10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________________

Commission file number: 000-52654

STW Resources Holding Corp.

(Exact name of registrant as specified in its charter)

NEVADA	77-1176182
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3424 South County Road 1192 Midland, Texas	79706
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (432) 686-7777

Securities registered under Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	Not applicable

Securities registered under Section 12(g) of the Act:

Common Stock, $0.001 PER SHARE

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes  [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes  [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.4.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [  ] Yes  [X] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:

Large accelerated filer	[   ]	Accelerated filer	[   ]
Non-accelerated filer	[   ]	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes  [X] No

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2013 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $1,723,579.

As of June 19, 2014, the Registrant has 151,118,930 shares of common stock outstanding.

TABLE OF CONTENTS

		Page No.
Part I
Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosure	18
Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	22
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	32
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	34
Item 9A.	Controls and Procedures	34
Item 9B.	Other Information	37
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	43
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	52
Part IV
Item 15.	Exhibits, Financial Statement Schedules	53

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

           This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements include, among others, the following:

● our ability to raise sufficient working capital necessary to continue to implement our business plan and satisfy our obligations,

● our ability to continue as a going concern,

● our ability to develop revenue producing operations,

● our ability to establish our brand and effectively compete in our target market, and

● risks associated with the external factors that impact our operations, including economic and leisure trends.

           Forward-looking statements are typically identified by use of terms such as “may”, “could”, “should”, “expect”, “plan”, “project”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “pursue”, “target” or “continue”, the negative of such terms or other comparable terminology, although some forward-looking statements may be expressed differently.  The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management.  These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors.  Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control.  In addition, management’s assumptions about future events may prove to be inaccurate.  Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur.  Actual results may differ materially from those anticipated or implied in the forward-looking statements.   You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.  You should also consider carefully the statements under “Risk Factors” and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in “Item 1A. - Risk Factors”.  Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.  These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

Unless specifically set forth to the contrary, when used in this Report the terms “STW,” “we”, “our”, the “Company” and similar terms refer to STW Resources Holding Corp., a Nevada corporation and its subsidiaries  In addition, when used herein and unless specifically set forth to the contrary, “2011” refers to the year ended December 31, 2011, “2012” refers to the year ended December 31, 2012 and “2013” refers to the year ended December 31, 2013.

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Corporate History

STW Resources Holding Corp (“STW” or the “Company”, f/k/a Woozyfly Inc. and STW Global Inc.) is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas. STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia. STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem. The Company is also evaluating the deployment of similar technology in the municipal wastewater industry.

On January 17, 2010, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned subsidiary of STW Resources, Inc. (“STW Sub”) and certain shareholders of STW controlling a majority of the issued and outstanding shares of STW. Pursuant to the Merger Agreement, STW merged into the Acquisition Sub resulting in an exchange of all of the issued and outstanding shares of STW for shares of the Company on a one for one basis. At such time, STW became a wholly-owned subsidiary of the Company (the “Merger”). The Merger was effective as of February 12, 2010.  In consideration for the Merger, the Company issued an aggregate of 31,780,004 (“the STW Acquisition Shares”) shares of common stock to the shareholders of STW at the closing of the Merger and all derivative securities of STW as of the Merger became derivative securities of the Company including options and warrants to acquire 12,613,002 shares of common stock at an exercise price ranging from $3.00 to $8.00 with an exercise period ranging from July 31, 2011 through November 12, 2014 and convertible debentures in the principal amount of $1,467,903 with a conversion price of $0.25 and maturity dates ranging from April 24, 2010 through November 12, 2010.  The par value of the exchanged shares changed from $0.00001 to $0.001. All share amounts presented throughout this document reflect this change in par value.

The Company changed its name from Woozyfly, Inc. to STW Global, Inc., on March 1, 2010. Subsequently on March 3, 2010, the Company then changed its name to its current form, STW Resources Holding Corp. The name change was accomplished by merging a wholly owned subsidiary into the Company, resulting in a name change and the Company being the surviving corporation. The Company is the surviving and continuing entity of the Merger and the historical financials following the Merger are those of STW. Woozyfly was a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to its acquisition of STW pursuant to the terms of the Merger Agreement. Consequently, management believes that the Merger has caused the Company to cease to be a shell company as it no longer has nominal operations.

Formation of New Subsidiaries

On June 25, 2013, we formed a new subsidiary: STW Energy Services, LLC (“STW Energy”). We maintain a 75% limited interest in STW and the remaining 25% non-controlling interest is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”).

Effective June 30, 2013, we formed a new subsidiary: STW Oilfield Construction, LLC (“Oilfield Construction”), a Texas limited liability company. We are the sole member of Oilfield Construction, which is managed by the Company's CEO and COO, as well as one of the Company's directors and an employee of the Company.

Effective September 20, 2013, we formed another new subsidiary: STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), a Texas limited liability company. The Company is the sole member of Pipeline Maintenance, which is managed by its members.

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Overview

The Company, based in Midland, Texas, provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations.

STW’s expertise is applicable to several market segments including:

● Gas shale hydro-fracturing flowback;

● Oil and gas produced water;

● Desalination;

● Brackish water; and

● Municipal wastewater.

Understanding water chemistry is the foundation of STW’s expertise. STW provides detailed chemical analysis of the input stream and the process output that conforms to the various environmental and legal requirements and the needs of the customer. STW becomes an integral part of the water management process and provides a customized solution that encompasses analysis, design and operations including pretreatment and transportation. Simultaneously, STW evaluates the economic impact of this process to the customer. These processes will use technologies that fit our customer’s needs: fixed, mobile or portable; reverse-osmosis, membrane technology, chemical, other technologies and any necessary pre-treatment, post-treatment. STW will also supervise construction, testing and operation of these systems. Our keystone is determining and optimizing the most appropriate technology to effectively and economically address our customers’ particular requirements. As an independent solutions provider, STW is manufacturer-agnostic and is committed to using the right technology demanded by the design process.

Market Opportunities

STW is actively pursuing opportunities in all the major shale formations in Texas. The initial focus, in this sector, is the shale activity in the Permian, Delaware and Eagle Ford basins of Texas.

Unconventional tight oil and gas shales such as the Wolfcamp Shale in West Texas require millions of gallons of fresh water to drill and stimulate a new well. The water returns during the fracture flowback (“frac”) and production (“production”) with salts or total dissolved solids (“TDS”) at levels unfit for human consumption. This flowback or produced water is typically disposed of through various means such as controlled injection into disposal wells. STW will target the frac water market in the tight oil and gas formations first, then subsequently approach the produced water market for oil and gas production.

Oil and gas reservoirs are usually found in porous rocks, which also contain saltwater. Cross linked gel fracture fluids with high “proppant” loading (additives that prop open fissures in the geological formation caused by hydraulic fracturing) have been utilized to fracture these zones in order to gain permeability, allowing the oil and gas to flow to the well bore. The unconventional shale formations have been common knowledge for decades, but the cost of gas production was always considered to be uneconomical. The wells were drilled and fractured with the same crossed linked system as discussed above.

All of the wells were vertical and required stimulation about every three (3) years with a new fracture. Around 2001, the “slick water fracture” technique was developed. This change required larger volumes of fresh water (1.2 million gallons per fracture on a well) to be used in the fracturing process, a friction reducing polymer additive and low concentrations of a proppant in the hydraulic fracture fluid. Wells using this modified technique now can economically produce oil and gas for over eight (8) years without re-stimulation. The fresh water is believed to dissolve salts from the shale over time and open up the natural fractures and fissures in the rock, allowing more oil and gas to be produced. In 2003, horizontal drilling rigs were brought into the Barnett Shale, and the slick water fracture volume increased from one to eight plus million gallons per well. The slick water fracture technique has become the standard for most of the shale formations for stimulation of the wells.

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This map illustrates the location of the major shale formations that are discussed below:

The Permian and Delaware Basins in West Texas

Producers in West Texas are facing the same water related problems as other producers are nationwide – a shortage of fresh water due to drought and municipality expansion. There are over 450 drilling rigs working in West Texas using approximately 8+ million gallons of fresh water monthly. The formations are shale and the discovery of several new shale formations. West Texas is considered to be one of the largest and most active oil and gas areas in the United States.

Eagle Ford Shale Formation

The Eagle Ford Shale is a recently discovered formation located in South Texas. The development stage of the field is carried out by drilling thousands of wells annually. This area has limited supplies of fresh water, leading the Company to believe water reclamation will be a required solution in order for producers to access a sufficient supply of frac water in this market. Production of natural gas has been reported at levels in excess of ten (10) million cubic feet (“MMcf”) per day and hundreds of barrels of condensate at some of the wells. The Company expects to intensify its efforts to address this market opportunity.

Produced Water

Shale zones are typically dry geological formations devoid of any formation or connate water, and hence, the fracture flowback water comprises most of water that returns following gas production. Outside of shale formations, where most gas and oil production occurs, there is typically a reservoir of connate water in the production zone that generates “produced” water. Produced water is primarily salty water trapped in the reservoir rock and brought up along with oil and/or gas during production, and is the most common oil field waste. The quality of produced water varies significantly in different parts of the world depending on the geology of the underlying formation.

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In a large number of the oil fields in the USA, secondary or tertiary means of handling produced water storage, such as water floods and steam floods, are typically utilized. These are operations where the produced water is used to maintain reservoir pressure, prevent subsidence and sweep the zone to remove the oil. Most of these water floods utilize a fresh water source as a supply so that sufficient volumes are available. As these fields age, more water is required for the flood, so excess contaminated brines concentrate and require disposal. As this water could be reclaimed with STW proprietary systems, STW believes that the market for reclaiming produced water outside the shale reclamation projects represents a considerable opportunity for the Company.

Texas is the largest oil and gas production state in the nation. Like other deep injection well practices in every gas and oil producing region in the world, the same detrimental and resource conservation issues exist. The produced water is unfit for use, poses a threat to the environment and is typically injected into deep injection wells. In accordance with regulations of the Railroad Commission of Texas, water placed in these disposal wells is rendered permanently unavailable for re-use or consumption.

STW believes that the reclaimed water could be utilized for many beneficial purposes, including agricultural and environmental applications as well as re-use in hydraulic fracturing operations. The water reclamation products and services offered by the Company could provide a significant part of the solution to all constituencies concerned.

Brackish Water

World-wide, there are brackish water zones that contain large volumes of water. The water contains dissolved salts in the 0.5 to 2% (5,000 to 20,000 mg/l Total Dissolved Solids (“TDS”)) range and, hence, is unfit for human use. This water can be treated to reduce the TDS below 500 mg/l or 0.05% TDS making the water fit for human consumption. Factors such as decreasing supplies of fresh ground and surface water, increased competition for surface water resources and changes in population/demand centers are driving the need for brackish water for water supply. STW’s potential customers are private companies and municipalities serving fast growing metropolitan areas where demand for water is outpacing the available supply. For example, aquifers in the Texas Gulf Coast region contain a large volume of brackish water (less than 10,000 part per million TDS) that once desalinized will help meet increasing demand in the region.

There are more than 450 drilling rigs operating in West Texas and each one will use approximately 8+ millions gallons of fresh water per month for drilling and fracking wells. In its current form, brackish water is unsuitable for oilfield use. By cleaning the brackish water in an economical way with STW technology, it may be used in the oilfield, which reduces the strain on current fresh water supplies.

Moreover, during one of the worst droughts in U.S. history, the use of treated brackish water has become an extremely popular alternative water source. With STW’s successfully designed and engineered proprietary system, the Company is capable of very economically processing brackish water. For instance, STW is involved in several projects that clean brackish water for municipal golf courses. These types of projects greatly help in the conservation of our fresh water resources.

Process

STW’s proprietary systems and processes are predicated upon a thorough understanding of the customer’s water needs and related issues. This understanding is developed through a series of interactive discussions with the customer followed by data gathering and analysis. STW collects samples at various locations and at different time intervals, which are then tested at independent laboratories and analyzed by STW. Based upon this analysis, STW recommends a solution using the most appropriate technologies, which the Company obtains through the acquisition and financing of such technologies as well as contracts with engineering procurement construction (“EPC”). Finally, STW oversees the EPC process and operates the facility.

