UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-QSB

                        [x] Quarterly report pursuant to
                                  Section 13 or
                     15(d) of the Securities Exchange Act of
                                  1934 for the
                  quarterly period ended - September 30, 2005.

     [ ] Transition report pursuant to Section 13 or 15(d) of the Securities
                          Exchange Act of 1934 for the
            Transition period from ______________ to _______________.

                        COMMISSION FILE NUMBER 000-30392

                     ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.

               (Exact name of Company as specified in its charter)

                   Florida                              98-0346454
        ------------------------------              -------------------
        State or other jurisdiction of               (I.R.S. Employer
        incorporation or organization               Identification No.)

                               335 Connie Crescent
                                Concord, Ontario
                                 L4K 5R2 CANADA
                                    (Address
             of principal executive offices, including postal code.)

                                 (905) 695-4142
              (Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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 [ ]

The issuer had 55,102,825 shares of common stock, par value $0.001 outstanding
as of November 9, 2005.
<PAGE>

                     ENVIRONMENTAL SOLUTIONS WORLDWIDE INC.
                                   FORM 10-QSB

                                      INDEX

PART I    FINANCIAL INFORMATION                                         PAGE NO.

  ITEM 1  Financial Statements (unaudited)
            Consolidated Condensed Balance Sheet as of                        F2
              September 30, 2005
            Consolidated Condensed Statements of Operations for the           F3
              Three and Nine Months Ended September 30, 2005 and 2004

            Consolidated Condensed Statement of Changes in Stockholders'      F4
              Equity for the Nine Months Ended June 30, 2005

            Consolidated Condensed Statements of Cash Flows for the           F5
              Nine Months Ended June 30, 2005 and 2004

            Notes to Consolidated Condensed Financial Statements         F6- F15

  ITEM 2  Management's Discussion and Analysis of Operations                   2

  ITEM 3  Controls and Procedures                                              7

PART II   OTHER INFORMATION

  ITEM 5  Other Information -- Subsequent Events                               8

  ITEM 6  Exhibits and Reports on Form 8-K                                     8
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                     ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEET
                               SEPTEMBER 30, 2005
                                   (UNAUDITED)
<TABLE>
<S>                                                                   <C>
ASSETS

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

           Total current assets                                         5,788,284

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

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

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

LIABILITIES AND STOCKHOLDERS EQUITY

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

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

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

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

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

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

                                                                      $ 9,781,745
                                                                      ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       F2
<PAGE>
<TABLE>
<CAPTION>

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


                                                          Nine Months                   Three Months
                                                      Ended September 30,             Ended September 30,
                                                      2005            2004            2005            2004
                                                  ------------    ------------    ------------    ------------
<S>                                               <C>             <C>             <C>             <C>
Revenue
      Net sales                                   $  2,223,605    $  1,216,470    $    912,779    $    290,293

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

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

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

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

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

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

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

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

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

    The accompanying notes are an integral part of these financial statements


                                       F3
<PAGE>
<TABLE>
<CAPTION>

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



                                                                        Shares for
                                  Common Stock           Additional     Interest on   Accumulated
                             Shares         Amount    Paid-In Capital    Debentures     Deficit          Total
                           --------------------------------------------------------------------------------------
<S>                        <C>          <C>            <C>             <C>          <C>             <C>
January 1, 2005            50,224,843   $     50,224   $ 12,661,114                  $(11,561,282)   $  1,150,056

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

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

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

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

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

         See accompanying notes to the consolidated financial statements


                                       F4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   2005            2004
                                                                -----------    -----------
<S>                                                             <C>            <C>
Net loss                                                        $(2,296,823)   $(1,226,074)

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

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

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

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

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

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

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

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

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

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

Supplemental disclosures:
Interest received                                               $    74,949    $     1,344
                                                                ===========    ===========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       F5
<PAGE>

NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION

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

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

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

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

ESTIMATES

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

CONCENTRATIONS OF CREDIT RISK

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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


                                       F6
<PAGE>

PATENTS AND TRADEMARKS

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

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

REVENUE RECOGNITION

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

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

RESEARCH AND DEVELOPMENT

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

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

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


                                       F7
<PAGE>

NOTE 4 - CASH AND CASH EQUIVALENTS

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

NOTE 5 - INVENTORY

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

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

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

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

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

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

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

NOTE 7 - REDEEMABLE CLASS A SPECIAL SHARES

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

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


                                       F8
<PAGE>

NOTE 8 - CONVERTIBLE DEBENTURES

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

NOTE 9 - INCOME TAXES

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

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

NOTE 10 - ISSUANCE OF COMMON STOCK

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


                                       F9
<PAGE>

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

NOTE 11 - STOCK OPTIONS AND WARRANT GRANTS

The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation" since its inception and
adopted Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of FASB No.
123", in December 2002. In conjunction with the adoption of these standards, the
Company will continue to apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" with pro forma disclosure of net income and earnings per
share as if the fair-value based method prescribed by SFAS No. 123 had been
applied. In general, no compensation cost related to the Company's non-qualified
stock option plan is recognized as options are issued for no less than 100% of
fair market value on date of grant.

