percent to $115,117 from $214,505 for the six month period ended June 30,
2011. The depreciation costs for the six month period ended June 30, 2012 were
substantially lower due to: (a) write-off of assets located in ESW’s Canadian
operations as a result of the relocation of operations in 2011, (b) application
of additional depreciation to cost of sales, (c) fully amortized patents, and
(d) full depreciation for a portion of the assets. The Company has valued the
impairment loss at $28,945 for the balance of the office equipment, furniture
and fixtures of ESW Canada Inc. as of June 30, 2012. The former landlord of the
Canadian property terminated the lease for the facility as of May 1, 2012, and
effective May 22, 2012, ESW Canada and its former landlord entered into an
agreement for the full release of any future obligations under the prior lease
agreement. For the six month period ended June 30, 2011, the Company had valued
the impairment loss at $311,304 related to the transfer of manufacturing
operations to Pennsylvania, USA.


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Loss from operations for the six month period ended June 30, 2012 decreased by $2,375,687, or 67.6 percent, to $1,138,168 from $3,513,855 for the six month period ended June 30, 2011. ESW’s loss from operations for the six month period ended June 30, 2012 included the following non-cash items: allowance for inventory obsolescence of $107,360, allowance for doubtful accounts of $213,108, depreciation expenses of $294,804, an impairment loss of $28,945 and stock based compensation expense of $41,417. In addition, cash costs of $153,034 related to the rent and other facility costs of the Canadian facility are included in loss from operations for the six month period ended June 30, 2012. This amount includes the expenses for the full release of the Canadian facility and its lease obligations. Effective February 3, 2012 ESW’s wholly-owned non-operational subsidiary BBL Technologies Inc., (“BBL”) filed for bankruptcy in the Province of Ontario, Canada. Due to the insolvency of BBL, the redeemable Class A special shares were cancelled and the Company recorded a $453,900 gain on the Consolidated Condensed Statement of Operations and Comprehensive Loss. In the six month period ended June 30, 2011, the Company incurred the following costs related to various financing and debt transactions: •    $578,739                              -              Change in fair value of exchange feature liability •    $126,850                              -              Interest on notes payable to related party •    $3,506,074                           -              Interest accretion expense •    $485,101                              -              Financing charge on embedded derivative liability •    ($1,336,445)                        -              Gain on convertible derivative •    $154,205                              -              Bank fees related to credit facility covenant waivers •    $5,583                                   -              Gain on disposal of property and equipment  No costs related to financing and debt transactions were incurred in the six month period ended June 30, 2012.  