Exhibit 99.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
       PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
                      906 OF THE SARBANES-OXLEY ACT OF 2002

      I,  Terri Lyn Harris  certify,  pursuant  to 18 U.S.C.  Section  1350,  as
adopted  pursuant to Section  906 of the  Sarbanes-Oxley  Act of 2002,  that the
Annual Report of  WorldWater  Corp. on Form 10-KSB/A for the annual period ended
December 31, 2001 fully  complies  with the  requirements  of Section  13(a) and
15(d) of the Securities and Exchange Act of 1934 and that information  contained
in such Annual Report on Form 10-KSB/A fairly presents in all material  respects
the financial condition and results of operation of WorldWater Corp.

      By: /s/Terri Lyn Harris
          -------------------
      Name:  Terri Lyn Harris
      Title:  Chief Financial Officer


<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-25


                                      F-1
<PAGE>

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 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, 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.

As discussed in Note 19 to the financial statements, certain errors in recording
the induced  conversion of convertible debt and the accounting of warrants,  was
discovered by management of the Company during the year.  Accordingly,  the 2001
financial statements have been restated to correct the error.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and 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 1. 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, except for notes 12 and 19
as to which the date is June 2, 2003


                                      F-2
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                            (Restated, see Note 19)

<TABLE>
<CAPTION>
       Assets                                                                                            2001               2000
                                                                                                         ----               ----
                                                                                                      (Restated)
<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' (Deficiency):
    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                                                                        12,665,929         10,844,423
    Accumulated other comprehensive expense                                                              (10,641)                --
    Accumulated deficit                                                                              (13,642,779)       (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
                            (Restated, see Note 19)

<TABLE>
<CAPTION>
                                                                                                 2001                      2000
                                                                                                 ----                      ----
                                                                                              (Restated)
<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                                              1,305,052                 1,600,285
                                                                                             ------------              ------------
        Total Expenses                                                                          1,607,384                 1,990,642
                                                                                             ------------              ------------
Loss from Operations                                                                           (1,547,865)               (1,958,821)
                                                                                             ------------              ------------
Other Expense (Income)
    Interest expense (income), net                                                                214,400                    24,017
                                                                                             ------------              ------------
        Total Other Expense (Income), Net                                                         214,400                    24,017
                                                                                             ------------              ------------
Net loss before income taxes and extraordinary item                                            (1,762,265)               (1,982,838)
Benefit for sale of NJ net operating losses                                                       145,148                   163,887
                                                                                             ------------              ------------
Net loss before extraordinary item                                                             (1,617,117)               (1,818,951)
Extraordinary Item

    Gain on extinguishment of debt                                                                     --                   114,772
                                                                                             ------------              ------------
Net loss                                                                                       (1,617,117)               (1,704,179)
  Accretion of preferred stock dividends                                                         (877,640)                       --
                                                                                             ------------              ------------

Net Loss Applicable to Common Shareholders                                                   $ (2,494,757)             $ (1,704,179)
                                                                                             ============              ============

Net Loss Applicable per Common Share:
     Basic                                                                                   $      (0.07)             $      (0.06)
                                                                                             ============              ============
     Diluted                                                                                 $      (0.07)             $      (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
                            (Restated, see Note 19)

<TABLE>
<CAPTION>
                                                                                         Additional     Additional
                                                                                          Paid-In        Paid-In
                                             Common Stock           Preferred Stock       Capital        Capital        Accumulated
                                          Shares    Par Value      Shares   Par Value     (Common)      (Preferred)       Deficit
                                          ------    ---------      ------   ---------     --------      -----------       -------