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STW’s processes are based upon a fundamental understanding of the core issue and developing an appropriate solution using our experience and expertise. For example, such processes include sampling and testing, analysis, design and, where required by customers, implementation and operation. Some of the steps involved are described below:

● Determine the inlet water quality and measurement of TDS, hardness, barium, strontium, bromine, sulfate and hydrocarbon concentrations, which are critical.

● Take multiple samples over time to ensure consistency and accuracy of inlet water quality measurement.

● Obtain an understanding and analysis of potential uses for the reclaimed water.

● Conduct a site inspection to determine the various vessels needed such as tanks, pumps, pits, truck off loading racks, and engineering testing of the land.

● Analyze fluid volumes and their variability over time.

● Determine the length of time the water needs to be reclaimed at this site.

● Determine appropriate technology: fixed or mobile, evaporation, reverse osmosis or other.

● Obtaining permits as needed.

● Investigate the handling of the concentrated brines and any other residue from the reclamation process.

● Ascertain disposal options for the residue including potential use of the by-products.

Technology

STW has developed relationships with a number of manufacturers that offer “best in class” technologies applicable to its customer base. These technologies include thermal evaporation, membrane technology and reverse osmosis and are available as fixed or mobile units with varying capacities. Various pre and post-treatment options are available as necessary including crystallizers that process very high TDS (>150,000 mg/l).

Thermal Evaporation

STW’s process is capable of handling waters that contain up to 150,000 mg/l TDS, with fresh water recovery rates from 50% to 90%, or greater depending on inlet water quality. The recovered fresh water, or “distillate,” is highly purified water from the evaporative process and has multiple re-use applications. It is particularly applicable in the gas shale and oil production facilities for reclaiming frac and produced waters.

The technology is scalable and can be deployed as mobile units that can process 72,000 gallons per day (“gpd”), as portable units that can process 216,000 gpd, or as fixed central units capable of processing up to 2,880,000 gpd.

Depending on local conditions and producer priorities, residual brine concentrate can either be disposed of in deep injection wells or be treated further through a crystallizer that reduces the brine into distillate and commercially valuable salt residuals.

Reverse Osmosis

Waters that are below 34,000 mg/l of TDS and contain low levels of barium, strontium, bromine, and sulfate can be reclaimed through a reverse osmosis unit (“RO”). Reverse osmosis is the process of forcing a solvent from a region of high solute concentration through a semi-permeable membrane into a region of low solute concentration by applying a pressure in excess of the osmotic pressure. The membranes used for reverse osmosis are generally designed to allow only water to pass through while preventing the passage of solutes such as salt ions. This process is best known for its use in desalination (removing the salt from sea water to obtain fresh water), but it has also been used to purify fresh water for medical, industrial and domestic applications. Recovery rates for seawater to drinking water are about 50%.

The reverse osmosis process creates a by-product of concentrated brine with higher TDS. This brine can be properly disposed of or utilized as a feed solution to a brine concentrator or crystallizer. The latter ensures higher quality water with lower TDS levels for industrial uses.

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Most oilfield water cannot be processed through an RO membrane because the water contains barium, strontium or bromine. The barium and strontium are very large molecules that plug the membrane and damage or permanently foul the membrane surface. Bromine and other such halogens react with the membrane and destroy its integrity. Although some oil field water could be processed through this technology, a thorough study is required to ensure success. STW will continue to utilize this technology where the water chemistry can be processed through RO membranes without damaging the membrane.

Membrane Bioreactor

A membrane bioreactor (“MBR”) is a water treatment system that combines biological and ultra filtration technologies. The biological technology is the same process utilized in all sewage treatment facilities. Bacteria are maintained in an aerobic condition that decays the organic materials in the water and oxidizes these organic materials into low molecular weight acids, usually acetic acid. Maintaining the bacteria in an oxygen rich environment prevents mutation or growth of any anaerobic bacteria, which would produce inorganic acids such as hydrogen sulfide.

A filter membrane removes the water fraction from the unit. The membrane provides filtration in the 0.01 microns or lower range, which is enough to remove viruses, bacteria and other colloidal materials. The water exiting the units is potable water and safe for human consumption.

Brine Discharge / Deep Injection Wells

In many gas shale fields, disposal through a deep injection well offers a cost-effective alternative to water reclamation although the method is environmentally questionable. If suitable geology exists, high TDS flowback waters can be disposed by injection into a deep discharge well. There are operative brine discharge wells in each of the major shale formations.

Oil and Gas Services

Our subsidiaries, STW Energy, STW Pipeline Maintenance & Construction, and STW Oilfield Construction Services offer a wide a range of oilfield and pipeline construction, maintenance and support  services. Our services include construction of new poly and steel pipeline for oil gas or water service and leak repair crews to help combat decaying pipelines in all major production areas. We use top of the line equipment including poly fusion machines that are capable of fusing 3 inch to 24 inch pipe as well as all of the equipment to ditch and lay all types of pipeline. Our employees each have at least 10 years’ experience in the pipeline construction & maintenance industry. Permian basin pipeline infrastructure consists of thousands of miles of steel and poly pipeline already in service that were installed over the past few decades, along with thousands of miles per year of new service pipelines added due to greatly increased production resulting from the use of fracking. Over half of these aging pipelines have countless leaks that cause huge gas losses for midstream companies.  Our goal is to provide the best service to mitigate these issues. Pipeline employs qualified laborers with years of experience in the oil patch, and Supervisor/Sales people with particular oil patch knowledge in the Permian and Delaware Basins of West Texas, Eastern New Mexico, and in the Eagle Ford of South Texas.

Expertise & Differentiators

-Experienced and entrepreneurial management

-Unique, high quality and efficient process

-Highly trained, insured workforce

-Newest technology; mobile units

-All inclusive capabilities

Marketing & Sales

STW’s business proposition is to provide comprehensive, necessary water treatment solutions. We work closely with our customers to evaluate their water treatment needs, understand how these may change over time, assess the regulatory and economic factors and design an optimal solution. STW offers a broad array of technical solutions coupled with a service suite and financial structuring options that provide our customers with the ability to obtain a turnkey solution to their wastewater disposal challenges.

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Oil and Gas Shale

Most of the oil and gas producers in each of the shale formations are already well known to the Company. STW personnel have developed many, and in some cases, long standing relationships with key personnel responsible for well completion and remedial operations at each gas producer. STW monitors production plans at the producer level, the acreage acquisitions at the shale formations and trends that relate to the demand for water reclamation by region. In addition, the Company maintains detailed databases that monitor drilling permits, rig counts and other key statistics that forecast gas production rates by geography. These activities allow the Company to anticipate demand for its services and to prioritize its sales calling efforts on those producers for whom freshwater supply is an issue or where shalewater disposal pose the greatest challenges.

The foundation of the Company’s sales strategy is to become an integral part of its customer’s water management function. This involves identifying and finding solutions to customer needs through a multi-step, consultative approach:

· Evaluate drilling program and production expansion plans.

· Identify and define fracture water supply needs and waste brine generation levels.

· Study the flowback water volumes and chemistry over time.

· Generate economic models jointly with producers, with full consideration of all costs of obtaining, utilizing and disposing of the water.

· Evaluate various water reclamation options, from equipment to logistics and develop financial models for all the options.

· Provide a customized presentation comparing present practices to all of the options of water reclamation available to the customer for buy-in to the best scenarios.

· Jointly develop a presentation of the best scenarios for water management (present and future) for use by upper management, and support the presentation as required.

· Review and determine optimal system design, location and financial structure.

· Develop a timeline for water reclamation implementation.

· Execute definitive off-take and/or other agreements satisfactory to all parties.

STW is able to facilitate this part of the sales process through its detailed knowledge of oil and gas drilling, fracking and production process and economics, shale formation geology, frac water chemistry, well completion techniques and logistics, and regional regulatory landscapes. This expertise reduces the time required during the evaluative stage of the sales process and fosters a positive working relationship with our customers. STW then works together with its engineering and manufacturing partners to complete the technical solution, develop ancillary system requirements (balance of plant), evaluate cost and operating data, model the financial performance of the system and define remaining project parameters and an installation timeline.

Water reclamation is a new paradigm for oil and gas producers. Educating them about the economic, environmental and political benefits is key to long-term adoption.

Development Stage Enterprise

In the year ended December 31, 2012, the Company was a development stage company as defined by the Financial Accounting Standards Board (the “FASB”). However, during the year ended December 31, 2013, the Company realized $1,945,631 in revenue. The revenues consisted of $536,735 from the design, build and delivery of a proprietary water desalinization facility and $1,408,896 from oil & gas support services, including $347,550 of revenues from a related party. As revenues commenced January 1, 2013, the Company is no longer a development stage company as of that same date

Competition

In the oil and gas industry, current fracturing and produced water disposal methods – deep injection wells and surface water disposal – represent the Company’s greatest source of competition.

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Legislative and Regulatory

Progressively tighter regulations are demanding a thorough review of the entire water-use cycle in industrial applications with the ultimate goal of encouraging and/or mandating reclamation and re-use of water. STW works closely with Federal, State and local regulators and environmental agencies to share our expertise and knowledge on this complex issue and discuss our views on potential solutions. The Company’s intimate knowledge of this process is a key tool in assisting their customers to gain a better understanding of the legislative and regulatory elements related to water management and advising them of various alternatives.

Employees

As of December 31, 2013, we had 59 full-time or part-time employees. Our executive officers provide certain services dedicated to current corporate and business development activities on an as needed part-time basis.

Company’s Office and Website

Our offices are located at 3424 South County Road 1192, Midland, Texas 79706. Our website address is www.STWresources.com. Information found on our website is not incorporated by reference into this report.

ITEM 1A.  RISK FACTORS

Risks Related to Our Business

We have a history of operating losses; we incurred a net loss in both fiscal year 2013 and fiscal year 2012. Our revenues are not currently sufficient to fund our operating expenses, and there are no assurances we will develop profitable operations.

The report of our independent registered public accounting firm on our 2013 consolidated financial statements contains an explanatory paragraph which raises substantial doubt about our ability to continue as a going concern, and we will need additional financing to execute our business plan, fund our operations and to continue as a going concern, which additional financing may not be available on a timely basis, or at all.

We have limited remaining funds to support our operations. We have prepared our consolidated financial statements in this Form 10-K on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We will not be able to execute our current business plan, fund our business operations or continue as a going concern long enough to achieve profitability unless we are able to secure additional funds. The Report of Independent Registered Public Accounting Firm on our December 31, 2013, consolidated financial statements includes an explanatory paragraph stating that the recurring losses incurred from operations and a working capital deficiency raise substantial doubt about our ability to continue as a going concern. However, in order to sustain and improve operations, we will need to secure additional funds. If adequate financing is not available, we will not be able to sustain operations. In addition, if one or more of the risks discussed in these risk factors occur or our expenses exceed our expectations, we may be required to raise further additional funds sooner than anticipated.

We will be required to pursue sources of additional capital to fund our operations through various means, including equity or debt financing, funding from a corporate partnership or licensing arrangement or any similar financing. However, we may be unable to obtain such financings on reasonable terms, or at all.  Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have additional dilutive effects. In addition, if we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish potentially valuable rights to our product candidates or proprietary technologies, or grant licenses on terms that are not favorable to us. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. As a result, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. If we are unable to raise funds to satisfy our capital needs prior to the end of 2014, we may be required to cease operations.

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STW’s results of operations have not resulted in profitability, and we may not be able to achieve profitability going forward.

STW has a deficit accumulated of $24,355,343 as of December 31, 2013 and had a net loss of $7,032,955 for the year ended December 31, 2013. In addition, as of December 31, 2013, STW had total liabilities of $14,574,240 and total assets of $1,515,647.

Our management is developing plans to alleviate the negative trends and conditions described above. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future. Further, as we are a new enterprise, we expect that net losses will continue and our working capital deficiency will exacerbate.

We have historically been, and may continue to be, heavily reliant upon financing from related parties, which presents potential conflicts of interest that may adversely affect our financial condition and results of operations.