COMPARISON OF THE THREE MONTH PERIOD ENDED JUNE 30, 2012 TO THE THREE MONTH PERIOD ENDED JUNE 30, 2011 RESULTS OF OPERATIONS The following MD&A of financial condition and results of operations should be read in conjunction with the MD&A included in ESW's Annual Report on Forms 10-K, for the year ended December 31, 2011. Revenues for the three month period ended June 30, 2012, decreased by 23.3 percent to $2,344,103 from $3,054,847 for the three month period ended June 30, 2011. The decrease in revenue is related to reduced retrofit funding opportunities and lack of enforcement of regulations by regulatory agencies. The decrease in revenue was offset by increases in part sales and sales of a military product. Cost of sales as a percentage of revenues for the three month period ended June 30, 2011 was 62.1 percent compared to 81.6 percent for the three month period ended June 30, 2011. The reduction in cost of sales in the current period of 2012 versus 2011 is reflective of the changes that were implemented in the Company’s operations since February 2011, such as the streamlining of the Canadian manufacturing operations, ESW’s focus on optimizing pricing and its materials costs, and the changing product mix with the growing contribution of the Air Testing Services.  In addition, the three month period ended June 30, 2011 was negatively impacted by a write-down of inventory in the amount of $271,212. Consequently, the gross margin for the three month period ended June 30, 2012 was 37.9 percent compared to 18.4 percent for the three month period ended June 30, 2011. Marketing, office and general expenses for the three month period ended June 30, 2012 decreased by 32.7 percent to $675,060 from $1,003,506 for the three month period ended June 30, 2011. The decrease is primarily due to: (a) decrease in factory expense of $69,931 resulting from cost saving initiatives and higher factory overheads applied to cost of sales, (b) decrease in in sales and marketing wages and selling expenses by of $100,345, (c) $29,448 decrease in general administration expenses, (d) decrease in facility expenses of $21,907 resulting from release of the Canadian facility in May 2012, (e) decrease in administration salaries and wages of $11,393, (f) decrease in investor relation costs of $20,422 and (g) an offsetting grant of $75,000 related to a Job Creation Tax Credit from the Pennsylvania Department of Community and Economic Development. The Company incurred $0 and $4,465 as restructuring charges for the three month periods ended June 30, 2012 and 2011, respectively. The restructuring costs for the first six months of 2011 consisted primarily of severance, vacation payouts and other restructuring related agreements. R&D expenses for the three month period ended June 30, 2012 increased by $35,498, or 23.6 percent, to $185,770 from $150,272 for the three month period ended June 30, 2011. The primary driver of R&D expenses for the three month period ended June 30, 2012 versus the comparable period in 2011 was related to ESW's pursuit of the verification expansion of its Level III product. In addition to the decrease, in the prior year three month period the Company received grant money amounting to $48,713. During the three month period ended June 30, 2012 there was no grant funding to offset R&D cost.