<S>                                    <C>           <C>       <C>           <C>        <C>             <C>             <C>
Balance, December 31, 1999              27,125,854   $27,126          --          --    $  7,628,467    $         0     ($9,443,843)
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                                        --        --          --          --              --             --      (1,704,179)
                                       -----------   -------  ----------   ---------    ------------    -----------    ------------
Balance, December 31, 2000              32,330,811    32,331   1,722,166      17,222       9,461,695      1,382,728     (11,148,022)
                                       ===========   =======  ==========   =========    ============    ===========    ============
Conversion of preferred stock
   - Series A                            4,419,778     4,420  (1,111,055)    (11,111)        995,530       (988,839)             --
   - Accretion of dividends                     --        --          --          --         827,473         50,167        (877,640)
Issuance of preferred stock
  for service - 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             --              --
Warrants granted for financing and
  consulting services                           --        --          --          --         144,895             --              --
Comprehensive loss:
  Net loss                                      --        --          --          --              --             --      (1,617,117)
Other comprehensive expense -
  Currency translation adjustment               --        --          --          --              --             --              --

Total comprehensive loss


                                       -----------   -------  ----------   ---------    ------------    -----------    ------------
Balance, December 31, 2001 (Restated)   40,761,489   $40,761     677,778   $   6,778    $ 12,162,540    $   503,389    ($13,642,779)
                                       ===========   =======  ==========   =========    ============    ===========    ============
</TABLE>

                                            Accumulated
                                               Other
                                           Comprehensive
                                           Income (Loss)         Total
                                           -------------         -----

Balance, December 31, 1999                    $      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)
                                              --------       -----------
Balance, December 31, 2000                          --          (254,046)
                                              ========       ===========
Conversion of preferred stock
   - Series A                                       --                --
   - Accretion of dividends                         --                --
Issuance of preferred stock
  for service - 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                                      --           158,636
Issuance of common stock
  for options exercised                             --           122,608
Warrants granted for financing and
  consulting services                               --           144,895
Comprehensive loss:
  Net loss                                          --        (1,617,117)
Other comprehensive expense -
  Currency translation adjustment              (10,641)          (10,641)
                                                             -----------
Total comprehensive loss                                      (1,627,758)
                                                             -----------
                                              --------       -----------
Balance, December 31, 2001 (Restated)         $(10,641)      ($  939,952)
                                              ========       ===========

      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
                            (Restated, see Note 19)

<TABLE>
<CAPTION>
                                                                                                      2001                 2000
                                                                                                      ----                 ----
                                                                                                    (Restated)
<S>                                                                                                <C>                  <C>
Cash Flows from Operating Activities:
    Net loss                                                                                       $(1,617,117)         $(1,704,179)
    Adjustments to reconcile net loss to
       net cash used in operating activities:
           Non-cash compensation expense related to warrants issued                                     13,417                   --
           Amortization of interest expense                                                            131,478                   --
           Issuance of options for service and interest                                                 78,250               12,950
           Issuance of stock for service                                                                60,000               24,021
           Depreciation                                                                                 45,048               36,077
           Bad debts                                                                                    (6,240)              10,000
           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                                            (882,732)          (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                                                             691,927              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                                           863,328            1,931,957
                                                                                                   -----------          -----------

Net effect of currency translation on cash                                                             (10,641)                  --

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

Cash at End of Year                                                                                $    18,115          $    67,229
                                                                                                   ===========          ===========
</TABLE>

      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)   Liquidity

      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.

(2)   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.

(3)   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.


                                      F-7
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

      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.

      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.


                                      F-8
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(3)   Summary of Significant Accounting Policies (continued)

      Revenue Recognition (continued)

      The Company derives  revenues  primarily from the sale and installation of
      its solar  pumping  systems and solar energy  products.  Revenues are also
      derived to a lesser extent from  government  consulting  projects and from
      grant revenue received.  Revenues are recorded when persuasive evidence of
      an arrangement  exists,  the price is fixed or determinable,  delivery has
      occurred  or  services  have  been  rendered  and when  collectibility  is
      reasonably assured in the following manner:

      Revenues from time and material service  arrangements are recognized using
      the  percentage  of  completion  method  measured by labor and other costs
      incurred to total estimated  labor and other costs required.  Estimates of
      costs to complete  are  reviewed  periodically  and  modified as required.
      Provisions are made for the full amount of anticipated  losses, if any, on
      all  contracts  in the period in which the  losses  are first  determined.
      Changes in estimates are also reflected in the period they become known.