We have historically obtained financing from related parties, including major shareholders, directors and officers, in the form of debt, debt guarantees, factoring facilities and issuances of equity securities, to finance working capital growth. These related parties have the ability to exercise significant control over our financing decisions, which may present conflicts of interest regarding the choice of parties from whom we obtain financing, as well as the terms of financing. No assurance can be given that the terms of financing transactions with related parties are or will be as favorable as those that could be obtained in arms’ length negotiations with third parties.

We will need additional financing, which we may not be able to obtain on acceptable terms, if at all.

The cash resources of the Company are insufficient to meet its planned business objectives without additional financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

We will require additional financing for our operations, to purchase equipment and to establish a customer base and to pursue our general business plan. We will need to raise additional working capital to continue implementing our business model, to provide funds for marketing efforts, to increase our revenues and for general overhead expenses, including those associated with our reporting obligations under Federal securities laws. We have undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing.

Management continues seeking additional funds, primarily through the issuance of debt or equity securities for cash to operate our business. Currently, we have no firm commitments for any additional capital. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

While to date we have relied upon the relationships of our executive officers and shareholders in our capital raising efforts, there are no assurances that these resources will continually be available to us or provide us with sufficient funding. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all. However, if we do not raise funds as needed, then we will not have sufficient funds to complete the purchase of equipment and commercialization of our services and we may not be able to continue to implement our business objectives. As of the date of this Annual Report, we have no firm commitments for additional capital.

-10-

We have a significant amount of debt, a portion of which consists of convertible debt that is coming due soon, which could impact our ability to continue implementing our business objectives.

We have incurred indebtedness totaling $14,574,240 as of December 31, 2013, which includes: $1,256,045 in accounts payable; $30,468 in bank overdrafts; $856,919 of related party payables; $1,839,439 in accrued expenses and interest on our various debt obligations, $350,074 of sales and payroll taxes payable, $285,190 of accrued payroll, and $491,724 of accrued board fees; $231,897 of fees payable in common stock; $310,000 of stock subscriptions payable, $1,630,985 of derivative liability, and $7,291,501 in notes payable, including convertible notes. An aggregate principal amount of $2,504,736 of notes was to mature by November 30, 2013, with the remaining $400,000 balance maturing at various dates through November 2014. On September 22, 2013, the Company negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, the Company agreed to issue an aggregate 800,973 shares of its common stock with a value of $64,078. As of December 31, 2013, the total of outstanding 14% convertible notes is $2,904,736 of which $897,971 was to mature by November 30, 2013 and is in default. We do not have adequate funds to satisfy the outstanding obligations. Unless we are able to restructure some or all of this debt and raise sufficient capital to fund our continued development, our current operations do not generate sufficient cash to pay these obligations, when due. Accordingly, there can be no assurance that we will be able to pay these or other obligations we may incur in the future and it is unlikely that we would be able to continue as a going concern.

As of June 19, 2014, we have $2,326,617 in outstanding convertible notes.  We recently received consent from the holders of approximately 42% of the outstanding principal amount of such notes to extend the maturity date of their notes. Although we continue to seek consent from the remaining note holders, there can be no assurance that we will receive it from any or all of these holders. The notes provide us with a 30 day cure period, but if we are unable to pay the notes when they become due, the note holders maintain the right to demand immediate payment of all outstanding principal and interest or maintain the note at an increased default interest rate of 18% per annum until we remedy the default. If we do not receive consent to extend the maturity date of the notes from the remaining note holders, the notes are not converted into equity or we do not otherwise restructure such debt, our current operations do not generate sufficient cash to pay the interest and principal on these obligations when they become due. Accordingly, there can be no assurance that we will be able to pay these or other obligations which we may incur in the future.

We have limited operating history and we cannot assure you that our business model will be successful in the future or that our operations will be profitable.

Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. Although formed in 2010 as a corporation providing customized water reclamation technologies and services, we only began to generate revenue from our operations in fiscal year 2013. Accordingly, investors have little operating history with which to evaluate our business model. There can be no assurances whatsoever that we will be able to successfully implement our business model, penetrate our target markets or attain a wide following for our services. We are subject to all the risks inherent in an early stage enterprise and our prospects must be considered in light of the numerous risks, expenses, delays, problems and difficulties frequently encountered in such businesses.

We depend upon key personnel and need additional personnel.

Our success depends on the continuing services of Stanley Weiner, our Chief Executive Officer and director. The loss of Mr. Weiner could have a material and adverse effect on our business operations. Additionally, the success of the Company’s operations will largely depend upon its ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guarantee that the Company will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for the Company. Our inability to attract and retain key personnel may materially and adversely affect our business operations.

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We must effectively manage the growth of our operations, or our company will suffer.

To manage our growth, we believe we must continue to implement and improve our operational and marketing departments. We may not have adequately evaluated the costs and risks associated with this expansion, and our systems, procedures, and controls may not be adequate to support our operations. In addition, our management may not be able to achieve the rapid execution necessary to successfully offer our products and services and implement our business plan on a profitable basis. The success of our future operating activities will also depend upon our ability to expand our support system to meet the demands of our growing business. Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations.

We rely on confidentiality agreements that could be breached and may be difficult to enforce.

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of our confidential information to third parties by our employees, consultants, advisors or others, as well as agreements that provide for disclosure and assignment to us of all rights to the ideas, developments and discoveries of our employees and consultants while we employ them, such agreements can be difficult and costly to enforce. Moreover, although we generally seek to enter into these types of agreements with our consultants, advisors and research collaborators, to the extent that such parties apply or independently develop intellectual property in connection with any of our projects, disputes may arise concerning allocation of the related proprietary rights. If a dispute were to arise, enforcement of our rights could be costly and the result unpredictable.

Despite the protective measures we employ, we still face the risk that: agreements may be breached; agreements may not provide adequate remedies for the applicable type of breach; our trade secrets or proprietary know-how may otherwise become known; our competitors may independently develop similar technology; or our competitors may independently discover our proprietary information and trade secrets.

Our operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on us.

Our operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Various permits from government bodies are required for our operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages. We generally maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks. To date, we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

Risks associated with the collection, treatment and disposal of wastewater may impose significant costs.

Our wastewater collection, treatment and disposal operations of our subsidiaries are subject to substantial regulation and involve significant environmental risks. If collection systems fail, overflow or do not operate properly, untreated wastewater or other contaminants could spill onto nearby properties or into nearby streams and rivers, causing damage to persons or property, injury to aquatic life and economic damages, which may not be recoverable in rates. Liabilities resulting from such damage could adversely and materially affect our business, results of operations and financial condition. Moreover, in the event that we are deemed liable for any damage caused by overflow, our losses might not be covered by insurance policies, and such losses may make it difficult for us to secure insurance in the future at acceptable rates.

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We are delinquent in our payroll tax obligations

As of June 19, 2014, we are delinquent in payment of $565,675 of federal employee payroll taxes, including withholding, and filing of payroll tax returns and have submitted an application to the Internal Revenue Service to enable us to pay these delinquent taxes over an extended period. Since these payroll tax liabilities include failure to deposit employee trust funds, we may be subject to 100% trust fund penalties for these taxes and have accrued $114,957 of these estimated penalties as of December 31, 2013. We cannot assure you that the Internal Revenue Service will accept our application for installment payments or that we will not incur additional fines and penalties for failure to timely file such federal payroll tax returns.

We compete with many larger, well capitalized companies.

We face competition from companies in reclamation of oil and gas wastewater industry that provide similar services to the Company’s. Our competitors may have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements.

Our business and stock price could be adversely affected if we are not successful in enhancing our management, systems, accounting, controls and reporting performance.

We have experienced, and may continue to experience, difficulties in implementing the management, operations and accounting systems, controls and procedures necessary to support our growth and expanded operations, as well as difficulties in complying with the reporting requirements related to our growth. With respect to enhancing our management and operations team, we may experience difficulties in finding and retaining additional qualified personnel. If such personnel are not available locally, we may incur higher recruiting, relocation and compensation expenses. In an effort to meet the demands of our planned activities in fiscal year 2014 and, thereafter, we may be required to supplement our staff with contract and consultant personnel until we are able to hire new employees. Further, we may not be successful in our efforts to enhance our systems, accounting, controls and reporting performance. All of this may have a material adverse effect on our business, results of operations, cash flows and growth plans as well as our regulatory standing, listing status and stock price.

We will be subject to risks in connection with acquisitions, and the integration of significant acquisitions may be difficult.

Our business plan contemplates significant acquisitions of reserves, properties, prospects, and leaseholds and other strategic transactions that appear to fit within our overall business strategy, which may include the acquisition of asset packages of producing properties or existing companies or businesses operating in our industry. The successful acquisition of producing properties requires an assessment of several factors, including:

● recoverable reserves;

● future oil and natural gas prices and their appropriate differentials;

● development and operating costs; and

● Potential environmental and other liabilities.

The accuracy of these assessments is inherently uncertain. In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess their deficiencies and potential recoverable reserves. Inspections may not always be performed on every well, and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems. We are not entitled to contractual indemnification for environmental liabilities and acquired properties on an “as is” basis.

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Significant acquisitions of existing companies or businesses and other strategic transactions may involve additional risks, including:

· diversion of our management’s attention to evaluating, negotiating, and integrating significant acquisitions and strategic transactions;

· the challenge and cost of integrating acquired operations, information management, and other technology systems, and business cultures with our own while carrying on our ongoing business;

· difficulty associated with coordinating geographically separate organizations; and

· the challenge of attracting and retaining personnel associated with acquired operations.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of our business. Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage our business. If our senior management is not able to manage the integration process effectively, or if any significant business activities are interrupted as a result of the integration process, our business could be materially and adversely affected.

Risks Related to the Ownership of Our Securities

A small number of shareholders own a significant amount of our common stock, which could limit your ability to influence the outcome of any shareholder vote.

Our executive officers, directors and shareholders holding in excess of five percent (5%) of our issued and outstanding shares, beneficially own over 47% of our common stock as of December 31, 2013. Under our Articles of Incorporation and Nevada law, the vote of a majority of the shares outstanding is generally required to approve most shareholder action. As a result, these shareholders, acting together, would have the ability to control the outcome of matters submitted to our shareholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these shareholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

· delaying, deferring or preventing a change in corporate control;

· impeding a merger, consolidation, takeover or other business combination involving us; or

· discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Outstanding notes and warrants may adversely affect us in the future and cause dilution to existing shareholders.

We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of our present shareholders. We are currently authorized to issue 250,000,000 shares of common stock and 10,000,000 shares of Preferred Stock with such designations, preferences and rights as determined by our Board of Directors, as well as additional classes or series of ownership interests or debt obligations which may be convertible into any class or series of ownership interests in the Company. Such securities may be issued without the approval or other consent of the holders of the Common Stock.  As of June 19, 2014, there are 151,118,930 shares of our common stock outstanding and no shares of preferred stock outstanding.

However, as of June 19, 2014, the Company has issued or has authorized the issuance of: (i) notes convertible into an aggregate of 37,473,627 shares of our common stock; (ii) fees payable in common stock of 548,700 shares, (iv) stock subscriptions payable of 5,125,000 shares and (v) warrants to purchase up to an aggregate of 18,747,976 shares of our common stock with exercise prices ranging from $0.02 to $8.00 per warrant. Conversion of the preferred stock or exercise of the warrants may cause dilution in the interests of other shareholders as a result of the additional common stock that would be issued upon conversion or exercise. In addition, sales of our common stock issuable upon exercise of the warrants could have a depressive effect on the price of our stock, particularly if there is not a coinciding increase in demand by purchasers of our common stock.

Any further issuances that may be authorized and issued by the Company, and the conversion and exercise of any preferred stock and warrants, respectively, will increase the number of shares of common stock outstanding, which will have a dilutive effect on the ownership interests of our existing shareholders.

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There is a lack of liquidity in our common stock and the price could be volatile when you want to sell your holdings.