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

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


                                      F10
<PAGE>

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

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

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

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

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

                              PRO FORMA INFORMATION
                         NINE MONTHS ENDED SEPTEMBER 30,

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

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

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


                                      F11
<PAGE>

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

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

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

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

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

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

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

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

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


                                      F12
<PAGE>

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

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

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

In addition, the Company has warrants outstanding as follows:

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

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

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

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

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


                                      F13
<PAGE>

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

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

NOTE 12 - RELATED PARTY TRANSACTIONS

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

NOTE 13 - COMMITMENTS AND CONTINGENCIES

LEASES

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

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

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

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

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


                                      F14
<PAGE>

NOTE 14 - COMPARATIVE FIGURES

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

NOTE 15 SUBSEQUENT EVENTS

WARRANT EXTENSION

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

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

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

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



                                      F15
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

The following discussion should be read in conjunction with the Company's
Financial Statements and Notes thereto included elsewhere in this Report.

This Form 10-QSB contains certain forward-looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company 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, the Company cautions investors that actual financial and
operating results may differ materially from those projected in forward-looking
statements made by, or on behalf of, the Company. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause the actual results, performance, or achievements of the Company
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 the Company's Annual Report on Forms 10-KSB, 10-KSB/A
(No. 1) and 10-KSB/A (No. 2) for the year ended December 31, 2004 as filed with
the Securities and Exchange Commission.

GENERAL

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES

General

Our discussion and analysis of the financial condition and results of operations
are based upon our consolidated condensed financial statements, which have been
prepared in accordance with United States Generally Accepted Accounting
Principles.

A critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates generally require us to make assumptions about matters that
are highly uncertain at the time of the estimate; and if different estimates or
judgments were used, the use of these estimates or judgments would have a
material effect on our financial condition or results of operations.


                                       -2-
<PAGE>

The estimates and judgments we make that affect the reported amount of assets,
liabilities, revenues and expenses are based on our historical experience and on
various other factors, which we believe to be reasonable in the circumstances
under which they are made. Actual results may differ from these estimates under
different assumptions or conditions. We consider our accounting policies related
to revenue recognition, the valuation of inventories and accounting for the
value of long lived assets and intangible assets to be critical accounting
policies.

REVENUE RECOGNITION

The Company recognizes revenue when it is realized or realized and earned. The
Company considers revenue realized or realizable and earned when persuasive
evidence of an arrangement exists, delivery has occurred, the amount is fixed
and determinable, risk of ownership has passed to the customer and collection of
the resulting receivable is reasonably assured.

On a monthly basis, an aged account receivable report is produced and management
reviews all account receivables. Management reviews all amounts outstanding
greater than sixty days. Based on previous customers payment history, management
determines whether an (or portion of an) allowance needs to be provided on each
customers' outstanding balance.

INVENTORIES

Raw materials are stated at the lower of cost and replacement cost. Work in
process and finished goods inventories are stated at the lower of cost and net
realizable value. These costs include the cost of materials plus direct labor
applied to the product and the applicable share of overhead. Cost is determined
on a first-in-first-out basis.

The Company's policy for valuation of inventory, including the determination of
obsolete or excess inventory, requires management to estimate the future demand
for the Company's product. Inventory is subject to inexact estimates by
management.

The Company purchases on a "buy to order" basis. When a customer orders a
product, then the Company purchases the majority of the materials to start
manufacturing the product.

VALUATION OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS

The Company assesses the impairment on long lived assets and intangible assets
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable.

Intangible assets are stated at cost less accumulated amortization and are
comprised of licenses and patents. Unforeseen events, changes in circumstances
and market conditions, and material differences in the value of long-lived and
intangible assets due to changes in estimates of future cash flows could affect
the fair value of the Company's assets and require an impairment charge.
Intangible assets are reviewed annually to determine if any events have occurred
that would warrant further review. In the event that a further assessment is
required, the Company will analyze estimated undiscounted future cash flows to
determine whether the carrying value of the intangible asset will be recovered
and if an impairment charge will be required.

Patents include all costs necessary to acquire intellectual property such as
patents and trademarks, as well as legal costs arising out of litigation
relating to the assertion of any Company-owned patents.

RESEARCH AND DEVELOPMENT

The Company is engaged in research and development work. Research and
development costs for the acquisition of capital assets that have a future
benefit have been capitalized. Due to uncertainties all other costs relating to
research and development have been expensed as incurred.

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

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 our Annual Report on Forms 10-KSB, 10-KSB/A (No. 1) and 10-KSB/A
(No. 2) for the year ended December 31, 2004.

Revenues for the three month period ended September 30, 2005 increased by
$622,486 or 214.4 percent, to $ 912,779 from $ 290,293 for the three month
period ended September 30, 2004. Factors that favorably impacted revenue during
the three months ended September 30, 2005 included repeat orders from existing
customers for the company's diesel substrate products.