      Revenues from contracts  containing  acceptance  provisions are recognized
      upon customer acceptance.

      Revenues from consulting projects are recognized as services are rendered.

      Grant revenues 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.

      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.


                                      F-9
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(3)   Summary of Significant Accounting Policies (continued)

      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

(3)   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

(3)   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 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.


                                      F-12
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(3)   Summary of Significant Accounting Policies (continued)

      New Accounting Standards

      Standards implemented

      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.


                                      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)   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.

(7)   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.


                                      F-14
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(8)   Long-Term Debt

<TABLE>
<CAPTION>
      Long-term debt consist of the following at December 31:                                 2001           2000
                                                                                              ----           ----
<S>                                                                                          <C>            <C>
      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

      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
                                                                                            ========       ========
</TABLE>


                                      F-15
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

8)    Long-Term Debt (continued)

      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
                                                            ========

      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.

(9)   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%.


                                      F-16
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(9)   Income Taxes (continued)

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

                                                       2001        2000
                                                       ----        ----

      Expected tax benefit at 34%                   $ 550,000   $ 674,165

      State tax benefit before allowance              (48,950)    117,781

      Change in deferred tax valuation allowance     (501,050)   (791,946)
      Sale of state net operating loss and
         Research & Development credit                145,148     163,887
                                                    ---------   ---------

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

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

                                                            2001         2000
                                                            ----         ----

            Net operating losses carryforwards          $3,899,391    $3,398,341
            Valuation allowance                          3,899,391     3,398,341
                                                        ----------    ----------
            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:

<TABLE>
<CAPTION>
                                         Net Operating Loss           Research and Development
         Year Expiring                     Carryforwards                   Tax Credits
      Federal     State             Federal            State           Federal        State
      -------     -----             -------            -----           -------        -----
<S>   <C>          <C>             <C>             <C>                 <C>           <C>
      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
</TABLE>


                                      F-17
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(9)   Income Taxes (continued)

      The Company participates in the State of New Jersey's corporation business
      tax benefit  certificate  transfer program (the  "Program"),  which allows
      certain high technology and biotechnology companies to transfer unused New
      Jersey net operating  loss  carryovers  and research and  development  tax
      credits to other New Jersey corporation  business  taxpayers.  During 2001
      and 2000, the Company  submitted  applications  to the New Jersey Economic
      Development  Authority  (the "EDA") to  participate in the Program and the
      applications were approved.  The EDA then issued  certificates  certifying
      the Company's eligibility to participate in the Program for these years.

      The program  requires  that a purchaser  pay at least 75% of the amount of
      the  surrendered  tax  benefit.  During 2001 and 2000,  the  Company  sold
      approximately  $1,729,498  and  $1,337,757  of its New  Jersey  state  net
      operating loss  carryforwards  and $17,001 and $76,221 of its research and
      development  tax credits  for  $145,148  and  $163,887,  respectively  and
      recognized  a tax  benefit  for  that  amount.  The  state  of New  Jersey
      suspended this program in 2002.

      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.

(10)  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
                                                                    =========
</TABLE>


                                      F-18
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

      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
                                    ========     =========      ====       =====

      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      $2,494,757    $2,616,707    $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


                                      F-19
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(11)  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  7,027,281common  shares are
      outstanding;  1,581,228 warrants  exercisable during the year 2002, with a
      strike price of $0.15 - $0.75,  2,765,053 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.

      (12) 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 and preferred dividends of $104,995
      at $0.25 per share for a total of 4,419,778  common shares.  In accordance
      with SFAS No. 84, "Induced  Conversions of Convertible  Debt (an Amendment
      of APB  Opinion  No.  26)",  the  Company  recorded  a charge to  retained
      earnings of $722,478. The charge was equal to the fair value of the common
      stock  received  less the fair value of the  common  stock that would have
      been received  pursuant to the original  conversion  terms of the Series A
      Preferred Stock.  This charge was recorded as accretion of preferred stock
      dividends on the  accompanying  statement of operations and as a component
      of the net loss available to common shareholders.