Our common stock is currently traded on the OTC Pink Sheet market due to our untimely filing of this 10K and the quarterly report on form 10Q for the quarter ended March 31, 2014, under the symbol STWS. Once those reports are filed, we anticipate moving back up to the OTCOB under the same symbol. There is currently only a limited public market for the Company’s common stock and common stock is not actively traded. Moreover, the price of our common stock may be volatile due to numerous factors, many of which are beyond our control that may cause the market price of our common stock to fluctuate significantly. These factors include:

· expiration of lock-up agreements;

· our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;

· changes in financial estimates by us or by any securities analysts who might cover our stock;

· speculation about our business in the press or the investment community;

· significant developments relating to our relationships with our customers or suppliers;

· stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the oil and gas industry;

· customer demand for our products;

· investor perceptions of the oil and gas industry in general and our company in particular;

· the operating and stock performance of comparable companies;

· general economic conditions and trends;

· major catastrophic events;

· announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;

· changes in accounting standards, policies, guidance, interpretation or principles;

· sales of our common stock, including sales by our directors, officers or significant stockholders; and

· additions or departures of key personnel.

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.

Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our company at a time when you want to sell your interest in us.

If securities or industry analysts do not publish research or reports about us or our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future. Any return on investment may be limited to the value of our common stock.

No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not expect to pay cash dividends on our common stock in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.

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Our Common Stock is subject to the “penny stock” rules of the Securities and Exchange Commission.

The Securities and Exchange Commission has adopted Rule 15g-9, which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The market price of our common stock is less than $5.00 per share and, therefore, it is designated as a “penny stock” according to SEC rules.

This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also must be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

The market for penny stocks has experienced numerous frauds and abuses, which could adversely impact investors in our stock.

Penny stocks are frequent targets of fraud or market manipulation. Patterns of fraud and abuse include:

· Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

· Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

· Boiler room practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

· Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

· Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

Our publicly filed reports are subject to review by the SEC, and any significant changes or amendments required as a result of any such review may result in material liability to us and may have a material adverse impact on the trading price of the Company’s common stock.

The reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements. The SEC is required to undertake a comprehensive review of a company’s reports at least once every three (3) years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification, amendment or reformulation of information contained in such reports could be significant and result in material liability to us and have a material adverse impact on the trading price of the Company’s common stock.

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Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results, and shareholders could lose confidence in our financial reporting.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. For example, Section 404 of the Sarbanes-Oxley Act of 2002 requires that our management report on, the effectiveness of our internal controls structure and procedures for financial reporting. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to do so. If we fail to do so, or if in the future our chief executive officer and chief financial officer determine that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our common stock. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results.

The Company’s management assessed the design and operating effectiveness of internal control over financial reporting as of December 31, 2013, based on the framework set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992). In connection with the assessment described above, management identified control deficiencies that represent material weaknesses at December 31, 2013, see “Item 9A. Controls and Procedures” for more detailed discussion. Notwithstanding the foregoing, management reviewed the financial statements and underlying information included in this annual report on Form 10-K and believes the procedures performed are adequate to fairly present our financial position, results of operations and cash flows for the periods presented in all material respects.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls, could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

In order to achieve effective internal controls, we may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company, which will increase costs. Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company. Such a diversion of attention from other business concerns could have a material adverse effect on our business, financial condition and results of operations.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

ITEM 2.  DESCRIPTION OF PROPERTY

Our principal office is located at 3424 South County Road 1192, Midland, Texas 79706, a 5,000 square feet warehouse, and yard and office space. We pay $9,750 per month in rent, and our lease commenced on October 1, 2013 and expires on September 30, 2020. We have an option to extend the lease for an additional seven (7) years and an option to purchase the property for $825,500 during the first thirty-six (36) months of the lease.

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ITEM 3.  LEGAL PROCEEDINGS

From time to time, the Company may become a party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. The Company is involved currently in legal proceedings described below that could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations.  The Company may become involved in material legal proceedings in the future.

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE Ionics, Inc. (“GE”) filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”). Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE entered into on August 31, 2010, upon which STW owed GE $2.1 million plus interest. GE elected to forgo suit on the settlement amount and sued STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”). STW filed its Answer asserting that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE had, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote.

Viewpoint Securities, LLC Arbitration.  On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC (“VP”) who entered into an engagement agreement, dated March 9, 2008 (as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010), with STW whereby the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company. The demand alleged breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement. VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock, payment of a $15,000 promissory note plus 3+ years of interest at 12%, attorneys’ fees of $18,000 and costs of arbitration for filing fees and hearing fees. The Company believed it had valid defenses and contested these claims vigorously. On August 18, 2012, VP dismissed Stan Weiner from the claim with prejudice.  A final arbitration hearing was held on February 3, 2014.   On April 1, 2014, the Arbitrator issued an Award in favor of Viewpoint for $196,728 on Viewpoint’s claim for $216,217 in fees and expenses, plus $5,541 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commencing April 1, 2014.  The Arbitrator denied Viewpoint’s claims related to the Company’s warrants, a $15,000 promissory note plus 12% interest and for $18,000 in attorneys’ fees.

Marcus Muller and Roy Beach Promissory Notes. On March 2, 2012, counsel for Marcus Muller and Roy Beach sent a demand letter to the Company demanding payment on two 12% Convertible Notes by the Company to Messrs. Muller and Beach. The notes in an original principal amount of $25,000 each were issued on August 13, and 18, 2010 and were in a default status. Muller and Beach’s counsel threatened to initiate Chapter 7 Involuntary Bankruptcy proceedings against the Company, but did not disclose the necessary third debtor alleging a liquidated and uncontested claim. Since that date, the Company has made many payments to Muller and Beach and the related matter has been resolved; however, an issue regarding attorneys’ fees in relation to this matter is now pending.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable to our operations.

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PART II

ITEM 5.  MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Price of and Dividends on Common Equity and Related Stockholder Matters

Our common stock is currently traded on the OTC Pink market due to our untimely filing of this 10K and the quarterly report on Form 10Q for the quarter ended March 31, 2014, under the symbol “STWS”. Once those reports are filed, we anticipate moving back up to the OTCOB under the same symbol.

The reported high and low last sale prices for the common stock are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

	High		Low
Fiscal 2012
March 31, 2012	$	0.04	$	0.01
June 30, 2012	$	0.09	$	0.01
September 30, 2012	$	0.08	$	0.01
December 31, 2012	$	0.06	$	0.03
Fiscal 2013
March 31, 2013	$	0.15	$	0.04
June 30, 2013	$	0.12	$	0.03
September 30, 2013	$	0.08	$	0.03
December 31, 2013	$	0.12	$	0.06
Fiscal 2014
March 31, 2014	$	0.15	$	0.07

The last sale price of our common stock as reported on the OTC Pink market was $0.10 on June 16, 2014.  As of June 18, 2014, there were approximately 242 recorded owners of our common stock.

Dividend Policy

Holders of the Company’s common stock are entitled to receive such dividends as may be declared by STW's board of directors. The Company has not declared or paid any dividends on STW's common shares and it does not plan on declaring any dividends in the near future. The Company currently intends to use all available funds to finance the operation and expansion of its business.

Recent Sales of Unregistered Securities

Information regarding any equity securities we have sold during the period covered by this Report, as well as from the end of such time period through the date of this Report, that were not registered under the Securities Act of 1933, as amended, and that were not included in a previously filed Quarterly Report on Form 10-Q or in a Current Report on Form 8-K is set forth below.  Each such transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(2) of the Securities Act or Rule 506 of Regulation D promulgated by the SEC. Unless stated otherwise: (i) the securities were offered and sold only to accredited investors; (ii) there was no general solicitation or general advertising related to the offerings; (iii) each of the persons who received these unregistered securities had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the receipt of these securities, and that they were knowledgeable about our operations and financial condition; (iv) no underwriter participated in, nor did we pay any commissions or fees to any underwriter in connection with the transactions; and, (v) each certificate issued for these unregistered securities contained a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities.

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FYE 2014

During January, 2014, we issued 6,292,754 shares of common stock to accredited investors in our 14% Convertible notes in consideration of the investors’ conversion of accrued interest and extension of the maturity dates of the notes from November 30, 2013 to June 1, 2015.

On January 27, 2014, we issued 1,000,000 shares of common stock in payment of accrued consulting fees.

During January, 2014, we issued 382,901 shares of our common stock to an accredited investor upon the investor’s conversion of $25,000 of principal and accrued interest of a 14% convertible note.

During January, 2014, we issued 6,824,500 shares of our common stock to two (2) accredited investors upon their conversion of $225,000 of principal and $116,225 accrued interest of the investors’ 12% convertible notes.

During February, 2014, we issued 500,000 shares of common stock to a consultant for investor relations advisory services.

During March, 2014, we issued 1,656,250 shares of common stock accredited investors pursuant to a Share Purchase Agreement (the "Purchase Agreement") to ten (10) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $132,500 in gross funding in the transaction (the "Offering").

During March, 2014, we issued 113,207 shares of our common stock to an accredited investor upon the investor’s conversion of accrued interest of a 14% convertible note.

On April 17, 2014, the company issued 3,016,250 shares of stock to two employees as signing bonuses.

On April 24, 2014, shares totaling 5,581,568 were issued in payment for Board of Director Compensation.

On April 24, 2014, an additional issuance of 721,750 shares was made to an Officer of the company for invoices that were in the accounts payable balance at year end.

In April 2014, eight (8) accredited investors were issued 1,275,000 shares in a Unit Share Offering.

On May 22, 2014, we converted the Calibre 14% convertible note that was in default in the amount of $544,426 of principal and $197,486 of accrued interest into 9,273,902 shares of its common stock.

On May 28, 2014, we sold an aggregate of 2,312,500 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to four (4) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $185,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants. Warrants in total came to 2,412,500.

Debt Extension

During 2013, we issued to certain accredited investors, new 14% Convertible Notes with an aggregate principal amount of $2,380,975.  We also issued 566,667 warrants to the placement agent under the same terms.  These notes were due on November 30, 2013 and otherwise have the same terms as the 14% Notes we issued in 2011.  In light of our current cash position, we recently received consent to extend the maturity date of such notes (the "Extension") from the holders of approximately 50% of the outstanding principal amount of such notes. Pursuant to the Extension, the maturity date is extended to June 1, 2015.  In consideration for their consent to the Extension, we agreed to issue each of the consenting note holders additional shares of our common stock in an amount equal to one half of the original principal amount of such holder's note. We negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, during January 2014, we issued an aggregate of 733,137 shares of our common stock valued at $67,354 and are obligated to issue an additional 67,836 shares of our common stock, for a total of 800,973 shares.

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14% convertible notes Paid In Kind “PIK” interest offering

As part of our effort to free up critical capital necessary to carry out our business plans and increase shareholder value, we recently received consent from certain of our outstanding note holders to receive accrued interest in shares of our common stock (the "PIK Shares"), rather than in cash as required by the related note agreement.  Upon consent, the PIK Shares are being issued at the rate of $0.08 per share.  During January, 2014, we issued a total of 5,559,617 PIK Shares representing $444,769 of accrued interest to those note holders who have consented to receiving same.

FYE 2013

On January 8, 2013, we and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt, entered into an equity exchange agreement (the “Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock, which shares will be issued once the Company amends its articles of incorporation, as amended, to increase the number of authorized shares of common stock.  On October 14, 2013, we entered into a Rescission Agreement with BPE, pursuant to which BPE has agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we are not required to issue the Pearl Shares and BPE agreed to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

On June 6, 2013, the Company issued 353,120 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible note payable and 750,380 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 12% convertible note payable.  The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in interest expense of $44,243.

On June 26, 2013, the Company issued 4,000,000 warrants to an accredited investor in connection with a $1.0 million equipment loan facility. These warrants have an exercise price of $0.20, are immediately exercisable and a have a two year maturity.