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Officers’ compensation and directors’ fees for the three month period ended June 30, 2012 decreased by 20.9 percent to $154,484 from $195,342 for the three month period ended June 30, 2011. Included in the June 30, 2012 officers’ compensation and directors’ fees is $20,709 of stock based compensation expenses for options issued in 2010 to a past officer and director. The decrease in fees is mainly due to changes in executive management and the board compensation structure of ESW. Consulting and professional fees for the three month period ended June 30, 2012 increased by 9.6 percent to $79,629 from $72,661 for the three month period ended June 30, 2011. The increase is a result of a change in accrual for the annual audit costs, as the Company has started accruing the annual fees on an ongoing monthly basis for the estimated 2012 annual audit fees as opposed to an annual accrual in 2011. Foreign exchange loss for the three month period ended June 30, 2012 was $11,612 as compared to a loss of $24,594 for the three month period ended June 30, 2011. This is a result of the fluctuation in the exchange rate of the Canadian Dollar to the United States Dollar. Depreciation and amortization expense for the three month period ended June 30, 2012 decreased by 58.7 percent to $38,935 from $94,155 for the three month period ended June 30, 2011. The depreciation costs for the three month period ended June 30, 2012 were substantially lower due to: (a) write-off of assets located in ESW’s Canadian operations as a result of the relocation of operations in 2011, (b) application of additional depreciation to cost of sales, (c) fully amortized patents, and (d) full depreciation for a portion of the assets. The Company did not recognize any impairment loss for the three months ended June 30, 2012. The former landlord of the Canadian property terminated the lease for the facility as of May 1, 2012, and effective May 22, 2012, ESW Canada and its former landlord entered into an agreement for the full release of any future obligations under the prior lease agreement. Loss on impairment of property plant and equipment for the three month period June 30, 2011 was $311,304 related to the transfer of manufacturing operations to Pennsylvania, USA. Loss from operations for the three month period ended June 30, 2012 decreased by $1,035,907, or 80.0 percent, to $258,197 from $1,294,104 for the three month period ended June 30, 2011. ESW’s loss from operations for the three month period ended June 30, 2012 included the following non-cash items: allowance for inventory obsolescence of $107,360, depreciation expenses of $142,367, stock based compensation expense of $20,709, foreign exchange loss of $11,612 and a bad debt recovery of $979. In addition, cash costs of $19,230 related to the release of the Canadian facility including full release of lease obligations are included in the loss from operations for the three month period ended June 30, 2012.  In the three month period ended June 30, 2011, the Company incurred the following costs related to various financing and debt transactions:  •    $92,329                 -              Interest on notes payable to related party •    $2,456,074            -              Interest accretion expense •    $47,693                 -              Bank fees related to credit facility covenant waivers •    $2,033                   -              Gain on disposal of property and equipment  No costs related to financing and debt transactions were incurred in the three month period ended June 30, 2012.  LIQUIDITY AND CAPITAL RESOURCES ESW's principal sources of operating capital have been the proceeds from its various financing transactions. During the six month period ended June 30, 2012, the Company used $1,005,746 of cash to sustain operating activities compared with $948,729 for the six month period ended June 30, 2011. As of June 30, 2012 and 2011, the Company had cash and cash equivalents of $78,556 and $759,003, respectively. Net cash used in operating activities for the six  month period ended June 30, 2012 amounted to $1,005,746. This amount was attributable to the net loss of $684,268, plus non-cash expenses such as depreciation, impairment loss, stock based compensation, gain on deconsolidation of BBL and others of $231,734, and a decrease in net operating assets and liabilities of $553,212. Net cash used in operating activities for the six month period ended June 30, 2011 amounted to $948,729. This amount was attributable to the net loss of $7,022,796, plus non-cash expenses such as depreciation, amortization, interest and accretion on long term debt, inducement premium on conversion of debentures and others of $4,661,834, and an increase in net operating assets and liabilities of $1,412,233. Net cash used in investing activities was $292,869 for the six month period ended June 30, 2012, as compared to $28,544 used in investing activities for the six month period ended June 30, 2011. Net cash provided by financing activities totaled $273,522 through a loan payable in the amount of $280,787 with repayment of $6,024 in principal and repayment under capital lease obligation amounting to $1,241 for the six month period ended June 30, 2012, as opposed to net cash provided by financing activities of $1,732,767 for the six month period ended June 30, 2011. In the prior year period of 2011, $4,000,000 was provided through the issuance of the notes payable to related parties, $373,615 was used towards costs of the Rights Offering which closed on June 30, 2011, $1,891,079 was repaid under ESW's CIBC credit facility and $2,539 was repaid under capital lease obligation.