      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.
      Dividends have been accrued and are shown in accretion on the statement of
      operations.

      The Series A and Series B preferred  stock  shares  automatically  convert
      into common shares upon expiration at the end of three years.


                                      F-20
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(13)  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 one half percent
      (0.5%) 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.

(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)  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.


                                      F-21
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(16)  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

(17)  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.

(18)  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.

      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 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.


                                      F-22
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

19)   Restatement

      Convertible Preferred Stock

      In November  2001 the Company  converted  1,111,055  shares of Series A 7%
      three year Convertible Preferred Stock and preferred dividends of $104,995
      at $0.25 per share for a total of 4,419,778 common shares.

      In accordance with accounting  principles generally accepted in the United
      States of America,  SFAS No. 84, "Induced  Conversions of Convertible Debt
      (an  Amendment of APB Opinion No. 26)",  the Company has recorded a charge
      to retained  earnings of $722,478.  The charge was equal to the fair value
      of the common stock  received less the fair value of the common stock that
      would have been received pursuant to the original  conversion terms of the
      Series A Preferred Stock.

      The Company has also  reclassified  the preferred  dividend on Series A 7%
      three year Convertible  Preferred Stock  originally  reflected as interest
      expense  and  has  recorded  preferred   dividends  on  the  Series  B  7%
      Convertible Preferred Stock in the amount of $50,167.

      These charges were recorded as accretion of preferred  stock  dividends on
      the  accompanying  statement of  operations  and as a component of the net
      loss available to common shareholders.

      Detachable warrants

      Subsequent  to  the  issuance  of  the  Company's  consolidated  financial
      statements for the year ended  December 31, 2001, it was  determined  that
      the Company had incorrectly  accounted for warrants issued during the year
      to various  individuals.  The  Company did not record  charges  related to
      beneficial  conversion  features for convertible  notes and did not record
      compensation expense for other warrants issued.

      At various  dates the  Company  was  provided  loans for  working  capital
      financing.  The Company agreed to issue warrants  representing  additional
      consideration for the loans provided.  Accordingly, the warrants have been
      valued at their  fair  value  and the  proceeds  from the loans  have been
      allocated on a relative fair value basis between the debt and the warrants
      in accordance with Accounting  Principles Board Opinion No. 14 ("APB 14").
      This has resulted in a discount on the debt and the resulting discount was
      recorded  within  interest  expense.  The  amount of  additional  interest
      expense recorded in 2001 is $131,478.

      At various dates the Company  provided  warrants for services from various
      individuals.  These  warrants  have been valued at their fair value on the
      date of issuance  and  recorded  as  compensation  expense.  The amount of
      additional compensation expense recorded in 2001 is $13,417.


                                      F-23
<PAGE>

                        WORLDWATER CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(19)  Restatement (continued)

      Decision not to make reference to other auditors'

      In the  Independent  Auditors'  Report dated April 13,  2002,  we had made
      reference to other auditors, who had audited,  WorldWater (Phils.), Inc. a
      wholly-owned   subsidiary.   We  have  subsequently  performed  additional
      procedures  and  have  reissued  our  report  assuming  responsibility  as
      Independent Auditors' for the financial statements.

      Impact of Restatement

      The net impact of the restatement has reduced  retained  earnings by $0 at
      January 1, 2001.

      As a result the Company has restated its consolidated financial statements
      as of December 31, 2001 from the amounts previously reported. A summary of
      the significant effects of the restatement is as follows:

                                                         December 31,  2001
                                                    As previously
                                                       Reported     As Restated
                                                       --------     -----------
      General and administrative                      $1,220,335     $1,305,052
      Operating loss                                  (1,463,148)    (1,547,865)
      Interest expense, net                              187,980        214,400
      Net loss applicable to common shareholders      (1,577,217)    (2,494,757)
      Basic and diluted loss per common share              (0.05)         (0.07)

                                                    As previously
                                                       Reported     As Restated
                                                       --------     -----------
      Additional Paid-in-Capital                      11,748,389     12,665,929
      Accumulated Deficit                            (12,725,239)   (13,642,779)

(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-24