Prior to the July 12, 2013, amendment to our Articles of Incorporation to increase our authorized capital from 100,000,000 shares of common stock to 250,000,000 shares of common stock (the "Amendment"), we did not have sufficient shares of authorized capital to meet all of our outstanding security obligations.  Some of these obligations required us to issue shares of common stock to our officers and directors, pursuant to the agreements we maintain with them or board approved issuances to such persons; following the Amendment, on September 16, 2013 the company issued an aggregate of 5,043,750 shares of common stock as follows:

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		625,000	2012 Director Compensation
Manfred E. Birnbaum		625,000	2012 Director Compensation
D. Grant Seabolt, Jr.		625,000	2012 Director Compensation
Joseph I. O'Neill III		625,000	2012 Director Compensation
Audry Lee Maddox		356,250	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		625,000	2012 Director Compensation
Paul DiFrancesco		625,000	2012 Director Compensation
Bill G. Carter		625,000	2012 Director Compensation
Steven Schachman		156,250	2012 Advisory Board Compensation
Hunter Hill		156,250	2012 Advisory Board Compensation

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On September 16, 2013, the Company issued 2,100,000 shares of its Common stock in payment of accrued consulting fees. These shares were authorized by the board of directors at a value of $0.10 per share based on the value on March 5, 2013, the date that the board of directors approved the payment in shares.  At the time of the March 5, 2013, board action to approve the payment of the accrued fees in stock, the Company did not have adequate shares authorized to settle the contracts so the issuance of shares was delayed until September 16, 2013.  These shares were issued on September 16, 2013, at a value at the time of issuance of $126,000, resulting in a reduction of accrued consulting fees expense of $84,000.

During August and October, 2013, the Company issued to four (4) accredited investors revenue participation notes with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These note mature eighteen (18) months from the date of issuance and carry stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Energy services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 91,000 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on various dates through June 30, 2015.

During September, 2013, the Company issued to a related party accredited investor a convertible revenue participation note with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures twenty four (24) months from the date of issuance and carries stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 131,608 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on September 27, 2015.  The note is convertible into 548,347 shares of the Company’s common stock. On December 6, 2013, the Company and this investor agreed to a mutual rescission of this note and the related warrants.  The net cash proceeds of $50,418 are included in the total balance of $134,013 as Payable to Related Party, Dufrane Nuclear Shielding Inc., a company controlled by our Vice President of Operations, Mr. Joshua Brooks.

During October and November, 2013, the Company issued to two accredited investors convertible revenue participation notes with an aggregate principal amount of $207,115 and an original issue discount of $27,015 yielding net cash proceeds to the Company of $180,100 These notes mature eighteen (18) months from the date of issuance and carry a stated interest rate of 6%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Pipeline Maintenance contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full.

In the months of October and December 2013 five (5) of the companies’ consultants were issued 4,400,000 shares in exchange for their invoice amounts due from the company.

On December 9, 2013, the Company issued 2,000,000 shares to an) employee as a signing bonus under an employment contract.  The Company also issued 300,000 shares of its common stock to an employee of its subsidiary, STW Pipeline Maintenance & Construction, LLC, as an installment on a signing bonus under an employment contract with the subsidiary.

ITEM 6.  SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operation for 2013 and 2012 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

The Company was formed for the deployment of multiple water reclamation systems throughout Texas to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced by oil and gas operators.  The Company, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem. The Company is also evaluating the deployment of similar technology in the municipal wastewater industry.

The Company’s operations are located at 3424 South County Road 1192, Midland, Texas 79706.

On January 17, 2010, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned subsidiary of STW Resources, Inc. (“STW”) and certain shareholders of STWR controlling a majority of the issued and outstanding shares of STW. Pursuant to the Merger Agreement, STW merged into Acquisition Sub resulting in an exchange of all of the issued and outstanding shares of STW for shares of the Company on a one for one basis. At such time, STW became a wholly owned subsidiary of the Company.

On February 9, 2010, the Court entered an order confirming the Second Amended Plan of Reorganization (the “Plan”) pursuant to which the Plan and the Merger Agreement were approved. The Plan was effective February 19, 2010 (the “Effective Date”). The principal provisions of the Plan were as follows:

· MKM, the DIP Lender, received 400,000 shares of common stock and 2,140,000 shares of preferred stock;

· the holders of the Convertible Notes received 1,760,000 shares of common stock;

· general unsecured claims received 100,000 shares of common stock; and

· the Company’s equity interest was extinguished and cancelled.

On February 12, 2010, pursuant to the terms of the Merger Agreement, STW merged with and into Acquisition Sub, which became a wholly-owned subsidiary of the Company (the “Merger”). In consideration for the Merger and STW becoming a wholly-owned subsidiary of the Company, the Company issued an aggregate of 31,780,004 shares of common stock ("the STW Acquisition Shares") to the shareholders of STW at the closing of the merger and all derivative securities of STW as of the Merger became derivative securities of the Company including options and warrants to acquire 12,613,002 shares of common stock at an exercise price ranging from $3.00 to $8.00 with an exercise period ranging from July 31, 2011 through November 12, 2014 and convertible debentures in the principal amount of $1,467,903 with a conversion price of $0.25 and maturity dates ranging from April 24, 2010 through November 12, 2010.

Considering that, following the Merger, the shareholders of the Company control the majority of our outstanding voting common stock of the Company and effectively succeeded our otherwise minimal operations to those that are theirs; the Company is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of the Company’s securities for our net monetary assets, which are de minimus, accompanied by a recapitalization. Accordingly, the Company has not recognized any goodwill or other intangible assets in connection with this reverse merger transaction.

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The Report of Independent Registered Public Accounting Firm to our December 31, 2013 consolidated financial statements include an explanatory paragraph stating that the recurring losses and negative cash flows from operations and our working capital deficiency at December 31, 2013 raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Plan of Operations

For the next twelve months, our current operating plan is focused on providing water reclamation services to oil and gas producers and other commercial ventures in Texas. Water reclamation services include treating brackish water for use in fracking operations, landscaping and other commercial applications and reclaiming produced water. During fiscal 2013, we earned most of our revenue through our STW Pipeline Maintenance & Construction, LLC subsidiary and while we hope to continue to benefit from our ownership of that entity, we shall continue to focus on successfully implementing our water reclamation services.

As is discussed further in the Liquidity and Capital Resources section below, we have limited funds to support our operations. Our continuation as a going concern subsequent to the year ended December 31, 2013, is dependent on our ability to obtain additional financing to fund the continued operation of our business model for a long enough period to achieve profitable operations. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek additional financing. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

Results of Operations

For the Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Development Stage Enterprise

During the year ended December 31, 2012, the Company was a development stage company as defined by the Financial Accounting Standards Board (the "FASB"). Revenues commenced January 1, 2013, accordingly, as of January 1, 2013, the Company is no longer a development stage company.

Revenues

Revenues:  Revenues consist of $536,735 from the design, build and delivery of a proprietary water desalinization facility plus revenues of $1,408,896 of oil & gas services, including $347,550 from related parties. Total revenues for the year ended December 31, 2013 were $1,945,631 compared to no revenues during the year ended December 31, 2012. The increase in revenues is attributable to the completion of a contract during the year ended December 31, 2013, with the Ranchland Hills Golf Club in Midland, Texas and oil & gas services revenues realized during the period. During the year ended December 31, 2012, we were still a development stage enterprise and did not realize revenues.

Cost of Revenues:  Total costs of revenues for the year ended December 31, 2013 were $1,675,314, and are attributable to the costs of the contract to design, build and deliver a proprietary water desalinization facility and costs associated with the Company’s oil & gas services projects. Since we were still a development stage company during the year ended December 31, 2012, we had no revenues nor associated costs of revenues.

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Gross Profit:  Gross Profit was $270,317 during the year ended December 31, 2013, and was derived the desalinization contract and the Company’s oil & gas services projects. Since we were still a development stage company during the year ended December 31, 2012, we had no gross profit during 2012.

Research and development expenses:  During the year ended December 31, 2013, we incurred $80,556 of research and development costs in connection with the development of our water treatment technologies.  We had no research and development expenses during the year ended December 31, 2012, as expenses consisted primarily of general and administrative expenses.

Sales and marketing expenses:  During the year ended December 31, 2013, we incurred $37,066 of sales and marketing expenses in connection with the ramp up of our oil & gas services business operations.  We had no sales & marketing expenses during the year ended December 31, 2012 as we were still a development stage enterprise.

General and Administrative Expense:  General and administrative expenses increased by $1,356,454 or 70.3% to $3,291,481 for the year ended December 31, 2013 from $1,935,027 for the year ended December 31, 2012.  Our general and administrative expenses for the year ended December 31, 2013  consisted of general and administrative expense of $716,367, salaries and wages of $298,896, management compensation of $701,284, professional fees of $189,478, consulting fees of $687,878, insurance of $91,753, and board of director fees of $605,825, for a total of $3,291,481.

Our general & administrative expenses for the year ended December 31, 2012 consisted of general and administrative expense of $215,175, salaries and benefits of $69,850, management compensation of $216,000, professional fees of $194,127, consulting fees of $696,375, and board of director fees of $543,500, for a total $1,935,027.  The reasons for the increases in comparing the year ended December 31, 2013 to the year ended December 31, 2012 was mainly due to the increase in board compensation of $62,325, decrease in professional fees of $4,649, increase in management compensation of $485,284, increase in salaries and wages of $229,046, decrease in consulting fees of $8,497, increase in insurance expense of $91,753, and a net $501,192 increase in other general and administrative expenses. During the years ended December 31, 2013 and 2012, non-cash expenses relating to consulting fees and employment signing bonuses included in general and administrative expenses were $810,593 and $696,375, respectively.

Interest Expense:  Interest expense increased by $549,967 to $1,205,338 for the year ended December 31, 2013 from $655,371 for the year ended December 31, 2012.  The increase is due to additional interest expenses incurred on additional debt financing incurred by us since December 31, 2012.

Penalties:  Penalties expense of $114,957 was recorded for the year ended December 31, 2013, due to the Company’s failure to file its payroll tax returns on a timely basis. We did not incur a similar expense during the year ended December 31, 2012.

Change in derivative liability: During the year ended December 31, 2013, we recorded a $2,561,918 expense due to the change in the derivative liability from December 31, 2012.  During the year ended December 31, 2012, we recorded a $990,751 expense due to the change in the derivative liability from December 31, 2011. The key factor for the increase in comparing the year ended December 31, 2013 to the corresponding period for 2012, were that we applied an assumed volatility factor of 100% during the year ended December 31, 2012, while during the year ended December 31, 2013, we applied a historical volatility factor, expected for future periods, of 623% due to our transition from the development stage.

Non-controlling interest in Net Loss:  During the year ended December 31, 2013, we reported $48,824 as the non-controlling interest in the net loss of our STW Energy Services, LLC subsidiary. This non-controlling interest in the net loss represents of a 25% non-controlling interest in the net loss of STW Energy Services, LLC, and a subsidiary company. We did not have a non-controlling interest in this subsidiary during the year ended December 31, 2012.

 Net Loss:  Net loss increased by $3,434,271, or 95.4%, to a net loss of $7,032,955 for the year ended December 31, 2013 from a net loss of $3,598,684 for year ended December 31, 2012.  This net loss reflects the increased operating expenses and change in derivative liability discussed above.

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Liquidity and Capital Resources

Cash, total current assets, total assets, total current liabilities and total liabilities as of December 31, 2013 as compared to December 31, 2012, were as follows:

	December 31,		December 31,
	2013		2012
Cash	$	17,301	$	59,870
Total current assets	$	583,581	$	153,847
Total assets	$	1,515,647	$	201,014
Total current liabilities	$	11,951,231	$	8,846,344
Total liabilities	$	14,574,240	$	9,359,485

At December 31, 2013, the Company had total current assets of $583,581, consisting of $17,301 in cash, $532,910 in accounts receivable and $33,370 of prepaid expenses. At December 31, 2013, the Company had total current liabilities of $11,951,231 which includes $30,468 in bank overdrafts payable, $1,256,043 in accounts payable, $856,919 in related party payables, $1,839,439 in accrued interest, which principally includes accrued interest on our various debt obligations, $350,074 of sales, payroll taxes, and penalties payable, $285,190 of accrued compensation, $491,724 of accrued board compensation, $4,668,492 in current portion of notes payable of which $872,971 are past due, $231,897 of Fees Payable in Common Stock, $310,000 of stock subscriptions payable, and $1,630,985 of derivative liability.