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ESW
operates in a capital intensive and highly regulated industry, where a long
lead time to bring new products into market is considered normal. ESW continues
to invest in research and development to improve its technologies and bring
them to the point where its customers have a high confidence level to purchase
our products. During six month periods ended
June 30, 2012 and in 2011, ESW did not produce sufficient cash from operations
to support its expenditures. Prior financings supported the Company's
operations during the period. ESW's principal use of liquidity relates to the
Company's working capital needs and to finance any further capital expenditures
or tooling needed for production and/or its testing facilities. ESW anticipates certain capital
expenditures in 2012 related to the general operation of its business as well
as to upgrade the Air Testing Services facilities in Montgomeryville,
Pennsylvania. Overall, capital adequacy is
monitored on an ongoing basis by our management and reviewed quarterly by the
Board of Directors. Competition is expected to
intensify as the market for ESW's products expands. ESW's ability to continue
to gain significant market share will depend upon its ability to continue to
develop strong relationships with regulators, distributors, customers and
develop new products. Increased competition in the market place could result in
lower average pricing which could adversely affect ESW's margins and pricing
for its products. ESW's ability to service its
indebtedness, other obligations and commitments in cash will depend on its
future performance and ability to raise capital, which will be affected by
prevailing economic conditions, financial, business, regulatory and other
factors. Certain of these factors are beyond ESW's control. ESW may need
additional financing to meet its financial projections and obligations.
Significant assumptions underlie ESW's projections, including, among other
things, that ESW will be successful in implementing its business strategy, that
some of ESW's products that have received verification from the appropriate
regulatory authorities will obtain customer and market acceptance, and that
there will be no material adverse developments in ESW's business, liquidity or
capital requirements. If ESW cannot generate sufficient cash flow from
operations to service its future indebtedness and to meet other obligations and
commitments, ESW might be required to refinance or to dispose of assets to
obtain funds for such purpose. There is no assurance that refinancing or asset
dispositions or raising funds from sales of equity or otherwise could be
effected on a timely basis or on satisfactory terms. In such circumstance, ESW
would have to issue shares of its common stock as repayment of these
obligations, which would be of a dilutive nature to ESW's present shareholders. DEBT
STRUCTURE On April 25, 2012, the Company’s
wholly-owned subsidiary ESWA entered into a Machinery and Equipment Loan Fund
(“MELF Facility”) with the Commonwealth of Pennsylvania for up to $500,000 for
the purchase of equipment and related purchases. Two (2) draw-downs are
permitted under the MELF Facility by ESWA. The first draw-down of $280,787
was made under the MELF Facility in connection with equipment purchased by ESWA
on April 25, 2012 (the “Closing Date”).  ESWA may make one (1) additional
draw-down per the terms of the MELF Facility so that the aggregate amount
borrowed under the MELF Facility may be up to $500,000. Terms of the MELF
Facility include initial interest at three (3%) percent per annum with monthly
payments and full repayment of the MELF Facility on or before the first day of
the eighty fifth (85) calendar month following the Closing Date. As part of the
loan agreement, within three years from the Closing Date ESWA is required to
create, or retain, at its current location a certain number of jobs that is
specified in the loan Application. A breach by ESWA in the creation or
maintenance of these jobs shall be considered an event of default under the
MELF Facility. In the event ESWA defaults on any payments, the MELF Facility
may be accelerated with full payment due along with certain additional modifications
including the increase in interest to twelve and one half (12 1/2%) percent. In
connection with the MELF Facility, the Company entered into a Guaranty and a
Loan and Security Agreement on behalf of its wholly-owned subsidiary
ESWA. As of June 30, 2012 and December
31, 2011, the loan payable amounted to $274,763 and $0, respectively. For the
six month period ended June 30, 2012, the Company paid interest amounting to
$1,396 (June 30, 2011 - $0) on the loan and also repaid principle in the amount
of $6,024 (June 30, 2011 - $0). CONTRACTUAL
OBLIGATIONS LEASES Effective November 24, 2004, the
Company's wholly-owned subsidiary, ESWA, entered into a lease agreement for
approximately 40,220 square feet of leasehold space at 2 Bethlehem Pike
Industrial Center, Montgomery Township, Pennsylvania. The leasehold space
houses the Company's research and development facilities and also houses ESW’s
manufacturing operations. The lease commenced on January 15, 2005 and was to
expire January 31, 2010. Effective October 16, 2009, the Company's wholly-owned
subsidiary ESWA entered into a lease renewal agreement with Nappen &
Associates for the leasehold property in Pennsylvania. There were no
modifications to the original economic terms of the lease under the lease renewal
agreement. Under the terms of the lease renewal, the lease term will now expire
February 28, 2013. Effective June 30, 2011, ESWA entered into a lease amendment
agreement with Nappen & Associates for the leasehold property in
Pennsylvania, whereby ESWA has the sole option to extend the expiry of the
lease agreement by an additional 3 years if exercised, six months prior to
February 28, 2013; there were no modifications to the original economic terms
of the lease.


