FORM 10-KSB ANNUAL REPORT

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

Annual report under section 13 or 15(d) of the  Securities  Exchange Act of 1934
(Fee required) for the fiscal year ended December 31, 2001

                                WorldWater Corp.

Nevada                                            33-0123045

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


55 Route 31 South, Pennington, NJ                 08534


(Address of principal executive offices)          (Zip Code)


Issuers telephone number (609) 818-0700

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports, and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X]    No

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

The issuers revenue for its most recent fiscal year was $241,045.

On April 12, 2002 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $6,213,508.

As of April 12, 2002 the Registrant had outstanding 44,382,203 shares of Common
Stock and 677,778 shares of Preferred Stock.


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                           FORM 10-KSB ANNUAL REPORT

Part l

Item 1. Description of Business

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

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

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

      WorldWater  has also  recently  entered the domestic  market.  In February
2002,  WorldWater  introduced  their  AquaMax(TM)  and SolGen(TM)  technology in
California at the world's  largest  agricultural  show,  the WorldAg  Expo.  The
response from farmers was very positive as the WorldWater system enables them to
save  considerable  money by  eliminating  the need to buy expensive peak period
electrical  grid power during the day. The WorldWater  system can drive pumps up
to 600 HP under the sun and  automatically  switches to grid  connection  in the
evening,  when grid  electrical  costs are reduced.  The State of California (as
well as other  States) is offering  substantial  rebates and tax  incentives  to
farmers and  municipalities  that  utilize  alternative  energy.  The Company is
actively pursuing this large market potential.

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

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


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                           FORM 10-KSB ANNUAL REPORT

(a)   Major Customers and Export Sales

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

      Philippines:  The Company has been in the  Philippines  since 1997 when it
delivered  25  solar  pumps  for   installation   by  the  National   Irrigation
Administration (NIA) under the directive of former President Fidel V. Ramos. All
projects in the Philippines have received extensive media coverage ensuring that
WorldWater's  programs are well recognized.  The Philippines  represents a major
opportunity for WorldWater. In February 2000, WorldWater (Phils) Inc. was formed
as a wholly owned subsidiary of WorldWater Holdings Inc. of Delaware, which is a
holding  company owned 100% by WorldWater  Corp. The  Philippine  Company has an
established  and talented  local  management  team who have  identified  several
projects  now in varying  phases of  development.  The first  phase of the first
project,  is to bring safe drinking  water to 150  Municipalities  in the island
province of Cebu.  This  project was  launched in November  1999 with a $235,000
U.S. Trade and Development  Agency (USTDA)-  supported  feasibility  study.  The
first  municipality,  Ronda,  recently completed it's bank financing through the
Philippine  National Bank and is now awaiting  installation which is expected to
occur in May of 2002.  The  funding  of  WorldWater  systems  for the  remaining
Municipalities  are being  negotiated  with the Philippine  National Bank (PNB),
Development  Bank of  Philippines  (DBP) and the Land Bank of  Philippines.  The
Company will  implement its  proprietary  AquaCard(TM)  (SmartCard(TM))  for the
first time in the Cebu  communities,  enabling  customers to buy the  WorldWater
debit  card at the  local  bank or  store.  When  inserted  into  the  Company's
AquaMeter(TM) at the water site,  liters flow into a container until the card is
removed, with the applicable number of liters debited from the card. This method
eliminates  collection  problems and enables the  communities to obtain and then
pay off the Bank  loans.  Communities  are thus able to recover  their  costs of
supplying  the  equipment  purchased  from  WorldWater.  The Company  intends to
maintain a carrying  charge of some 10 percent net of the card gross revenue for
service  charges during the life of the contract.  In addition,  the Company has
been marketing its solar  lanterns  (SolBrite(TM))  with an opening  contract in
July 2001 of $50,000 to a rural area  (Zambales) in Luzon.  In November of 2001,
WorldWater  signed a contract with the Philippine  Secretary of Agriculture  and
the  Director  of the U.S.  Trade and  Development  Agency  (USTDA) to perform a
nationwide  water study  defining the scope and  direction  for a potential  $52
million irrigation  project.  The USTDA is funding $302,500 for the water study,
which WorldWater is now implementing.

      Sri Lanka:  WorldWater  submitted a bid on a Tender  Offer to supply clean
drinking water and  electrification for households in 250 fishing villages worth
$17.33  million and is currently  awaiting the final award of the contract.  The
second phase of this  project  would be for 200 more  villages in the  Northeast
Province  worth $15  million.  The third phase  would be for the Port  Authority
worth $10 million.  WorldWater  has been in Sri Lanka since being invited by the
Ministry of Fisheries and Aquatic  Resources in February 1999 to demonstrate the
AquaSafe water pumping system and SolPower  systems for officials on the island.
The success of that demonstration  brought about WorldWater's bid on the current
tender  offer.  In this bid,  WorldWater  has formed a Strategic  Alliance  with
Siemens Solar Industries of the U.S.


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                           FORM 10-KSB ANNUAL REPORT

      Pakistan/Afghanistan:  The  Company  has made a proposal to UNICEF for the
use of  WorldWater's  solar  pumping  systems in the  Afghanistan  and  Pakistan
refugee camps.  The business that might result from supplying water and power to
the refugees and damaged villages in Afghanistan as well as Pakistan,  under the
auspices of UNICEF, is very substantial.  Anticipated activity would be expected
in the Spring of 2002 when the weather  permits  installation  of the pumps.  In
addition to the refugee  program,  Pakistan  continues  to be a viable  business
location  for  WorldWater  although  contracts  are not  expected to close until
Pakistan receives funding from the U.S. or other countries or agencies.

(b)   Products

Solar Water Systems

AquaSafe(TM)

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

AquaMax2200(TM)

AquaMax2200(TM)   high  yield   hybrid   irrigation   pumps  take   WorldWater's
AquaSafe(TM) remote water pumping systems to unprecedented levels. For the first
time,  more than 2,000 gallons per minute of water for irrigation  driving pumps
up to 600HP can be powered with solar  energy alone or in automatic  combination
with diesel  generators or the electric grid.  Irrigating fields in remote areas
with solar requires no fuel costs, no need for regular maintenance,  generate no
noise and no pollution.  And now with WorldWater's hybrid systems, if sun is not
available,   the  AquaMax(TM)   automatically  switches  to  another  diesel  or
electrical power source.

AquaDrive(TM)

The AquaDrive(TM)  controller converts solar DC current to AC, then supplies the
AC power to a pump from either the solar  array or the grid or diesel  generator
or  simultaneously  from both sources.  The hybrid operation is programmed to be
completely  automatic so manual  intervention is not required to switch from one
power source to the other.

AquaCard(TM)/ SmartCard(TM) Water Meter

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

SolPower(TM) Systems

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


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                           FORM 10-KSB ANNUAL REPORT

Solar Lighting

SolBrite(TM)

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

SolLite(TM)

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

SolarPal(TM)

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

(c)   Marketing

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

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

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

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

      The Company is addressing the uncertainty of oversees market  fluctuations
with a new focus on domestic business.  With the recent additions of rebates and
tax incentives  the use of  alternative  energy such as solar power has become a
viable  alternative  to  electrical  grid power.  The Company has engaged  sales
representative  in  the  State  of  California  in  conjunction  with  traveling
headquarters staff to launch this new sales potential.


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                           FORM 10-KSB ANNUAL REPORT

(d)   Market Size

      Over  the  last 15 years  the  photovoltaic  (PV)  industry  has  grown in
revenues  from $2 million to over $1.5  billion.  By 2020,  worldwide  annual PV
direct  sales are  estimated  at $27  billion  and  related  sales more than $50
billion  per year as stated by the U.S.  National  Renewable  Energy  Laboratory
Report, "Photovoltaics: Energy for the New Millenium," January 1, 2000. Advances
in PV  technology  and  corresponding  reduction  in costs  continue to fuel the
increasing demand for PV power. As stated earlier, the greatest potential for PV
technology  is in  developing  countries  where  roughly 2 billion  people  lack
electricity  and water.  Applications  range from  remote  pumping,  irrigation,
telecommunications and lighting, to village size power production.  Worldwide PV
module shipments continue at an accelerating rate.