During the year ended December 31, 2013, the Company received funds of $2,099,877 from our financing activities compared to $504,500 during the year ended December 31, 2012.

At December 31, 2013, we had a working capital deficit of $11,367,649 compared to a working capital deficit of $8,692,497 at December 31, 2012. Current liabilities increased to $11,951,231 at December 31, 2013 from $8,846,344 at December 31, 2012.

We have been funding our operations through private loans and the sale of common stock in private placement transactions. Management anticipates that significant additional expenditures will be necessary to develop and expand our water treatment and oil & gas services revenue before significant positive operating cash flows will be achieved. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Our consolidated financial statements have been prepared on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, our cash resources are insufficient to meet our planned business objectives without additional financing. These and other factors raise substantial doubt about our ability to continue as a going concern.  The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of our company to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations.  As of December 31, 2013, we had $17,301 of cash on hand. These funds are insufficient to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the issuance of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing.  There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

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In the event the Company is unable to continue as a going concern, the Company may elect or be required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.

Presently, due to the lack of revenues and profitability, we are not able to meet our operating and capital expenses. The success of our ability to continue as a going concern is dependent upon successful permitting of our sites obtaining customers for water reclamation services, and maintaining a break even or profitable level of operations. We have incurred operating losses since inception, and this is likely to continue in the near future.

The financial requirements of our Company will be dependent upon the financial support through credit facilities and additional sales of our equity securities.  There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek additional financing. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations and there is substantial doubt that we can continue to operate as a going concern.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company, since inception, has not had any significant revenues or significant operating history. We had an accumulated deficit of $24,355,343 as of December 31, 2013, and as of that date we were delinquent in payment of $350,074 of sales, payroll taxes, and penalties. As of December 31, 2013, $3,695,346 of our notes payable is in default. During the year ended December 31, 2013, the Company had a net loss of $7,032,955 and cash used in operating activities of $1,224,074. The Company had a working capital deficiency and stockholders’ deficit of $11,367,649 and $13,058,593, respectively, at December 31, 2013. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts and there can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

In the event the Company is unable to continue as a going concern, the Company may elect or be required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.

-27-

Presently, due to the lack of revenue in relation to our operating expenses, we are not able to meet our operating and capital expenses. The success of our ability to continue as a going concern is dependent upon successful permitting of our sites obtaining customers for water reclamation services, and maintaining a break even or profitable level of operations. We have incurred operating losses since inception, and this is likely to continue through the fourth quarter of 2014.

The financial requirements of our Company will be dependent upon the financial support through credit facilities and additional sales of our equity securities. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek additional financing. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the inability of the Company to continue as a going concern.

Operating Activities

Our operating activities from operations resulted in a net cash used by operations of $1,534,074 for the year ended December 31, 2013 compared to net cash used in operations of $451,817 for the year ended December 31, 2012.   The net cash used by operations for the year ended December 31, 2013 reflects a net loss of $7,032,955, decreased by $3,467,635 in non-cash charges and by $1,933,561 net increase in the working capital accounts.  The net cash used in operations for the year ended December 31, 2012 reflects a net loss of $3,598,684 offset by non-cash charges of $2,059,888, and $1,086,979 net change in the working capital accounts.

Investing Activities

Our investing activities used cash of $608,372 during the year ended December 31, 2013 while our investing activities did not generate any cash flows during the year ended December 31, 2012.

Financing Activities

Our financing activities resulted in a cash inflow of $2,099,877 for the year ended December 31, 2013, which represented the proceeds of $1,320,611 from notes payable, bank overdrafts of $30,468, related party payables of $568,985, common stock subscriptions payable of $310,000, non-controlling interest contribution of $2,500, reduced by debt issuance costs of $35,025 and repayment of $97,662 of notes payable. Our financing activities resulted in cash inflow of $504,500 for the year ended December 31, 2012, which represented the issuance of $165,000 of notes payable, issuance of $401,000 of convertible promissory notes, proceeds from the issuance of common stock of $45,000, reduced by debt issuance costs of $56,500 and $50,000 of principal payments of notes payable.

Short Term

On a short-term basis, the Company has not generated revenue or revenues sufficient to cover operations.  Based on prior history, the Company will continue to have insufficient revenue to satisfy current and recurring liabilities as the Company continues product and business development activities.

-28-

Need for Additional Financing

The Company does not have capital sufficient to meet its cash needs. The Company will have to seek loans or equity placements to cover such cash needs.

No commitments to provide additional funds have been made by the Company’s management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow us to cover the Company’s expenses as they may be incurred.

The Company will need substantial additional capital to support its proposed business objectives. The Company has limited revenues and has no committed source for any funds as of the date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, the Company may not be able to carry out its business plan, may never achieve sales or royalty income, and could fail in business as a result of these uncertainties.

Decisions regarding future participation customized water reclamation technologies or services will be made on a case-by-case basis. The Company may, in any particular case, decide to participate or decline participation. If participating, the Company may pay its proportionate share of costs to maintain the Company’s proportionate interest through cash flow or debt or equity financing. If participation is declined, the Company may elect to farm-out, non-consent, sell or otherwise negotiate a method of cost sharing in order to maintain some continuing interest in the prospect.

Warrants

As of December 31, 2013, the Company had 18,340,726 warrants outstanding to acquire the Company’s common stock.

Credit Facility

On March 19, 2014, we entered into a Line of Credit Agreement (the "Credit Agreement") with Black Pearl Energy, LLC ("Black Pearl"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt.  Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, approximately $1,010,000 of which has already been advanced to us; the credit was issued in the form of a promissory note (the "Note").  We must pay back all advanced funds on or before August 1, 2014, although such date will be extended to September 30, 2014 if we do not receive gross proceeds of no less than $6,000,000 resulting from either or both of: (a) the consummation of one or more private placements of debt or equity securities, not including the funds received pursuant to the Credit Agreement; or (b) the filing of a registration statement on Form S-1 with the Securities and Exchange Commission (“ SEC ”) for a public offering of our securities.  Interest accrues at 11% per annum.  To further induce Black Pearl to issue us the line of credit, we agreed to issue them 1,500,000 restricted shares of our common stock (after which, Black Pearl will own 1,500,000 (1%) of our common stock) and a $25,000 transaction fee to be paid on the final closing date of the credit line.

Off Balance Sheet Arrangements

None.

-29-

Contractual Obligations and Commitments

The following table is a summary of contractual cash obligations for the periods indicated that existed as of December 31, 2013, and is based on information appearing in the notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K:

	TOTAL		Less than 1 Year		1-2 years
14% Convertible Notes	$	2,904,736	$	1,297,971	$	1,606,765
12% Convertible Notes		375,000		375,000
Short term debt - TCA		43,280		43,280
GE Note		2,100,000		2,100,000
Deferred Compensation Notes		279,095		279,095
Revenue Participation Notes		745,480		203,202		542,279
Crown Financial equipment note		683,036		333,333		349,703
Capital lease and equipment finance contracts		160,873		36,611		124,262
TotTotal obligations	$	7,291,500	$	4,668,492	$	2,623,009

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Derivative Liabilities

Certain of the Company’s embedded conversion features on debt and issued and outstanding common stock purchase warrants, which have exercise price reset features, are treated as derivatives for accounting purposes. Our derivative liabilities consist of price protection features for embedded conversion features on debt, price protection features on warrants and derivative liabilities due to insufficient authorized shares to settle outstanding contracts which are carried at fair value, and are classified as Level 3 liabilities. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants and embedded conversion features using Black-Scholes.

-30-

Equity Instruments Issued to Non-Employees for Acquiring Goods or Services

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

Cash

Cash and cash equivalents include short-term, highly liquid investments with maturities of less than three months when acquired.

Income taxes

The Company accounts for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting for Income Taxes” and FIN 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No.109.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs.  A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

Fair Value of Financial Instruments

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses.  All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2013 and 2012.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2013 and 2012. The Company’s derivative liabilities as of December 31, 2013 and 2012, respectively, were valued at fair value. The Company did not have any other fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2013 and 2012.

-31-

Impairment of Long-Lived Assets

The Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of the assets to future net cash flows expected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets based on estimated future cash flows. No impairment charges were recorded for the years ended December 31, 2013 and 2012.

Share Based Expenses

ASC 718 “Compensation - Stock Compensation” codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights , may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 “Equity - Based Payments to Non-Employees” which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 (“EITF 96-18”), “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services”.  Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.  The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The full text of our audited consolidated financial statements as of December 31, 2013, and 2012, begins on page F-1 of this Annual Report on Form 10-K.

-32-

TABLE OF CONTENTS

	Page(s)
Reports of Independent Registered Public Accounting Firms	F-1 – F-2
Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years ended December 31, 2013 and 2012	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-6
Notes to the Consolidated Financial Statements	F-8 – F-36

-33-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Shareholders

STW Resources Holding Corp.

We have audited the accompanying consolidated balance sheet of STW Resources Holding, Corp. (the “Company”) as of December 31, 2013, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of STW Resources Holding, Corp., as of December 31, 2013, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced recurring losses since its inception and has a significant working capital deficiency and accumulated deficit as of December 31, 2013. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

/s/ Marcum LLP

Marcum llp

Los Angeles, CA

June 19, 2014

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of STW Resources Holding Corp.

We have audited the accompanying consolidated balance sheet of STW Resources Holding Corp. (the “Company”) as of December 31, 2012, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company is not required to have, nor were we engaged to perform, an audit on its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of STW Resources Holding Corp. as of December 31, 2012, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As more fully described in Note 1 to the consolidated financial statements, the Company has incurred significant operating losses and has had negative cash flows from operations, and at December 31, 2012, has an accumulated deficit of $(17,322,388).  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The consolidated financial statements do not include any adjustments to reflect possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result from the outcome of this uncertainty.

/s/ KMJ Corbin & Company LLP

Costa Mesa, California

August 5, 2013

F-2

STW Resources Holding Corp.

Consolidated Balance Sheets

			December 31, 2013				December 31, 2012
ASSETS
	Current Assets
	Cash		$	17,301		$	59,870
	Accounts receivable			532,910			5,040
	Prepaid expenses and other current assets			33,370			88,937
		Total Current Assets		583,581			153,847
	Long Term Assets
	Property and equipment, net			746,638			-
	Other assets
	Deferred loan costs, net of $102,435 and $45,675 accumulated amortization, respectively			185,428			47,167
TOTAL ASSETS			$	1,515,647		$	201,014
LIABILITIES AND STOCKHOLDERS' DEFICIT
	Current Liabilities
	Bank overdraft		$	30,468		$	-
	Accounts payable			1,256,043			794,191
	Payable to related parties:
	Black Pearl Energy, LLC			139,763			-
	Dufrane Nuclear, Inc.			132,490			-
	Accrued consulting fees - officers			584,666			287,934
	Current portion of notes payable, net of discounts, $854,928  payable to related parties in 2013			4,668,492			5,331,734
	Sales and payroll taxes payable			350,074			-
	Accrued expenses and interest			1,839,439			899,728
	Accrued compensation			285,190			127,665
	Accrued board compensation			491,724			235,000
	Deferred Revenue, net of deferred costs of $436,654			-			97,346
	Fees payable in common stock			231,897			-
	Stock subscriptions payable			310,000			-
	Derivative liability			1,630,985			1,046,439
		Total Current Liabilities		11,951,231			8,820,037
	Notes payable, net of discount and current portion			2,623,009			513,141
	Accrued interest on notes payable, net of current portion			-			26,307
	Total Liabilities			14,574,240			9,359,485
Commitments and contingencies (Note 10)
Stockholders' Deficit
	Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2013 and December 31, 2012			-			-
	Common stock $0.001 par value 250,000,000 and 100,000,000 shares authorized, 111,255,849 and 96,308,599 shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively			111,256			96,309
	Additional paid-in capital			11,231,418			8,067,608
	Accumulated deficit			(24,355,343	)		(17,322,388	)
	Total Stockholders' Deficit of STW Resources			(13,012,669	)		(9,158,471	)
Non-controlling interest in subsidiary				(45,924	)		-
Total Stockholders' Deficit				(13,058,593	)		(9,158,471	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT			$	1,515,647		$	201,014

See accompanying notes which are an integral part of these consolidated financial statements.