Cost of sales for the three month period ended September 30, 2005 increased by
$320,226, or 175.1 percent, to $503,139 from $182,913 for the three month period
ended September 30, 2004. Cost of sales as a percentage of revenues for the
three month period ended September 30, 2005 was 55.1 percent, which is below
63.0 percent for the three month period ended September 30, 2004. The gross
margin for the three month period ended September 30, 2005 was 44.9 percent as
compared to a gross margin of 37.0 percent for the three month period ended
September 30, 2004.


                                       -3-
<PAGE>

Marketing, office and general expenses for the three month period ended
September 30, 2005 increased by $598,989, or 169.3 percent, to $952,825 from
$353,836 for the three month period ended September 30, 2004. The increase is
primarily the result of an increase in payroll costs of $277,680 as the Company
added employees in conjunction with its Research and Development certification
programs, sales efforts, and office staff. An increase of $83,081 from investor
relations and warrant amortization interest, as it related to the issuance of
the convertible debentures in September 2004. An increase of $12,648 related to
general costs as the company continues to complete it's expansion of two new
facilities and an increase of $ 225,580 due to higher rent, setup and utility
costs for the new facility in Montgomeryville PA. and Concord Ontario, Canada,
non-employee related engineering development costs supporting new research and
development programs and the increase in general and administrative expenses to
further support organic growth. As a percentage of revenue, marketing, office
and general expenses decreased to 104.4 percent for the three month period ended
September 30, 2005, compared to 121.9 percent for the three month period ended
September 30, 2004.

Officer's compensation and director's fees for the three month period ended
September 30, 2005 increased by $14,074, or 18.0 percent, to $92,308 from
$78,234 for the three month period ended September 30, 2004. As a percentage of
revenue, officer's compensation and director's fees decreased to 10.1 percent
for the three month period ended September 30, 2005, compared to 26.9 percent
for the three month period ended September 30, 2004.

Consulting and professional fees for the three month period ended September 30,
2005 decreased by $16,225, to $94,059 from $110,284 for the three month period
ended September 30, 2004. The decrease is due in part to less consulting fees
paid during the later part of 2005 related to the development and implementation
of the Companies two new facilities. As a percentage of revenue, consulting and
professional fees decreased to 10.3 percent for the three month period ended
September 30, 2005, compared to 38.0 percent for the three month period ended
September 30, 2004.

Interest expense on long-term debt was $61,000 for the three month period ended
September 30, 2005 as opposed to $19,719 for the three month period ended
September 30, 2004. In September 2004, the Company issued $6.1 million of
convertible debentures in which the basis of conversion into the Company's
common stock is $0.50 per share, which includes warrants to purchase an
additional 3.05 million shares of common stock at $1.00 per share which
subsequently have been adjusted to $0.85 effective April 21, 2005. The
debentures are for a term of three (3) years and earn interest at the rate of
4%.

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

RESULTS OF OPERATIONS

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

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

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

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

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


                                      -4-
<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

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

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

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

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

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


                                       -5-
<PAGE>

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

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

DEBT STRUCTURE

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

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


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

NEW ACCOUNTING PRONOUNCEMENTS.

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

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

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


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<PAGE>

FOREIGN CURRENCY TRANSACTIONS

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

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

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

ITEM 3. 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 Chief Executive Officer ("CEO") 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 CEO 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.

(b) CHANGES IN INTERNAL CONTROLS

Not applicable.


                                      -7-
<PAGE>

                            PART II OTHER INFORMATION

ITEM 5. OTHER INFORMATION

SUBSEQUENT EVENTS

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

On November 7, 2005, the Company elected to issue shares of common stock as
payment of interest earned on our 4% convertible debentures. A total of 348,571
shares of common stock were issued to 10 debenture holders for the $244,000 of
accrued interest, as per the terms of the debentures.

On November 8, 2005 the Company filed with the United States Securities and
Exchange Commission a Registration Statement on Form SB-2.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS:

      31.1  Certification of Chief Executive Officer and President 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.

(B) REPORTS ON FORM 8-K:

A current Report on Form 8-K was filed on October 25, 2005 reporting that the
Company extended the expiry date from October 3, 2005 to April 27, 2006, for
4,214,705 warrants previously issued in the first traunch of the Company's Unit
Private Placement in October 2002. Two warrants are exercisable for one share of
common stock. Warrants can only be exercised in even lots for full shares of
common stock at an exercise price of $0.30 per share. Additionally, effective
October 3, 2005 the Company extended the expiry date from October 10, 2005 to
April 27, 2006, for 750,000 warrants issued in the Company's October 2000
Private Placement. The warrants have an exercise price of $0.17 per warrant
share.

A current report on Form 8-K was filed on July 11, 2005 reporting that the
Company completed a second traunche of a private placement offering.


                                    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: November 11, 2005
Concord, Ontario CANADA

                                ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.


                                BY: /S/ DAVID J. JOHNSON
                                    --------------------
                                    DAVID J. JOHNSON
                                    CHIEF EXECUTIVE OFFICER AND PRESIDENT


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