      Based on estimates  by UNDP and World Bank,  to bring clean water to the 2
billion  people  who are  without  access  to safe  drinking  water  and who are
targeted for such access by the  international  financial  agencies and national
and regional Governments will cost approximately $50 per person, or $100 billion
total.  The budgets  internationally  are available now and will be available in
the future  because  governments  are being forced to  reallocate  their funding
resources to address what the  WorldBank  says will be the number one problem of
this century - water shortages.

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

      Preliminary  estimates  for the  California  market are  significant.  The
WorldWater  AquaMax(TM)  pumping  systems  being  sought  are in the  $150,000 -
$400,000 per system range.

(e)   Marketing Strategies

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

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

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


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                           FORM 10-KSB ANNUAL REPORT

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

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

      Utilizing Company hydrogeologists to find water sources;

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

      Installing the Company's proprietary solar products;

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

      Arranging 100% project financing.

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

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

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

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

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

      Domestically,  WorldWater  has  worked  closely  with  Rutgers  University
agro-engineers and Cumberland County College in developing solar drip irrigation
systems  for use in  fresh  and  brackish  water.  WorldWater  is  currently  in
discussions with California State University of Fresno for use of solar power in
domestic irrigation.


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                           FORM 10-KSB ANNUAL REPORT

(f)   Research and Development

      Research and Development  expenditures  were $302,332 and $390,357 in 2001
and 2000,  respectively.  A key strategy of WorldWater is to continue developing
innovative,  cutting  edge  products  to meet  water and  electricity  need with
proprietary solar technology. The Company holds a patent on the electronic brain
controller (DC to AC converter) of the AquaSafe(TM) and AquaMax2200  systems and
has a patent  pending on the  electronics  which  match pump  performances  with
available  solar  power  input.  One  new  product  introduced  this  year - the
AquaDrive(TM) -- allows the AquaMax(TM)  system to work alone or interchangeably
with  existing grid  electricity  or diesel  generators  and operate pumps up to
600HP(see Item 1 (b) Products).

      Other  new  products  under  development  include  solar  drip  irrigation
systems,  and solar brackish water irrigation systems. The WorldWater solar drip
irrigation  system is in development in  collaboration  with Rutgers  University
agro-engineers. Comparisons were made between WorldWater's solar drip irrigation
and  diesel-powered  irrigation  to  determine  if solar was a  technically  and
economically   feasible   option.   Results  have  shown  that  solar   actually
outperformed  diesel.  Second  tests have been  completed  to establish a sizing
guideline to properly size the solar pump given the crop type,  how much land is
being  irrigated,  and the  depth of the  well.  Concurrently,  the  solar  drip
irrigation  system  is  being  tested  in the  field  in a  joint  venture  with
Cumberland County College for use with brackish water. Brackish water, a mixture
of fresh  and  salt  and  useless  for  drinking  or  irrigation,  is  prevalent
throughout most of the world. The WorldWater systems could thus have significant
impact by creating new usable water sources.

(g)   Manufacturing

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

      In the future,  when justified by marketing and  production  requirements,
WorldWater intends to locate  AquaSafe(TM) and AquaMax2200(TM) and other product
assembly sites overseas.  Such projects will leverage the capacity of WorldWater
to obtain local  permits,  finance  production and better market its products in
many of the world's largest and most promising potential markets.

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

(h)   Patents

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


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                           FORM 10-KSB ANNUAL REPORT

(i)   Source and Availability of Raw Materials

      The Company's solar modules are composed of silicon and other photovoltaic
materials.  The chief suppliers of solar modules to WorldWater are Siemens Solar
(recently  merged with Shell  Solar)  (see Item 1 (e)  Marketing  Strategy),  BP
Solar, ECD and Matrix Technologies.

(j)   Competitive Conditions Affecting the Company

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

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

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

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

      The  Company  believes  that it has a strong  lead in the  markets  it has
developed.  In many regions of the world competitive products are not available.
In  those  markets  where  competition  exists,  the most  commonly  encountered
competitor is Grundfos A/S of Denmark,  a manufacturer of a large range of water
pumps  including a solar pump line.  Their  pumps run off a  specially  wound AC
motor, which requires periodic  maintenance and replacement.  In addition to the
fact that this specialty pumping equipment is significantly  more expensive than
the conventional AC pumps that WorldWater uses, field maintenance of these units
has proven to be  problematic.  Grundfos  units are also  limited in capacity to
about 4 kW. WorldWater systems can comfortably  operate pumps more than 10 times
that capacity.

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

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


                                       9
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

(k)   Subsidiaries

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

(l)   Government Regulations

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

(m)   Employees

      On December  31,  2001,  the company  employed  nine people on a full-time
basis. The company also hires consultants on an as-needed basis and has informal
arrangements with two water consulting  companies,  the hydrogeological  firm of
Vincent Uhl Associates and Morehouse  Engineering,  specialists in water pumping
and distribution and waste water treatment. WorldWater is developing a worldwide
capability for installing and  maintaining  its line of products.  In some cases
this  involves  additional  consulting  contracts to evaluate  local water usage
requirements,  find the needed  water  sources,  drill the  necessary  wells and
supply the desired  water  storage  facilities.  It may also involve  training a
local   installation   and  servicing  team  and  supplying   assistance  on  an
as-requested basis.

Item 2. Description of Property

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

Item 3. Legal Proceedings

The Company is occasionally  subject to various claims and suits that arise from
time to time in the ordinary course of its business. The Company is not aware of
any pending or threatened  litigation that could have a material  adverse effect
upon the company's business, financial condition or results of operations.

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

None


                                       10
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

PART ll.

Item 5. Market for Common Equity and Related Stockholder Matters

(a)   Price Range of Common Stock.

WorldWater  Corp.'s common stock is traded on the OTC Electronic  Bulletin Board
and is listed under the stock symbol "WWAT.OB".  High and low bid quotations are
listed below:

                                        For the year ended December 31, 2001

                                                HIGH            LOW

First Quarter .....................             $0.75          $0.40
Second Quarter ....................             $0.64          $0.33
Third Quarter .....................             $0.41          $0.12
Fourth Quarter ....................             $0.34          $0.15

(b)   Holders of Common Stock

As of April  12,  2002,  the  common  stock  price  was  $0.14  and  there  were
approximately  780  shareholders of record for the Company's  common stock.  The
number of record holders does not include  holders whose  securities are held in
street name.

(c)   Dividends

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

(d)   Redemption Provisions of Preferred Stock

The  Company  issued  66,667  shares  and  1,111,055  shares  in 2001 and  2000,
respectively, of Series A 7% three year Convertible Preferred Stock at $0.90 per
share.  The Series A  Preferred  Shares are  callable at $1.80 if the market bid
price remains over the call level for 20 days.

In November 2001 the Company converted 1,111,055 shares plus accrued interest of
$104,995 at $0.25 per share for a total of 4,419,777 common shares.

In 2000 the Company  sold 611,111  shares of Series B 7% three year  Convertible
Preferred  Stock at $0.90 per share.  The Series B Preferred  Stock proceeds are
intended to be used by the Company for the  initial  operating  requirements  of
WorldWater  (Phils) Inc., the Philippine  subsidiary  wholly owned by WorldWater
Corp.  Therefore  the  conversion  privilege  is either  into 10% of  WorldWater
(Phils) Inc. or into 611,111 shares of WorldWater Corp. stock.

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

SALES OF RESTRICTED SECURITIES DURING THE FOURTH QUARTER 2001

Equity Investment

      Various  individuals  invested $104,000 in the Company  purchasing 775,000
shares.