F-3

STW Resources Holding Corp.

Consolidated Statements of Operations

For the Years ended December 31, 2013 and 2012

	For the Years Ended December 31:
	2013			2012
Revenues
Contract and service revenues	$	1,598,081		$	--
Service revenues from related party		347,550			--
Total revenues		1,945,631			--
Costs of Revenues		1,675,314			--
Gross Profit		270,317			--
Operating expenses
Research and development		80,556			--
Sales and marketing		37,066			--
General and administrative		3,291,481			1,935,027
Depreciation		60,380			--
Total operating expenses		3,469,483			1,935,027
Loss from operations		(3,199,166	)		(1,935,027	)
Other Income (Expense)
Interest expense		(1,205,338	)		(655,371	)
Change in fair value of shares     issued to note holder		--			(19,587	)
Other income		--			2,052
Penalties		(114,957	)		--
Change in derivative liability		(2,561,918	)		(990,751	)
Net Loss		(7,081,379	)		(3,598,684	)
Less: Share of net loss of subsidiary attributable to non-controlling interest		(48,424	)		--
Net Loss of STW Resources	$	(7,032,955	)	$	(3,598,684	)
Loss  per common share – basic and diluted	$	(0.07	)	$	(0.05	)
Weighted average shares outstanding - basic and diluted		99,992,398			76,376,677

See accompanying notes which are an integral part of these consolidated financial statements.

F-4

STW Resources Holding Corp.

Consolidated Statements of Stockholders’ Deficit

For the Years ended December 31, 2013 and 2012

	Common Stock $0.001 Par
	Number		Amount		Additional Paid-In Capital		Accumulated Deficit			Non-Controlling Interest			Stockholders’ Deficit
Balance, December 31, 2011		46,636,849	$	46,637	$	5,773,505	$	(13,723,704	)	$	--		$	(7,903,562	)
Share-based compensation for Board of Directors and advisory board		29,903,000		29,903		1,452,497		--			--			1,482,400
Shares issued for consulting services		15,768,750		15,769		770,606		--			--			786,375
Issuance of shares in connection with debt settlement agreement		3,000,000		3,000		27,000		--			--			30,000
Subscription sale of shares, net of issuance cost of $5,000		1,000,000		1,000		44,000		--			--			45,000
Net loss		--		--		--		(3,598,684	)		--			(3,598,684	)
Balance, December 31, 2012		96,308,599	$	96,309	$	8,067,608	$	(17,322,388	)	$	--		$	(9,158,471	)
Conversion of accrued interest on  12% convertible notes to common shares		353,120		353		20,834								21,187
Conversion   of 12% convertible notes to common shares		750,380		750		44,272								45,022
Value of warrants issued for loan fee						171,996								171,996
Value of warrants issued with notes payable						65,555								65,555
Shares issued to board members as directors fees		4,575,000		4,575		269,925								274,500
Shares issued to advisory board members as fees		468,750		469		27,656								28,125
Shares issued as consulting fees		6,500,000		6,500		427,500								434,000
Reclassification of derivative liability due to increase share authorization						1,977,372								1,977,372
Shares issued as employment signing bonuses		2,300,000		2,300		158,700								161,000
Non-controlling interest investment in subsidiary											2,500			2,500
Net loss for the period								(7,032,955	)		(48,424	)		(7,081,379	)
Balance, December 31, 2013		111,255,849	$	111,256	$	11,231,418	$	(24,355,343	)	$	(45,924	)	$	(13,058,593	)

See accompanying notes which are an integral part of these consolidated financial statements.

F-5

STW Resources Holding Corp.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2013 and 2012

	Years ended December 31:
	2013			2012
Cash flows from Operating Activities:
Net loss of STW Resources	$	(7,032,955	)	$	(3,598,684	)
Adjustments to reconcile net loss of STW Resources to net cash used in operations:
Depreciation		60,380			--
Net loss of subsidiary attributable to non-controlling interest		(48,424	)		--
Change in fair value of derivative liability		2,561,918			990,751
Amortization of discount and debt issuance costs		164,549			44,675
Share-based compensation		826,897			1,004,875
Change in fair value of common shares issued in connection with the debt settlement agreement					19,587
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable		(527,870	)		--
(Increase) Decrease in prepaid expense		55,567			1,343
Increase (Decrease) in accounts payable		459,649			(17,295	)
Increase (Decrease) in sales and payroll taxes payable		350,074			--
Increase (Decrease) in accrued compensation		157,525			--
Increase (Decrease) in accrued expenses and interest		976,613			772,835
Increase (Decrease) in accrued board compensation		559,349			232,750
Increase (Decrease) in deferred revenue		(97,346	)		97,346
Net cash used in operating activities		(1,534,074	)		(451,817	)
Cash flows used by investing activities
Purchase of vehicles and equipment		(608,372	)		--
Net cash used in investing activities		(608,372	)		--
Cash flows provided from financing activities
Bank overdraft		30,468			--
Stock subscriptions payable		310,000			--
Related party payables		568,985			--
Proceeds from notes payable		1,320,611			165,000
Principal payments on notes payable		(97,662	)		(50,000	)
Non-controlling interest contributions		2,500			--
Issuance of convertible notes payable					401,000
Proceeds from equity issuances, net					45,000
Debt issuance costs		(35,025	)		(56,500	)
Net cash provided from financing activities		2,099,877			504,500
Net increase (decrease) in cash		(42,569	)		52,683
Cash at beginning of period		59,870			7,187
Cash at end of period	$	17,301		$	59,870

(continued)

F-6

STW Resources Holding Corp.

Consolidated Statements of Cash Flows

For the years ended December 31, 2013 and 2012

Supplemental cash flow information:

Cash paid for interest	$	10,413	$	9,647
Non-cash investing and financing activities:
Value of warrants issued as debt issuance costs	$	171,996	$	--
Value of common shares issued in connection with debt settlement agreement		-	$	30,000
Fair value of shares sold by note holder to reduce the note payable principal balance in connection with the debt settlement		-	$	30,413
Value of warrants issued with revenue participation notes payable	$	65,555	$	--
Value of common shares issued to board and advisory board for accrued fees	$	302,625	$	1,173,900
Value of common shares issued to consultants	$	434,000	$	90,000
Value of common shares issued to employees as signing bonuses	$	161,000	$	--
Value of property, plant & equipment acquired with long term debt	$	247,004	$	--
Estimated fair value of warrants issued in connection with the 14% convertible notes payable		-	$	54,197
Reclassification of derivative liability due to increased share authorization	$	1,977,372	$	--
Notes and interest settled in stock	$	66, 209	$	--

See accompanying notes which are an integral part of these consolidated financial statements.

F-7

STW Resources Holding Corp.

Notes to Consolidated Financial Statements

Year Ended December 31, 2013 and 2012

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANTACCOUNTING POLICIES

History of the Company

STW Resources Holding Corp. (“STW” or the “Company”, is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas.  STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia.  STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem.  The Company is also evaluating the deployment of similar technology in the municipal wastewater industry.

The Company’s operations are located in the United States of America and the principal executive offices are located at 3424 South County Road 1192, Midland, Texas 79706. 

On January 17, 2010, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned subsidiary of STW Resources, Inc. (“STW Sub”) and certain shareholders of STW controlling a majority of the issued and outstanding shares of STW.  Pursuant to the Merger Agreement, STW merged into the Acquisition Sub resulting in an exchange of all of the issued and outstanding shares of STW for shares of the Company on a one for one basis. At such time, STW became a wholly owned subsidiary of the Company.  

On February 9, 2010, the Federal Bankruptcy Court handling a bankruptcy proceeding for our predecessor at the time entered an order confirming the Second Amended Plan of Reorganization (the “Plan”) pursuant to which the Merger Agreement was approved.  The Plan was effective February 19, 2010 (the “Effective Date”). The principal provisions of the Plan were as follows:

● MKM, the DIP lender, received 400,000 shares of common stock and 2,140,000 shares of preferred stock,

● The holders of the Convertible Notes received 1,760,000 shares of common stock,

● General unsecured claims received 100,000 shares of common stock, and

● The Company’s equity interest was extinguished and cancelled.

On February 12, 2010, pursuant to the terms of the Merger Agreement, STW Sub merged with Acquisition Sub, which became a wholly-owned subsidiary of the Company (the “Merger”).  In consideration for the Merger and STW Sub becoming a wholly-owned subsidiary of the Company, the Company issued an aggregate of 31,780,004 ("the STW Acquisition Shares") shares of common stock to the shareholders of STW at the closing of the Merger and all derivative securities of STW Sub as of the Merger became derivative securities of the Company including options and warrants to acquire 12,613,002 shares of common stock at an exercise price ranging from $3.00 to $8.00 with an exercise period ranging from July 31, 2011 through November 12, 2014 and convertible debentures in the principal amount of $1,467,903 with a conversion price of $0.25 and maturity dates ranging from April 24, 2010 through November 12, 2010.

Formation of New Subsidiaries

On June 25, 2013, the Company formed a new subsidiary, a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The remaining 25% non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”).

Effective June 30, 2013, STW Resources Holding Corp. (the “Company”) formed a new subsidiary, STW Oilfield Construction, LLC (“Oilfield Construction”), a Texas limited liability company. The Company is the sole member of Oilfield Construction, owning 100% of the membership interest in such entity, which is managed by the Company's CEO and COO, as well as one of the Company's directors and an employee of the Company.

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Effective September 20, 2013, the Company formed another new subsidiary, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), a Texas limited liability company. The Company is the sole member of Pipeline Maintenance, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation policy

The consolidated financial statements for the year ended December 31, 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and 75% owned subsidiary of STW Energy Services, LLC. The consolidated financial statements for the year ended December 31, 2012, include the accounts of the Company and its wholly owned subsidiary, STW Resources, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated as of December 31, 2013.

Reclassifications

Certain reclassifications were made to the prior year consolidated financial statements to conform to the current year presentation. There was no change to reported net loss.

Non-Controlling interest

On June 25, 2013, the Company invested in a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2013, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a net loss attributable to non-controlling interests of $48,424 for the year ended December 31, 2013.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $24,355,343 as of December 31, 2013, and as of that date was delinquent in payment of $350,074 of sales and payroll taxes. As of December 31, 2013, $3,695,346 of notes payable are in default. Since its inception in January 2008 through December 31, 2013, management has raised equity and debt financing of approximately $12,000,000 to fund operations and provide working capital.  The cash resources of the Company are insufficient to meet its planned business objectives without additional financing.  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond.  These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.  There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing.  There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At December 31, 2013, the Company had $17,301 of cash on hand; the Company raised $617,500 of equity financing and secured a $2.0 million credit line from Black Pearl Energy, LLC, a related party, on March 13, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations for the next three months. Management is currently seeking additional funds, primarily through the issuance of debt or equity securities for cash to be used in operations. No assurance can be given that any future financing will be available or, if available, and that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

Development Stage Enterprise

During the year ended December 31, 2012, the Company was a development stage company as defined by the Financial Accounting Standards Board (the “FASB”). During the year ended December 31, 2013, the Company realized $1,945,631, including $536,735 of revenues from its water treatment business and $1,408,996 from its oil services business. Revenues commenced January 1, 2013, accordingly, as of January 1, 2013, the Company is no longer a development stage company.

Use of Estimates

Consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Among other things, management has estimated the collectability of its accounts receivable, the valuation of long lived assets, the assumptions used to calculate its derivative liabilities, and equity instruments issued for financing and compensation. Actual results could differ from those estimates.

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2013, there were no uninsured deposits.

The Company anticipates entering into long-term, fixed-price contracts for its services with select oil and gas producers and municipal utilities.  The Company will control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures.

As of December 31, 2013, three vendors accounted for 64% of total accounts payable.  During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.  As of December 31, 2012, three vendors accounted for 78% of total accounts payable.