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Effective December 20, 2004, the Company's wholly-owned subsidiary, ESWC, entered into a lease agreement for approximately 50,000 square feet of leasehold space in Concord, Ontario, Canada. The leasehold space previously housed the Company's executive offices and the manufacturing operations. The renewed lease period commenced on October 1, 2010 and ended on September 30, 2015. Effective May 1, 2012, the landlord terminated the lease agreement  for the facility. The Facility had been vacated prior to the lease termination.   Thereafter effective May 22, 2012, ESWC and its former landlord entered into an agreement for the full release of any future obligations under the lease agreement subject to payment  of  a  mutually agreed consideration payable through September 2012. The agreement provides for a full and complete release of ESWC by the landlord for the consideration and terms under the lease agreement. The following is a summary of the minimum annual lease payments:  Year Ending December 31,

   Amount2012 (excluding the six months ended June 30, 2012)

   $   90,4952013

   30,165Total

   $ 120,660
 LEGAL MATTERS From time to time, the Company may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, ESW believes that the resolution of current pending matters will not have a material adverse effect on its business, consolidated financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on ESW because of legal costs, diversion of management resources and other factors CAPITAL LEASE OBLIGATION As of June 30, 2012 and December 31, 2011, the Company’s capital lease obligation amounted to $0 and $1,241, respectively. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-5 – “Comprehensive Income – Presentation of Comprehensive Income”.  This statement removed the presentation of comprehensive income in the statement of changes in stockholders’ equity.  The only two allowable presentations are below the components of net income in a statement of comprehensive income or in a separate statement of comprehensive income that begins with total net income.  The guidance was effective for interim or annual reporting periods beginning after December 15, 2011. The adoption of this ASU had no effect on the Company's unaudited consolidated condensed financial statements. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES ESW's significant accounting policies are summarized in Note 2 to the consolidated condensed financial statements included its quarterly reports and its 2011 Annual Report to Shareholders. In preparing the consolidated condensed financial statements, we make estimates and assumptions that affect the expected amounts of assets and liabilities and disclosure of contingent assets and liabilities. We apply our accounting policies on a consistent basis. As circumstances change, they are considered in our estimates and judgments, and future changes in circumstances could result in changes in amounts at which assets and liabilities are recorded. FOREIGN CURRENCY TRANSACTIONS The functional currency of the Company and its foreign subsidiaries is the U.S. dollar. Most of the Company’s revenue and materials purchased from suppliers are denominated in or linked to the U.S. dollar. Transactions denominated in currencies other than a functional currency are converted to the functional currency on the transaction date, and any resulting assets or liabilities are further translated at each reporting date and at settlement. Gains and losses recognized upon such translations are included within foreign exchange gain (loss) in the consolidated condensed statements of operations and comprehensive loss.


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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ESW is exposed to financial
market risks, including changes in currency exchange rates. The Company also
has foreign currency exposures at its foreign operations related to buying and
selling currencies other than the local currencies. The risk under these
interest rate and foreign currency exchange agreement is not considered to be
significant. ESW's exposure to foreign
currency translation gains and losses also arises from the translation of the
assets and liabilities of its subsidiaries to U.S. dollars during
consolidation. These risks have been significantly mitigated by the move of
ESW’s manufacturing operations to Pennsylvania, USA. During the year 2011, the Company
changed the functional currency of its Canadian operations from the Canadian
dollar to the U.S. dollar. For the six month period ended June 30, 2011, ESW
recognized a translation gain $125,957 reported as other comprehensive income
in the consolidated condensed statements of operations and comprehensive loss. Included in foreign exchange loss
in the consolidated condensed statements of operations and comprehensive loss
for the six month period ended June 30, 2012, ESW has recognized a translation
loss of $43,043 as compared to a loss of $84,719 in June 30, 2011 primarily as
a result of exchange rate differences between the U.S. dollar and the Canadian
dollar. INTEREST
RATE RISK ESW currently has no
variable-rate long-term debt that exposes ESW to interest rate risk.


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ITEM
4. CONTROLS AND PROCEDURES (a) EVALUATION OF DISCLOSURE
CONTROLS AND PROCEDURE EVALUATION OF
THE COMPANY'S DISCLOSURE AND INTERNAL CONTROLS The Company evaluated the
effectiveness of the design and operation of its "disclosure controls and
procedures" as of the end of the period covered by this report. This
evaluation was done with the participation of management, under the supervision
of the Executive Chairman ("EC") and Chief Financial Officer
("CFO"). LIMITATIONS ON
THE EFFECTIVENESS OF CONTROLS A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the control. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, control may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost
effective control system, misstatements due to error or fraud may occur and not
be detected. The Company conducts periodic evaluations of its internal controls
to enhance, where necessary, its procedures and controls. CONCLUSIONS Based on our evaluation, the EC
and CFO concluded that the registrant's disclosures, controls and procedures
are effective to ensure that information required to be disclosed in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Security
Exchange Commission rules and forms. (c) CHANGES IN INTERNAL CONTROLS Not applicable.