                                       11
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

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

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

Background

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

Results of Operations

Year Ended December 31, 2001 ( "Fiscal 2001" )
Compared to December 31, 2000 ( "Fiscal 2000" )

      The net  revenues  decreased  slightly to $241,045  from  $279,531 in 2000
primarily  due to fewer  equipment  sales.  The Company  continued to target its
sales efforts  towards large  contracts and is involved in ongoing  negotiations
pending contracts with several countries (see Item 1(a) Major Customers).

      Cost of sales for the year was $181,526, which reflects the fixed overhead
required to sell into an international market, while retaining experienced solar
industry engineers.

      Research  and  Development  expenses  were  $302,332  in 2001  compared to
$390,357 in 2000, reflecting a continuing effort to introduce new technology and
technological  improvements into the Company's  products (see Item 1(b) Products
and Item 1(f) Research and Development) while maintaining expenses.

      Marketing,  General and  Administrative  expenses were $1,220,335 in 2001,
compared  to  $1,578,582  in  2000,  a  decrease  of 23%.  The  decrease  can be
significantly  attributed to: lower  management  salaries,  travel and telephone
expenses also  contributed to the decrease as WorldWater  employees who traveled
overseas extended their time in country to decrease the number of trips while in
pursuit of financing  and  negotiating  pending  contracts.  Focus was placed on
particular  markets  that were  considered  to be the most  imminent and tighter
controls were also implemented on marketing material expenses.

      The Net Loss of $1,577,217  resulted  partially from the marketing process
of proposing,  presenting  and  demonstrating  the  Company's new  technology to
appropriate officials of developing countries and the resultant lag time between
agreements and annual budgeting (see item 1(a) and (c)). The Company's marketing
efforts with its successful feasibility studies was not able to secure contracts
in time to book revenues in 2001.  Management  continues to focus its efforts on
those  countries  among  the  emerging   nations  which  can  assume   financing
arrangements  offered through the Company's financing programs.  The Company has
also  placed new focus on  domestic  business  which is  anticipated  to produce
revenues early in 2002.


                                       12
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Liquidity and Capital Resources

      Net  cash  used by all  activities  in 2001 was  $49,114  as  compared  to
$128,071 in 2000. The cash used in operating activities was $998,368 compared to
$1,897,726  in 2000.  The  decrease in  Marketing,  General  and  Administrative
expenses  (see Results of  Operations)  and the accrual of accounts  payable and
salaries are the primary reasons for the decreased consumption of cash. Accounts
payable  increased  $164,437  as  compared  to a decrease  of  $248,622 in 2000.
Accrued  salaries  increased  $24,443 as  compared  to a decrease of $72,550 the
previous year.

      The  Company  was able to raise  approximately  $481,000  through  private
equity  placements,  $91,000  through the exercise of warrants and $123,000 from
the exercise of options.

      The Company paid no federal or state  income taxes in 2001,  and ended the
year  with  a  federal  net  operating  loss   carryforward   of   approximately
$1,381,244.

      During  2001 the  Company's  application  to the New  Jersey  Division  of
Taxation and the New Jersey Economic Development  Authority to sell its State of
New Jersey Corporate Net Operating Losses was approved.  The new law was enacted
January 1, 1999 and allows emerging  technology  companies  involved in research
and  development  the  opportunity  to sell their state loss  carryforwards  and
research and  development  credits to profitable  companies in the state for not
less  than 75% of their  net tax  value.  The  Company  was able to sell its Net
Operating Losses for approximately $145,000.

Item 7. Financial Statements

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

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

Not Applicable.

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

Name of Executive Officer           Age              Office

Quentin T. Kelly                    67               Chairman & CEO
Dr. Anand Rangarajan                52               Executive Vice President
Peter I. Ferguson                   58               Vice President
Terri Lyn Harris                    35               Vice President - Controller
Stephen A. Salvo                    52               Secretary

Name of Director                    Age              Term of Office
                                                     Commenced

Quentin T. Kelly                    67                   1984
Joseph Cygler                       66                   1993
Rolf Haefeli                        36                   1997
Dr. Davinder Sethi                  52                   1999
Lange Schermerhorn                  62                   2001


                                       13
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

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

James S. Farrin was President and Chief Operating  Officer until October of 2001
and remains an active  advisor and  consultant  to the  Company.  Mr.  Farrin is
former  President  of The  Mennen  Company,  International  Division.  Under his
leadership the Division  doubled sales and quadrupled  profit in four years. Mr.
Farrin has extensive  international  experience in consumer  packaged goods with
Fortune 500  companies.  He has lived and worked in nine  overseas  countries in
seventeen years in Asia, Latin America and Europe. He is a graduate of Princeton
University (BA) and Stanford University (MBA).

Dr.  Anand  Rangarajan,  Executive  Vice  President,  is a solar and water  pump
specialist.  He has 20 years  experience  in all  aspects of the solar  electric
business and has pioneered the  development of several  proprietary  solar water
pumping systems,  products and markets.  His systems have been installed in over
20 countries. He holds his Ph.D. in Engineering from University of Wisconsin.

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

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

Stephen  A. Salvo is a partner in the law firm of Salvo,  Russell,  Fichter  and
Landau,  specializing in corporate and securities matters,  and is the Company's
securities counsel.

Joseph  Cygler has been a Director of WorldWater  since  January of 1984,  and a
former Vice  President of Marketing  and Executive  Vice-President.  He has been
Chief Executive Officer of the CE&O Group, an organization  assisting  companies
in  operations  management,  since  1986.  Previously  he  was an  executive  at
Kepner-Tregoe,  Inc., an  international  business  consulting firm, from 1976 to
1986, an executive with Honeywell  Information  Systems from 1964 to 1976, and a
marketing representative with International Business Machines from 1961 to 1964.
Mr. Cygler has a BS in Engineering from the U.S. Military Academy at West Point.

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

Dr.  Davinder  Sethi,  a Director of  WorldWater,  is currently  an  independent
advisor and investor in the fields of information technologies and finance, with
experience  spanning  academia,   research,  business  and  investment  banking.
Previously,  he served as Director and Senior Advisor to Barclays de Zoete Wedd,
advising  global  providers of information  technologies  to develop and execute
corporate development opportunities.  Prior to Barclays de Zoete Wedd, Dr. Sethi
spent seven years at Bell Laboratories in operation  research and communications
network planning and seven years in corporate  finance at AT&T. He holds a Ph.D.
and M.S. in Operations Research, Economics and Statistics from the University of
California, Berkeley, and is a graduate of the Executive Management Program from
Penn State.


                                       14
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Lange Schermerhorn, retired U.S. Ambassador to Djibouti, is an economist who has
spent 30 years in the  Foreign  Service  and has  covered  the globe as a senior
foreign  officer  in such  places as  Brussels,  where she was  Deputy  Chief of
Mission,  with specific  emphasis on economics  relating to NATO and EU. She has
also had significant Foreign Service experience in Sri Lanka,  Vietnam,  Tehran,
London and Washington D.C. Ms.  Schermerhorn's  education and related experience
include Mt. Holyoke College (B.A. 1961),  Harvard Business School,  and National
War College.

Item 10. Executive Compensation

Quentin T. Kelly,  President  and CEO,  had a contract  for an annual  salary of
$42,000.  However Mr.  Kelly did not  receive  his full salary  during the years
1994-1999  and 2001 and has accrued  salary  payments of which  $43,950  remains
outstanding at December 31, 2001.

<TABLE>
<CAPTION>
Name and Principal Position       Year     Salary      Bonus     Other Annual   All Other
                                                                 Compensation   (Prior)
<S>                               <C>     <C>           <C>           <C>        <C>
Quentin T. Kelly                  2001    $33,600       $0            $0         $0
                                  2000    $42,000       $0            $0         $35,250
</TABLE>

Item 11. Security Ownership of certain Beneficial Owners and Management

The  following  tables set forth the number and  percentage of the shares of the
registrant's Common stock owned as of April 14, 2002 by all persons known to the
registrant who own more than 5% of the outstanding number of such shares, by all
directors of the registrant, and by all officers and directors of the registrant
as a group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.

Common Stock

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

Kuekenhof Partners L.P. and
Kuekenhof Equity Fund L.P.                  3,334,000                 7.6%
Quentin T. Kelly                            2,930,000                 6.7%
Joseph Cygler                                 634,300                 1.5%
Rolf Haefeli                                  487,713                 1.1%
Peter I. Ferguson                             332,750                   *%
Dr. Davinder Sethi                            150,000                   *%
Dr. Anand Rangarajan                          120,000                   *%
Terri Lyn Harris                               95,000                   *%
Lange Schermerhorn                             50,000                   *%

All Directors and Officers
as a group (8 persons)                      4,799,763                11.0%

*Less than 1%

(1) For  purposes of this table,  a person or group of persons is deemed to have
"beneficial  ownership"  of any shares of Common  Stock that such person has the
right to acquire within 60 days of April 14, 2002. For purposes of computing the
percentage of outstanding shares of Common Stock held by each person or group of
persons named above,  any security  which such person or persons has or have the
right to  acquire  within  such a date is  deemed to be  outstanding  but is not
deemed to be outstanding  for the purpose of computing the percentage  ownership
of any other person.  Except community property laws, the Company believes based
on  information  supplied by such persons,  that the persons named in this table
have sole voting and investment power with respect to all shares of Common Stock
which they beneficially own.


                                       15
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Item 12. Certain Relationships and Related Transactions

Included in notes payable and long-term  debt at December 31, 2001 and 2000, are
amounts  payable  to  employees,  directors  and their  immediate  relatives  as
follows:

                                                          2001              2000
                                                          ----              ----

      Directors                                      $   3,000         $   3,000
      Employees                                         78,500            38,000
      Immediate relatives                                    0                 0
                                                     ---------         ---------
          Total                                      $  81,500         $  41,000
                                                     =========         =========

The Company  occupied  space in 2001 and 2000 that is owned by its  Chairman/CEO
and  leased  this  space on a month  to  month  basis.  The  amount  paid to the
Chairman/CEO amounted to $30,000 in each of 2001 and 2000.


                                       16
<PAGE>

                           FORM 10-KSB ANNUAL REPORT

Part IV

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

         None

Signatures

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

WorldWater Corp.
(Registrant)

By:                                                         Date: April 12, 2002
------------------------------                                    --------------
Quentin T. Kelly, Chairman/CEO

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

Signature                 Title                                   Date

                          Chairman/Chief Executive
----------------------    Office                                  April 15, 2002
Quentin T. Kelly

                          Vice President/Controller               April 15, 2002
----------------------
Terri Lyn Harris

                          Director                                April 15, 2002
----------------------
Joseph Cygler

                          Director                                April 15, 2002
----------------------
Rolf Haefeli

                          Director                                April 15, 2002
----------------------
Dr. Davinder Sethi

                          Director                                April 15, 2002
----------------------
Lange Schermerhorn


                                       17


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 2001 and 2000


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                           December 31, 2001 and 2000

                                Table of Contents

                                                                    Page
                                                                    ----

Independent Auditors' Report                                        F-2

Financial Statements:

    Consolidated Balance Sheets                                     F-3

    Consolidated Statements of Operations                           F-4

    Consolidated Statements of Stockholders' Deficiency             F-5

    Consolidated Statements of Cash Flows                           F-6

    Notes to Consolidated Financial Statements                      F-7 - F-23

                                       F-1


<PAGE>

                          Independent Auditors' Report

To The Board of Directors and Shareholders,
WorldWater Corp:

We have audited the accompanying consolidated balance sheets of WorldWater Corp.
and  Subsidiaries as of December 31, 2001 and 2000 and the related  consolidated
statements of operations,  stockholders' deficiency and cash flows for the years
then ended.  These consolidated  financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated  financial  statements  based on our  audits.  We did not audit the
financials statements of WorldWater (Phils.),  Inc., a wholly-owned  subsidiary,
which  statements  reflect  total  assets  of 33 and  19  percent  and  revenues
constituting 25 and 0 percent, respectively, of the related consolidated totals.
Those  statements were audited by other auditors whose report has been furnished
to us,  and our  opinion,  insofar as it  relates  to the  amount  included  for
WorldWater (Phils.), Inc., is based solely on the report of other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall financial statement  presentation.  We believe our audits
provided a reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the financial position of WorldWater Corp. and Subsidiaries
as of December 31, 2001 and 2000, and the results of their  operations and their
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.

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

Civale, Silvestri, Alfieri, Martin & Higgins, LLC
Mercerville, New Jersey
April 13, 2002

                                       F-2


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
       Assets                                                           2001             2000
                                                                        ----             ----
<S>                                                                  <C>             <C>
Current Assets:
    Cash                                                             $     18,115    $     67,229
    Accounts receivable, net of allowance for doubtful
        accounts of $3,760 in 2001 and $10,000 in 2000                     53,634         106,313
    Inventory                                                              55,118          88,707
    Prepaid expenses                                                       15,746           6,654
                                                                     ------------    ------------
       Total Current Assets                                               142,613         268,903
    Equipment and leasehold improvements, Net                             117,698         158,123
    Deposits                                                                4,773          14,273
                                                                     ------------    ------------
       Total Assets                                                  $    265,084    $    441,299
                                                                     ============    ============

       Liabilities and Stockholders' (Deficiency)

Current Liabilities:
    Line of Credit                                                   $         --    $     50,388
    Notes payable                                                         167,000           7,000
    Notes payable, related parties                                         81,500          41,000
    Current maturities of long-term debt                                  177,199         163,480
    Accounts payable                                                      325,477         161,040
    Accrued interest                                                      113,867          89,842
    Accrued salaries                                                      143,393         118,950
    Accrued payroll taxes                                                 122,362          18,630
    Customer deposits                                                          --          14,446
    Other accrued expenses                                                 12,968          10,089
                                                                     ------------    ------------
       Total Current Liabilities                                        1,143,766         674,865
    Long-term debt                                                         61,270          20,480
                                                                     ------------    ------------
       Total Liabilities                                                1,205,036         695,345
                                                                     ------------    ------------
Stockholders' Equity:
    Preferred Stock 7% Convertible,$.01 par value;
      authorized 10,000,000; issued
      and outstanding at December 31, 2001:

          Series A  66,667 shares, liquidation preference $60,000             667          11,111
          Series B  611,111 shares liquidation preference $550,000          6,111           6,111
    Common stock, $.001 par value; authorized 50,000,000;
       issued and outstanding 40,761,489 and 32,330,811
       shares at December 31, 2001 and 2000, respectively                  40,761          32,331
    Additional paid-in capital                                         11,748,389      10,844,423
    Accumulated other comprehensive expense                               (10,641)             --
    Accumulated deficit                                               (12,725,239)    (11,148,022)
                                                                     ------------    ------------
       Total Stockholders' (Deficiency)                                  (939,952)       (254,046)
                                                                     ------------    ------------
       Total Liabilities and Stockholders' (Deficiency)              $    265,084    $    441,299
                                                                     ============    ============
</TABLE>

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

                                      F-3


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   For the years ended December 2001 and 2000

<TABLE>
<CAPTION>
                                                      2001            2000
                                                      ----            ----
<S>                                               <C>              <C>
Revenue:
    Equipment sales                               $    118,212     $    159,025
    Service                                            122,833          120,506
                                                  ------------     ------------
        Total Revenue                                  241,045          279,531
                                                  ------------     ------------
Cost of Goods Sold                                     181,526          247,710
                                                  ------------     ------------
Gross Profit                                            59,519           31,821
                                                  ------------     ------------
Operating Expenses:
    Research and development expense                   302,332          390,357
    Marketing, general and
      administrative expenses                        1,220,335        1,578,582
                                                  ------------     ------------
        Total Expenses                               1,522,667        1,968,939
                                                  ------------     ------------
Loss from Operations                                (1,463,148)      (1,937,118)
                                                  ------------     ------------
Other Expense (Income)
    Interest expense                                   187,980           42,025
    Interest income                                        (63)         (18,008)
    Other                                               71,300           21,703
                                                  ------------     ------------
        Total Other Expense (Income), Net              259,217           45,720
                                                  ------------     ------------
Net loss before income taxes and
  extraordinary item                                (1,722,365)      (1,982,838)
Benefit for sale of NJ net
  operating losses                                     145,148          163,887
                                                  ------------     ------------
Net loss before extraordinary item                  (1,577,217)      (1,818,951)
                                                  ------------     ------------
Extraordinary Item