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PART II OTHER
INFORMATION ITEM 1A. RISK
FACTORS In evaluating an investment in
our common stock, investors should consider carefully, among other things, the
risk factors previously disclosed in Part I, Item 1 of our Annual Report to the
Securities and Exchange Commission for the year ended December 31, 2011, as
well as the information contained in this report and our other reports and
registration statements filed with the Securities and Exchange Commission. ITEM 5. OTHER
INFORMATION Effective July 16th, 2012, CARB
verified the ThermaCat-e Active Level III Plus Diesel Particulate Filter System
targeted at EGR engines for retrofit on 1993 through 2009 On-Road engine model
years, having engine displacement between 4 and 13 liters and a horse power
(HP) rating between 150 to 400 HP. This new CARB Executive Order DE-12-005
extends the range of applications for the ThermaCat product line in step with
the changing marketplace demands.


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ITEM 6. EXHIBITS EXHIBITS:  31.1

   Certification of Executive Chairman and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002.31.2

   Certification of Chief Financial Officer, pursuant to the Sarbanes-Oxley Act of 2002.32.1

   Certification pursuant to 18 U.S.C. Section 1350, as amended pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

   Certification pursuant to 18 U.S.C. Section 1350, as amended pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.ins

   XBRL Instance101.xsd

   XBRL Schema101.cal

   XBRL Calculation101.def

   XBRL Definition101.lab

   XBRL Label101.pre

   XBRL Presentation
 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. DATED: August 28th, 2012Montgomeryville, PA, USA ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.  BY:/S/ MARK YUNGMARK YUNGEXECUTIVE CHAIRMAN /S/ PRAVEEN NAIRPRAVEEN NAIRCHIEF FINANCIAL OFFICER


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EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002 I, Mark Yung, certify that: 1. I have reviewed this amended quarterly report on Form 10Q/A of Environmental Solutions Worldwide, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying Officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the Registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance the generally accepted accounting principles; c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of 2012 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. DATE: AUGUST 28th, 2012 BY: /S/ MARK YUNGMARK YUNGEXECUTIVE CHAIRMAN


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EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002 I, Praveen Nair, certify that: 1. I have reviewed this amended quarterly report on Form 10Q/A of Environmental Solutions Worldwide, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying Officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the Registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance the generally accepted accounting principles; c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of 2012 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. DATE: AUGUST 28th, 2012 /S/ PRAVEEN NAIRPRAVEEN NAIRCHIEF FINANCIAL OFFICER


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EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 ASADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Amended Quarterly Report on Form 10-Q/A of Environmental Solutions Worldwide, Inc. (the "Company") for the quarterly period June 30, 2012 (the "Report"), Mark Yung, Executive Chairman of the Company, hereby certify, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) To my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  DATE: AUGUST 28th, 2012 BY: /S/ MARK YUNGMARK YUNGEXECUTIVE CHAIRMAN A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Environmental Solutions Worldwide, Inc. and will be retained by Environmental Solutions Worldwide, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


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EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 ASADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Amended Quarterly Report on Form 10-Q/A of Environmental Solutions Worldwide, Inc. (the "Company") for the quarterly period June 30, 2012 (the "Report"), Praveen Nair, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1). To my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. DATE: AUGUST 28th, 2012 /S/ PRAVEEN NAIRPRAVEEN NAIRCHIEF FINANCIAL OFFICER A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Environmental Solutions Worldwide, Inc. and will be retained by Environmental Solutions Worldwide, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.