    Gain on extinguishment of debt                          --          114,772
                                                  ------------     ------------

Net Loss Applicable to Common Shareholders        $ (1,577,217)    $ (1,704,179)
                                                  ============     ============

Net Loss Applicable per Common Share:
     Basic                                        $      (0.05)    $      (0.06)
                                                  ============     ============
     Diluted                                      $      (0.05)    $      (0.06)
                                                  ============     ============

Shares used in Per Share Calculation:
     Basic                                          33,832,459       30,783,796
                                                  ============     ============
     Diluted                                        33,832,459       30,783,796
                                                  ============     ============
</TABLE>

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


                                       F-4


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY For the
                     years ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                         Additional    Additional
                                                                                           Paid-In      Paid-In
                                           Common Stock           Preferred Stock          Capital      Capital
                                       Shares      Par Value    Shares     Par Value      (Common)     (Preferred)
                                       ------      ---------    ------     ---------     ----------    -----------
<S>                                   <C>            <C>       <C>            <C>         <C>           <C>
Balance, December 31, 1999            27,125,854    $27,126           --          --    $ 7,628,467    $       --
Issuance of preferred stock
  for cash - Series A                                          1,111,055      11,111             --       988,839
Issuance of preferred stock
  for cash - Series B                                            611,111       6,111             --       543,889
Private placement issuance
  costs                                       --         --           --          --        (10,000)     (150,000)
Issuance of common stock
  for cash                             1,000,000      1,000           --          --        199,000            --
Issuance of common stock
  for warrants exercised               1,023,667      1,024           --          --        464,117            --
Debt and accrued interest
  converted to common stock            2,757,385      2,757           --          --      1,103,745            --
Issuance of common stock
  for services                            28,340         28           --          --         23,993            --
Issuance of common stock
  for options                            338,065        338           --          --         39,423            --
Issuance of options for
  services                                    --         --           --          --         12,950            --
Issuance of common stock
  for WorldWater Inc. shares              57,500         58           --          --             --            --
Net loss                                      --         --           --          --             --            --
                                     -----------    -------   ----------    --------    -----------    ----------
Balance, December 31, 2000            32,330,811     32,331    1,722,166      17,222      9,461,695     1,382,728
                                     ===========    =======   ==========    ========    ===========    ==========
Conversion of preferred stock
   - Series A                          4,419,778      4,420   (1,111,055)    (11,111)     1,100,525      (988,839)
Issuance of preferred stock
  for cash - Series A                                             66,667         667             --        59,333
Private placement issuance
  costs                                       --         --           --          --       (112,720)           --
Issuance of common stock
  for cash                             2,456,000      2,455           --          --        486,978            --
Issuance of common stock
  for warrants exercised                 270,750        271           --          --         78,729            --
Issuance of common stock
  for services                           886,000        886           --          --        157,750            --
Issuance of common stock
  for options exercised                  398,150        398           --          --        122,210            --
Comprehensive loss:
  Net loss                                    --         --           --          --             --            --
Other comprehensive expense -
  Currency translation adjustment             --         --           --          --             --            --


Total comprehensive loss
                                     -----------    -------   ----------    --------    -----------    ----------
Balance, December 31, 2001            40,761,489    $40,761      677,778    $  6,778    $11,295,167    $  453,222
                                     ===========    =======   ==========    ========    ===========    ==========

<CAPTION>
                                                      Accumulated
                                                         Other
                                     Accumulated     Comprehensive
                                       Deficit       Income (Loss)         Total
                                       -------       -------------         -----
<S>                                 <C>               <C>                <C>
Balance, December 31, 1999           ($9,443,843)     $      0         ($1,788,250)
Issuance of preferred stock
  for cash - Series A                         --            --             999,950
Issuance of preferred stock
  for cash - Series B                         --            --             550,000
Private placement issuance
  costs                                       --            --            (160,000)
Issuance of common stock
  for cash                                    --            --             200,000
Issuance of common stock
  for warrants exercised                      --            --             465,141
Debt and accrued interest
  converted to common stock                   --            --           1,106,502
Issuance of common stock
  for services                                --            --              24,021
Issuance of common stock
  for options                                 --            --              39,761
Issuance of options for
  services                                    --            --              12,950
Issuance of common stock
  for WorldWater Inc. shares                  --                                58
Net loss                              (1,704,179)           --          (1,704,179)
                                    ------------      --------         -----------
Balance, December 31, 2000           (11,148,022)           --            (254,046)
                                    ============      ========         ===========
Conversion of preferred stock
   - Series A                                 --            --             104,995
Issuance of preferred stock
  for cash - Series A                         --            --              60,000
Private placement issuance
  costs                                       --            --            (112,720)
Issuance of common stock
  for cash                                    --            --             489,433
Issuance of common stock
  for warrants exercised                      --            --              79,000
Issuance of common stock
  for services                                --            --             157,750
Issuance of common stock
  for options exercised                       --            --             122,608
Comprehensive loss:
  Net loss                            (1,577,217)           --          (1,577,217)
Other comprehensive expense -
  Currency translation adjustment             --       (10,641)            (10,641)
                                                                       -----------
Total comprehensive loss                                                (1,587,858)
                                    ------------      --------         -----------
Balance, December 31, 2001          ($12,725,239)     $(10,641)          ($939,952)
                                    ============      ========         ===========
</TABLE>

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


                                      F-5


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 For the years ended December 31, 2001 and 2000

                                                        2001            2000
                                                        ----            ----

Cash Flows from Operating Activities:
    Net loss                                         $(1,577,217)   $(1,704,179)
    Adjustments to reconcile net loss to
       net cash used in operating activities:
           Depreciation                                   45,048         36,077
           Issuance of options for service
             and interest                                 78,250         12,950
           Issuance of stock for service                  60,000         24,021
           Allowance for doubtful accounts                (6,240)        10,000
           Currency translation adjustment               (10,641)            --
           Changes in assets and liabilities:
               Accounts receivable                        58,919         45,748
               Inventory                                  33,589         (7,170)
               Prepaid expenses                           (9,092)        (6,154)
               Accounts payable                          164,437       (248,622)
               Accrued payroll taxes                     106,611             --
               Customer deposits                           9,500         (5,889)
               Accrued interest                           24,025         18,042
               Accrued salaries                           24,443        (72,550)
                                                     -----------    -----------
                   Net Cash (Used in)
                     Operating Activities               (998,368)    (1,897,726)
                                                     -----------    -----------

Cash Flows from Investing Activities:
    Purchase of equipment and leasehold
      improvements                                        (4,623)      (156,413)
    Decrease (increase) in deposits                      (14,446)        (5,889)
                                                     -----------    -----------
                   Net Cash Provided by
                     (Used in) Investing
                     Activities                          (19,069)      (162,302)
                                                     -----------    -----------

Cash Flows from Financing Activities:
    Proceeds from issuance of long-term debt              10,000         28,460
    Payments on long-term debt                            (5,879)      (115,500)
    Proceeds from issuance of notes payable              406,000         70,388
    Payments on notes payable                           (205,500)      (146,301)
    Proceeds from issuance of common stock               796,922        704,960
    Private placement issuance costs                     (33,220)      (160,000)
    Proceeds from issuance of preferred stock                 --      1,549,950
                                                     -----------    -----------
                   Net Cash Provided by
                     Financing Activities                968,323      1,931,957
                                                     -----------    -----------

Net Increase (Decrease) in Cash                          (49,114)      (128,071)
Cash and cash equivalents at Beginning of Year            67,229        195,300
                                                     -----------    -----------

Cash at End of Year                                  $    18,115    $    67,229
                                                     ===========    ===========

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


                                      F-6


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1) Formation of the Company

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

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

(2) Summary of Significant Accounting Policies

      Description of the Business

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

      Principles of Consolidation

      The  consolidated   financial   statements   include  the  parent  company
      WorldWater  Corp.,  and its controlled  wholly owned  subsidiary  company,
      WorldWater  (Phils)  Inc. and certain  other  inactive  subsidiaries.  All
      significant intercompany accounts and transactions have been eliminated in
      consolidation.

      WorldWater Corp., 100% wholly owned inactive subsidiaries include -
               WorldWater, Inc.
               WorldWater Holdings Inc.
               WorldWater East Africa Ltd.
               WorldWater Pakistan (Pvt.), Ltd.


                                       F-7


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      Use of Estimates

      The  preparation  of financial  statements in conformity  with  accounting
      principles  generally  accepted in the United  States of America  requires
      management  to make  estimates  and  assumptions  that  affect the amounts
      reported in the consolidated  financial statements and accompanying notes.
      Estimates are used for, but not limited to, foreign currency  translation,
      depreciation,  taxes  and the  value  of  shares  issued.  Although  these
      estimates are based on  management's  best knowledge of current events and
      actions that the company may undertake in the future,  actual  results may
      be different from the estimates.

      Foreign Currency Translation

      For  International   subsidiaries,   asset  and  liability   accounts  are
      translated  at year-end  rates of exchange  and revenue and  expenses  are
      translated  at average  exchange  rates  prevailing  during the year.  For
      subsidiaries whose functional currency is deemed to be other than the U.S.
      dollar,  translation  adjustments are included as a separate  component of
      other  comprehensive   income  and  shareholders'   deficiency.   Currency
      transaction gains and losses are recorded in income.

      Comprehensive Loss

      Statement of Financial  Accounting  Standards  (SFAS) No. 130,  "Reporting
      Comprehensive Income" establishes standards for reporting and presentation
      of  comprehensive  loss  and its  components  in a full  set of  financial
      statements.  Comprehensive  loss consists of net loss and foreign currency
      translation   and  is  presented  in  the   consolidated   statements   of
      stockholders'   deficiency.   SFAS  No.  130  requires   only   additional
      disclosures in the financial statements;  it does not affect the Company's
      financial position or results of operations.

      Revenue Recognition

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


                                       F-8


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      Revenue Recognition (continued)

      Equipment

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

      Service

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

      Grants

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

      Accounting for Income Taxes

      Deferred  income  tax  assets  and  liabilities  are  determined  based on
      differences between the financial statement reporting and the tax basis of
      assets and liabilities,  operating losses,  and tax credit carry forwards.
      Deferred  income taxes are  measured  using the enacted tax rates and laws
      that are  anticipated to be in effect when the differences are expected to
      reverse.  The  measurement  of deferred  income tax assets is reduced,  if
      necessary,  by  valuation  allowance  for any tax  benefits  which are not
      expected  to be  realized.  The effect on  deferred  income tax assets and
      liabilities of a change in tax rates is recognized in the period that such
      tax rate changes are enacted.


                                       F-9


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      Cash and Cash Equivalents

      The  Company  considers  all highly  liquid  investments  with an original
      maturity  of three  months or less to be cash  equivalents.  The  carrying
      amount of cash and cash equivalents approximates its fair value due to its
      short-term nature.

      Inventory

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

      Equipment and Leasehold Improvements

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

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

      Research and Development Expense

      Costs incurred for research and development,  including  maintenance costs
      in the  development  stage,  are  expensed as  incurred.  Enhancements  to
      products  are  capitalized   once   technological   feasibility  has  been
      established.

      Long-Lived Assets

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


                                      F-10


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      Common Stock

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

      Preferred Stock

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

      Stock-Based Compensation

      The Company  granted options for a fixed number of shares to key employees
      and consultants  with the exercise price equal to the fair value of shares
      at the date of grant.  The Company  accounts  for stock  option  grants in
      accordance  with APB  Opinion  No.  25,  "Accounting  for Stock  Issued to
      Employees",  and,  accordingly  recognizes no compensation expense for the
      stock option grants. The Company has adopted the disclosure  provisions of
      SFAS No. 123,  "Accounting  for Stock-Based  Compensation",  which permits
      entities to provide pro forma net income (loss) disclosure for stock-based
      compensation as if the fair-value method had been applied.

      Transactions with non-employees, in which goods or services are considered
      received for the issuance for equity instruments,  are accounted for under
      the fair value method defined in SFAS No. 123.

      Equity Security Transactions

      Since inception,  the Board of Directors has established the fair value of
      common stock based upon quoted  market  prices  existing at the dates such
      equity transactions occurred.

      Net Loss Per Common Share

      Basic  earnings  (net) per  share is based  upon  weighted-average  common
      shares  outstanding.  Dilutive  earnings  per share is computed  using the
      weighted-average  common shares outstanding plus any potentially  dilutive
      securities  including  stock  options,  warrants,  and  convertible  debt.
      Options,   warrants  and  convertible   debt  were  not  included  in  the
      computation  of diluted net loss per common share  because,  the effect in
      years with a net loss are  antidilutive.  As of December 31, 2001 and 2000
      9,937,088 and 7,032,774  potentially dilutive securities were not included
      in the earnings per share calculation.


                                      F-11

<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      Reclassification

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

      New Accounting Standards

      Standards implemented

      In July 2001, the Financial  Accounting Standards Board (FASB) issued SFAS
      No.  141,  "Business  Combinations".  SFAS  141  requires  the  use of the
      purchase  method of  accounting  for all business  combinations  initiated
      after June 30, 2001 and eliminates the  pooling-of-interest  method. We do
      not believe  that the  adoption of SFAS No. 141 will have an impact on our
      consolidated financial statements.

      In July 2001,  FASB issued SFAS No. 142,  "Goodwill  and Other  Intangible
      Assets".  SFAS No. 142 requires  goodwill and other intangible assets with
      indefinite  lives to no  longer  be  amortized,  but  instead  tested  for
      impairment  at  least  annually.   In  addition,   the  standard  includes
      provisions for the  reclassification  of certain  existing  intangibles as
      goodwill  and  reassessment  of the useful  lives of  existing  recognized
      intangibles.  The standard is effective for fiscal years  beginning  after
      December  15,  2001.  We do not believe  that the adoption of SFAS No. 142
      will have an impact on our consolidated  financial  statements  because we
      have no goodwill or intangible assets.

      In July  2001,  the  FASB  issued  SFAS No.  143,  "Accounting  for  Asset
      Retirement  Obligations".  SFAS No.  143  requires  the  recognition  of a
      liability for an asset retirement in the period in which it is incurred. A
      retirement obligation is defined as one in which a legal obligation exists
      in the future  resulting  from existing  laws,  statues or contracts.  The
      standard is effective for fiscal years  beginning  after June 15, 2002. We
      do not believe the adoption of SFAS No. 143 will have a material impact on
      our consolidated financial statements.

      In  August  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
      Impairment or Disposal of Long-Lived  Assets",  which supersedes both SFAS
      No.  121,  Accounting  for the  Impairment  of  Long-Lived  Assets and for
      Long-Lived  Assets to be Disposed  Of, and the  accounting  and  reporting
      provisions   of  APB   Opinion   No.   30,   Reporting   the   Results  of
      Operations--Reporting  the Effects of Disposal of a Segment of a Business,
      and   Extraordinary,   Unusual  and  Infrequently   Occurring  Events  and
      Transactions,  for the  disposal  of a  business  segment  (as  previously
      defined in that Opinion).  SFAS No. 144 retains the fundamental provisions
      in


                                      F-12


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2) Summary of Significant Accounting Policies (continued)

      New Accounting Standards

      Standards implemented

      SFAS No. 121 for recognizing and measuring impairment losses on long-lived
      assets held for use and long-lived assets to be disposed of by sale, while
      also resolving significant  implementation issues associated with SFAS No.
      121. For example,  SFAS No. 144 provides guidance on how long-lived assets
      that are  used as part of a group  should  be  evaluated  for  impairment,
      establishes  criteria  for when a long-lived  asset is held for sale,  and
      prescribes the accounting for a long-lived  asset that will be disposed of
      other than by sale.  SFAS No. 144 retains the basic  provisions of APB No.
      30 on how to present  discontinued  operations in the income statement but
      broadens  that  presentation  to include a component of an entity  (rather
      than a  segment  of a  business).  Unlike  SFAS  No.  121,  an  impairment
      assessment under SFAS No. 144 will never result in write-down of goodwill.
      Rather,  goodwill is evaluated for impairment under SFAS No. 142, Goodwill
      and Other Intangible Assets.

      The  Company  is  required  to adopt  SFAS No.  144 no later than the year
      beginning  after  December 15, 2001,  and plan to adopt its provisions for
      the  quarter  ending  March 31,  2002.  The  Company  does not  expect the
      adoption of SFAS No. 144 for assets held for use to have a material impact
      on our consolidated financial statements because the impairment assessment
      under SFAS No. 144 is largely  unchanged from SFAS No. 121. The provisions
      of the new  standard  for assets held for sale or disposal  generally  are
      required  to be applied  prospectively  after the  adoption  date to newly
      initiated disposal activities.  Accordingly,  the Company cannot determine
      the  potential  effects that the adoption of these  provisions of SFAS No.
      144 will have on our consolidated financial statements.

(3) Going Concern

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


                                      F-13


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(4) Equipment and Leasehold improvements

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

                                                          2001           2000
                                                          ----           ----
     Computers                                          $ 30,117      $ 30,117
     Office furniture and equipment                      100,775        95,560
     Test and assembly fixtures                           33,550        33,550
     Vehicles                                             92,307        92,899
     Leasehold improvements                                8,123         8,123
                                                        --------      --------

                                                         264,872       260,249

     Less: Accumulated depreciation                      147,174       102,126
                                                        --------      --------

     Equipment and leasehold improvements, net          $117,698      $158,123
                                                        ========      ========

(5) Notes Payable

      The Company has outstanding several notes payable in the aggregate amounts
      of $248,500 and $48,000 at December 31, 2001 and 2000,  respectively.  The
      effective  interest  rates on these  notes  range from  0.00% to 10%.  All
      outstanding notes payable are unsecured.

(6) Long-Term Debt

      Long-term debt consist of the following
      at December 31:                                      2001         2000
                                                           ----         ----

      Loans payable to individuals, with no stated
      interest  rate  or  maturity   date.   These
      uncollateralized  notes are  convertible  at
      the  option  of the  holder  at  $0.495  per
      common  share for  106,060  shares of common
      stock.  These  loans  mature  at a date  six
      months  after the  closing of the  Company's
      first public offering.                              $52,500      $52,500

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


                                      F-14


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

6) Long-Term Debt (continued)

                                                            2001        2000
                                                            ----        ----

      Balance Carryforward                               $102,500     $102,500

      Loans payable to individuals  dated July 17,
      1995  through   February  25,  1997  bearing
      interest at 10.00  percent per annum and due
      on demand.The loans are uncollateralized and
      are  convertible at the option of the holder
      at $0.50 per common share for 106,000 shares
      of common  stock.  In addition,  all holders
      were  granted   602,965   warrants  for  the
      purchase  of  common  stock at the  price of
      $0.60 per share.                                     53,000       53,000

      Loan payable to an individual dated December
      14, 2001,  bearing  interest at 8.00 percent
      per annum with a maturity  date of September
      14, 2003. The loan is  uncollateralized  and
      is  convertible  at the option of the holder
      at $0.25 per common share for 40,000  shares
      of common stock.                                     10,000           --

      Loans   payable  to   certain   institutions
      collateralized  by  autos  with  a net  book
      value of  approximately  $21,727  payable in
      monthly installments of approximately $800.          20,131       28,460

      Loan payable to PNC Bank dated November 2001
      bearing  interest at 7.75% per annum payable
      in  monthly  installments  of  $813  with  a
      maturity   date  of  November  2008  and  is
      guaranteed by the Chairman.                          52,838           --
                                                         --------     --------

      Total                                              $238,469     $183,960

      Less current maturities                             177,199      163,480
                                                         --------     --------
      Total long-term debt                               $ 61,270     $ 20,480
                                                         ========     ========

      The current maturities of long-term debt are:
                           2002                          $177,199
                           2003                            21,269
                           2004                             6,953
                           2005                             7,512
                           2006 thereafter                 25,536
                                                         --------

                                                         $238,469
                                                         ========


                                      F-15


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

6) Long-Term Debt (continued)

      In July 2000,  the Company  entered  into a $50,000  Line of Credit with a
      commercial  bank,  of  which  approximately  $50,000  was  outstanding  at
      December  31,  2000.  In November of 2001,  the Line of Credit and accrued
      interest  was  converted  to  a  7  year  term  loan  payable  in  monthly
      installments  bearing  interest  at a fixed rate of 7.75% per annum and is
      included in long-term debt.

(7) Income Taxes

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

                                                 2001               2000
                                                 ----               ----
      Federal:
        Current                                $     --           $     --
        Deferred                                     --                 --
                                               --------           --------
                                               $     --           $     --
                                               ========           ========

      State:
        Current                                $145,148           $163,887
        Deferred                                     --                 --
                                               --------           --------
                                               $145,148           $163,887
                                               ========           ========

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

      As of December 31, 2001, our wholly owned  subsidiary  incurred  operating
      losses and are not included in our tax provision.

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

                                                          2001          2000
                                                          ----          ----

      Expected tax benefit at 34%                       $ 483,980    $ 633,821

      State tax benefit before allowance                  (84,554)    (406,824)

      Change in deferred tax valuation allowance         (399,426)     222,997
      Sale of state net operating loss and
        Research & Development credit                    (145,148)    (163,887)
                                                        ---------    ---------

      Income tax benefit                                $(145,148)   $(163,887)
                                                        =========    =========


                                      F-16


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(7) Income Taxes (continued)

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

                                                      2001              2000
                                                      ----              ----

      Net operating losses carryforwards            $4,651,884       $4,252,458
      Valuation allowance                            4,651,884        4,252,458
                                                    ----------       ----------
      Net deferred tax asset                        $       --       $       --
                                                    ==========       ==========

      At December 31, 2001,  the Company had net  operating  loss  carryforwards
      (NOL) and  research  and  development  credits  which may be  available to
      offset future Federal and state taxable income,  if any and will expire as
      follows:

                           Net Operating Loss          Research and Development
  Year Expiring               Carryforwards                  Tax Credits
Federal      State       Federal         State         Federal        State
-------      -----       -------         -----         -------        -----
  2002         --      $   14,778            --             --          --
  2003         --          29,505            --             --          --
  2004         --          95,302            --             --          --
  2005         --          94,557            --             --          --
  2006         --         402,684            --             --          --
  2007         --         251,079            --             --          --
  2008         --         641,341            --             --          --
  2009       2001         887,929            --         19,646          --
  2010       2002         912,453            --         15,207          --
  2011       2003         981,193            --         15,387          --
  2012       2004       1,263,193            --         12,923          --
  2013       2005       1,337,702        69,867         20,398          --
  2014       2006         660,000            --         16,100          --
  2015       2007       1,729,498            --         17,701          --
  2016       2008       1,381,244     1,381,244         12,795      12,795

      In 2001 and 2000,  the Company  applied and was eligible to participate in
      the State of New Jersey's  Technology Tax  Certificate  Transfer  Program.
      This program allowed the Company to sell a portion of its authorized state
      net operating loss and New Jersey  research and  development  tax credits.
      The Company was able to sell  $1,729,498  and  $1,337,757 of its state net
      operating loss and $17,701 and $76,221 of its research and development tax
      credit and received a cash payment of $145,148 and $163,887.

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


                                      F-17


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(8) Stock-Based Compensation Plans

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

      The following summarizes stock options activity and related information:

<TABLE>
<CAPTION>
                                                              Weighted-
                                                               average       Weighted-
                                    Exercise                  remaining       average
                                    price per      Share     contractual   exercise price
                                     Shares       Options    life (years)    per share
                                    ---------    ---------   -----------   ---------------
<S>                                 <C>         <C>             <C>           <C>
Balance, December 31, 1999          .15-.26        985,426
     Granted                        .25-1.00       775,200
     Cancelled                      .74             (8,400)
     Exercised                      .15           (338,065)
                                                ----------

Balance, December 31, 2000          .15-1.00     1,414,161
     Granted                        .29-.66      1,605,669
     Cancelled                      .15            (55,600)
     Exercised                      .15-.38       (398,150)
                                                ----------

Balance, December 31, 2001          .15-1.00     2,566,080
                                                ==========

    Options outstanding and
    exercisable as of
    December 31, 2001               .15            406,715       7             $ .15
                                    .25              8,000       7.85            .25
                                    .29            350,000       .33             .29
                                    .32            704,800       8.5             .32
                                    .34            530,200       9               .34
                                    .38             50,000       9.5             .38
                                    .40             48,000       9.5             .40
                                    .45             98,300       .75             .45
                                    .53-.57        100,065       8.65            .54
                                    .59-.66        262,000       4.34            .61
                                    1.00             8,000       8.66           1.00
                                    ----         ---------       ----          -----

    Balance, December 31, 2001      .15-1.00     2,566,080       6.57          $ .34
                                    ========     =========       ====          =====
</TABLE>


                                      F-18


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(8) Stock-Based Compensation Plans (continued)

      In  accordance  with APB Opinion No. 25, the  Company  does not  recognize
      compensation  expense for stock  options  granted to  employees  under the
      plan. SFAS No 123,  "Accounting for Stock-Based  Compensation"  requires a
      Company to  determine  the fair market  value of all awards of stock based
      compensation  using an option  priced  model and to disclose pro forma net
      income as if the resulting stock-based compensation amounts were recorded.
      The table below presents these pro forma disclosures.

                                 2001                          2000
                       -----------------------        -----------------------
                       As reported  Pro forma         As reported  Pro forma
                       -----------  ----------        -----------  ----------
   Net loss            $ 1,577,217  $1,699,167        $1,704,179   $1,712,179
                       ===========  ==========        ===========  ==========

      The Company used the  Black-Scholes  model to value the stock options that
      it granted.  The  assumptions  that the Company  used to estimate the fair
      value of the options and the  weighted-average  estimated fair value of an
      option on the date of the grant are as follows:

                                             2001         2000
                                             ----         ----

        Terms (years)                        3-10         3-10
        Volatility                            50%          50%
        Risk-free interest rate
        (zero coupon U.S.
           Treasury Notes)                    5%         6.25%
        Dividend yield                        0%          0%
        Weighted-average fair
           Value per option              $0.21-$0.27   $0.12-$0.43

(9) Warrants

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

      At December 31, 2001,  warrants to purchase  6,993,948  common  shares are
      outstanding;  1,581,228 warrants  exercisable during the year 2002, with a
      strike price of $0.15 - $0.75,  2,731,720 warrants  exercisable during the
      year  2003,  with a strike  price of  $0.20 -  $1.20,  1,440,000  warrants
      exercisable  during the year 2004,  with a strike  price of $0.15 - $0.50,
      1,241,000  warrants  exercisable during the year 2006, with a strike price
      of $0.30.


                                      F-19


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(10) Convertible Preferred Stock

      The Company  issued  66,667  shares of Series A 7% three year  Convertible
      Preferred Stock in exchange for financial public relations  services.  The
      shares  were  issued at $0.90 per share and the  services  were  valued at
      $60,000 and recorded in the financial statements.

      In November  2001 the Company  converted  1,111,055  shares of Series A 7%
      three year  Convertible  Preferred Stock plus accrued interest of $104,995
      at $0.25 per share for a total of 4,419,777 common shares.

      In 2000 the Company sold  1,111,055  shares of Series A and 611,111 shares
      of Series B 7% three year Convertible  Preferred Stock at $0.90 per share.
      The  Series A  Preferred  Shares are  callable  at $1.80 if the market bid
      price  remains  over the call level for 20 days.  The  Series B  Preferred
      Stock  proceeds  are  intended  to be used by the  Company for the initial
      operating   requirements  of  WorldWater   (Phils)  Inc.,  the  Philippine
      subsidiary  wholly owned by  WorldWater  Corp.  Therefore  the  conversion
      privilege  is either into 10% of  WorldWater  (Phils) Inc. or into 611,111
      shares of WorldWater Corp. common stock.

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

(11) Employment and Consultant Agreements

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

      The Company has unpaid  salaries of $143,393  which have been  deferred by
      the officers as of December 31, 2001.

      The Company has agreements  effective  through  December 31, 2005 with its
      Chairman which provides for an incentive fee of up to five percent (5%) on
      revenues  earned  by the  Company  with  an  annual  cap of  $250,000  per
      individual.  The Company  incurred $-0- incentive fee expenses in 2001 and
      2000, respectively.


                                      F-20


<PAGE>

                           WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(12) Feasibility Study

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

(13) Gain on the Extinguishment of Debt

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

(14) Leases

      The Company leases its  production,  service and  administrative  premises
      under a  five-year  lease  agreement  expiring  June 14,  2002.  The lease
      requires the lessee to pay taxes, maintenance, insurance and certain other
      operating costs of the leased property. Rent expense for 2001 and 2000 was
      $66,000 and $57,600 respectively.

      The minimum future rental  payments  under this lease are $27,500  through
      June 14, 2002.

(15) Related Party Transactions

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

                                                    2001           2000
                                                    ----           ----

        Directors                                 $ 3,000        $ 3,000
        Employees                                  78,500         38,000
        Immediate relatives                             0              0
                                                  -------        -------
            Total                                 $81,500        $41,000
                                                  =======        =======

      The Company leased office and laboratory  facilities  from the Chairman of
      the Company on a month to month basis. Lease payments to the Chairman were
      $30,000 for 2001 and 2000.


                                      F-21


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(16) Risks and Uncertainties

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

(17) Fair Value of Financial Instruments

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

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

                                                Carrying          Fair
                                                Amounts           Value
                                                --------         --------
             2001                               $486,969         486,969
             2000                                231,960         231,960

(18) Contingencies

      The Company is occasionally subject to various claims and suits that arise
      from time to time in the ordinary  course of its business.  The Company is
      not aware of any  pending  or  threatened  litigation  that  could  have a
      material adverse effect upon the company's  business,  financial condition
      or results of operations.


                                      F-22


<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(19) Supplemental Disclosure of Cash Flow Information

                                                     2001                2000
                                                     ----                ----
         Cash paid during the year for:

                  Interest                        $      --           $  15,960
                                                  =========           =========

Benefit for sale of NJ net operating losses       $(145,148)          $(163,887)
                                                  =========           =========

      Supplemental schedule of non-cash investing and finance activities:

      In 2001,  Series A Preferred  stockholders  converted  1,111,055 shares of
      Preferred stock for 4,419,772 shares of common stock.

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

(20) Subsequent Events

      In January 2002, the Company  entered in to a subscription  agreement with
      Kuekenhof Capital Management L.L.C. for the immediate purchase of $250,000
      of common stock at $0.15 per share and an additional  $250,000 through the
      exercise of warrants valued at $0.15 per share.

      In March of 2002, the lease was renewed for an additional five-year period
      expiring  in June  2007.  The lease  requires  the  lessee  to pay  taxes,
      maintenance,  insurance  and certain other  operating  costs of the leased
      property. The annual lease payments are $66,000.

      In April  of  2002,  the  Company  paid  accrued  payroll  taxes  totaling
      $57,540.82 plus interest of $3,813.18 for a total obligation of $61,354.00
      to the Internal Revenue Service thus bringing the Company current with its
      Federal payroll tax liability.


                                      F-23