As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.  As of December 31, 2012, one customer accounted for 100% of accounts receivable. During the year ended December 31, 2012, the Company had no revenues as it was a development stage enterprise.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, convertible notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments.  Our derivative liabilities are recorded at fair value (see Note 6).

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We determine the fair value of our financial instruments based on a three-level hierarchy for fair value measurements under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy:

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently, we do not have any items classified as Level 1.

Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, we do not have any items classified as Level 2.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment. We use the Black-Scholes-Merton option pricing model (“Black-Scholes”) to determine the fair value of the financial instruments.

If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s finance department is responsible for performing the valuation of financial instruments, including Level 3 fair values.  The valuation processes and results are reviewed and approved by the CFO at least once every quarter, in line with the Company’s quarterly and annual reporting dates. Valuation results are discussed with the Audit Committee as part of its quarterly review and annual audit of the Company’s financial statements.

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. For example, if the volatility factor was reduced from 623% to 500%, the derivative liability would be reduced from $1,630,985 to $1,585,686.

Our derivative liabilities consist of embedded conversion features on debt and price protection features on warrants, which are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 6).

Management has used the simplified Black Scholes Merton model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation.

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2013 and 2012.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985
December 31, 2012	$	--	$	--	$	1,046,439		$	1,046,439

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Accounting for Derivative Liabilities

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC  Topic 815-40, “Derivative Instruments and Hedging: Contracts in Entity’s Own Equity ” (“ASC Topic 815-40”). The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. The change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, price protection features on outstanding warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, the changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expired or waived. These common stock purchase warrants do not trade in an active securities market.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 6).

Equity Instruments Issued to Non-Employees for Acquiring Goods or Services

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

Long-lived Assets and Intangible Assets

In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

The Company had no such asset impairments at December 31, 2013 or 2012.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. As of December 31, 2012, the Company reported deferred revenue of $97,346, which is net of deferred costs of $436,654 related to this contract. These revenues and costs were recognized during the year ended December 31, 2013 upon completion of the contract and acceptance of the desalinization facility.

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The Company recognizes revenue on a contract once the services or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonable assured and amounts are fixed and determinable.

Services Revenues from Master Services Agreements

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies including Anadarko Petroleum Company, Apache Corporation, Diamondback E&P, Pioneer Natural Resources USA, Reliance Energy, Atlas Pipeline Holdings, and Targa Resources LLC. These MSAs contract the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services.  The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company realizes revenues from these contracts as the services are performed under the customer purchase orders. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

The Company recognizes revenue in the service area based on the MSA agreements. As services are performed and signed off by the customer the Company generates an invoice and recognizes the revenue from its ongoing customers. Revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

Business Segments

The Company has two reportable segments, (1) water reclamation services, and (2) oil & gas services. Segment information is reported in Note 11.

Income Taxes

In accordance with ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company maintains a valuation allowance with respect to deferred tax assets.  The Company established a valuation allowance based upon the potential likelihood of realizing the deferred tax asset in the future tax consequences. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits.  The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2013 and 2012.  The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2013 and December 31, 2012, respectively.

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Common Stock and Common Stock Warrants Issued to Employees

The Company uses the fair value recognition provision of ASC 718, “Stock Compensation,” which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes-Merton option pricing model to calculate the fair value of any equity instruments on the grant date.

At December 31, 2013 and 2012, the Company had no grants of employee common stock options or warrants outstanding.

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the lack of dilutive items. As of December 31, 2013 and 2012, the Company had 102,350,791 and 101,270,609 dilutive shares outstanding, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Furniture	3 years
Machinery	3-5 years

Stock Subscriptions Payable

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from a unit offering of its common stock in consideration of 3,875,000 shares of its common stock. The stock was not issued as of December 31, 2013 and was reported as Stock Subscriptions Payable.

Fees Payable in Common Stock

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 12,449,673 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 8,800,000 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 3,649,673 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.  The Company does not have any components of other comprehensive income (loss) as defined by ASC 220, “Reporting Comprehensive Income.”  For the years ended December 31, 2013 and 2012, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

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NOTE 2 – PROPERTY AND EQUIPMENT

Property, plant and equipment consisted of the following at December 31, 2013 and December 31, 2012:

	December 31, 2013			December 31, 2012
Office furniture and equipment	$	16,838		$	10,396
Tools and yard equipment		2,302			--
Vehicles and construction equipment		798,273			--
Total, cost		817,413			10,396
Accumulated Depreciation and Amortization		(70,775	)		(10,396	)
Total Property and Equipment	$	746,638		$	-

Depreciation expense for the year ended December 31, 2013 and 2012 was $60,380 and zero, respectively.

NOTE 3 – INVESTMENT IN BLACK WOLF, LLC

On January 8, 2013, the Company and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt, entered into an equity exchange agreement (the “Exchange Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock (the "Pearl Shares").  The Pearl Shares, although supposed to be issued after we amended our articles of incorporation to increase our authorized share capital, were never issued.  Other than the Pearl Shares, the Exchange Agreement did not obligate STW to provide any other assets or commitments in consideration of the transaction contemplated thereby.  The transaction contemplated by the Agreement - the transfer of ownership in Black Wolf - closed on January 28, 2013.  At the time of the Exchange Agreement, Black Wolf commercialized the expertise and services of Lone Wolf Resources, LLC, an environmental and civil construction company operating in the oil and gas industry (“Lone Wolf”). Lone Wolf has worked with the Department of Transportation and the Texas Commission on environmental quality to shape the standards for processing hydrocarbon-impacted soils to a reusable road base. Lone Wolf has completed projects internationally and throughout the United States, including the world's largest in-situ thermal remediation project. BPE is an oilfield service company that has developed an evaporation cover that is conservation friendly, economical and can be floated on to existing ponds or installed during construction for the elimination of evaporation on frac ponds used throughout the oilfield. BPE also provides high quality liners with fusion-welded seams, quality control testing including air tests of seams and destruction testing in West Texas and Eastern New Mexico, and intends to expand into South Texas during the first quarter of next year. Black Wolf combines Lone Wolf’s and BPE’s services and constructs drill sites, reserve pits, frac ponds, roads, pit closings, liners, leak detection systems, evaporation covers, and provides associated maintenance. Black Wolf also offers turnkey services for H-11 permitted ponds, including surveys, engineering and design, and permitting for storage of produced and brine waters as well as utilizes proprietary technologies employed by Lone Wolf in the reclamation of hydrocarbon-impacted soils. Black Wolf is currently negotiating on a number of multi-well packages with many of the largest oil and gas producers in West Texas.  After 4 months of operations, Lone Wolf initiated their termination clause with Black Pearl and Black Wolf.   As a result, Black Wolf was dissolved and we sought to terminate the Exchange Agreement since our investment would no longer be of any value.  On October 14, 2013, we entered into a Rescission Agreement with BPE, pursuant to which BPE has agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we are not required to issue the Pearl Shares and BPE agreed to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

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NOTE 4– RECEIVABLE FROM FACTOR, NET OF UNAPPLIED CUSTOMER CREDITS

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an accounts purchase facility with Crown Financial pursuant to an Account Purchase Agreement (the “Accounts Purchase Agreement”), pursuant to the Texas Finance Code.

The Accounts Purchase Agreement shall continue until terminated by either party upon 30 days written notice.  The Accounts Purchase Agreement is secured by a security interest in substantially all of STW Energy’s assets pursuant to the terms of a Security Agreement. Under the terms of the Accounts Purchase Agreement, Crown Financial may, at its sole discretion, purchase certain of the STW Energy’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to STW Energy up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Crown shall pay STW Energy a rebate percentage of between 0-18.5% of the related invoice. Each account receivable purchased by Crown will be subject to a discount fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Crown will generally have full recourse against STW Energy in the event of nonpayment of any such purchased account.

The Accounts Purchase Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening STW Energy’s mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Accounts Purchase Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Crown enforcing its rights under the Security Agreement and take possession of the collateral. The Accounts Purchase Agreement contains provisions relating to events of default that are customary for agreements of this type.

Factoring Agreement with Joshua Brooks

On September 26, 2013, STW Oilfield Construction, LLC (Oilfield Construction) entered into an accounts receivable factoring facility (the “Factoring Facility”) with Mr. Joshua Brooks, the Company's Vice President of Operations, pursuant to a Loan Agreement (the “Factoring Agreement”), which shall not be deemed an account purchase agreement pursuant to the Texas Finance Code. The Factoring Facility includes a loan in the amount of $225,000, of which none is outstanding at December 31, 2013.

The Factoring Facility shall continue until terminated by either party upon 30 days written notice. The Factoring Facility is secured by a security interest in substantially all of Oilfield Construction's assets pursuant to the terms of a Security Agreement. Under the terms of the Factoring Agreement, Joshua Brooks may, at his sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Brooks will advance to the Company up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Mr.

Brooks shall pay Oilfield Construction a rebate percentage of between 0-18.5% of the related invoice. Each account receivable purchased by Mr. Brooks will be subject to a factoring fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Mr. Brooks will generally have full recourse against the Company in the event of nonpayment of any such purchased account.

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Joshua Brooks as attorney in fact for various activities associated with the purchased accounts receivable, including opening Oilfield Construction's mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Mr. Brooks enforcing its rights under the Security Agreement and take possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

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The Company has guaranteed performance of certain of Oilfield Construction's obligations under the Factoring Agreement, pursuant to a Guaranty Agreement with Mr. Brooks, pursuant to which the Company shall guaranty payment of the loan and the related indebtedness thereon. Pursuant to the Guaranty Agreement, Mr. Brooks may take all reasonable steps to take and hold security for the payment of the obligations under the Guaranty Agreement and the Company granted Mr. Brooks a security interest in any claims the Company may have against Mr. Brooks or Energy Services, as well as the proceeds of any of the foregoing, any of which Mr. Brooks may retain without notice at any time until the guaranteed obligations are paid in full. Pursuant to the Guaranty Agreement, the Company may not, without Mr. Brooks' prior written consent, transfer or otherwise dispose of a material portion of the Company's assets or any interest thereon.

NOTE 5 – NOTES PAYABLE

The Company’s notes payable at December 31, 2013 and December 31, 2012, consisted of the following:

	December 31,			December 31,
Name	2013			2012
14% Convertible Notes	$	2,904,736		$	2,882,235
12% Convertible Notes		375,000			415,000
Other Short-term Debt		43,280			84,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		852,702			165,000
Crown Financial note		683,036			--
Equipment finance contracts		137,573			--
Capital lease obligation		23,300			--
Unamortized debt discount		(107,221)			(80,735)
Total Debt		7,291,501			5,844,875
Less: Current Portion		(4,668,492	)		(5,331,734	)
Total Long Term Debt	$	2,623,009		$	513,141

14% Convertible Notes

Between November 2011 and December 2012, the Company issued a series of 14% convertible notes payable to accredited investors.  The Company also issued 20,167,871 two year warrants to purchase common stock at an exercise price of $0.20 per share.  These notes are convertible into 46,746,898 shares of the Company’s common stock as of December 31, 2013.

The Company valued the warrants and the embedded conversion feature at inception using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.17% - 0.33%; expected volatility of 100%. The estimated fair value of the warrants issued between November 2011 and December 2012 was $81,656 and the embedded conversion feature was $35,546 at issuance and was recorded as a derivative liability at such time in the accompanying consolidated balance sheets. The warrants and embedded conversion feature were included in the derivative liabilities account each reporting period as the Company had insufficient authorized shares to settle outstanding contracts (see Note 6). On July 12, 2013, the Company increased its share authorization to 250,000,000 shares and reclassified the $1,977,372 derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

F-17

As of December 31, 2013, the aggregate principal balance of these notes is $2,904,736. An aggregate principal amount of $2,504,736 of these notes matured on November 30, 2013, with the remaining $400,000 balance maturing at various dates through November 2014. On September 22, 2013, the Company negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, the Company agreed to issue an aggregate 800,973 shares of its common stock with an accrued value of $64,078. As December 31, 2013, the total of outstanding 14% convertible notes is $2,904,736 of which $897,971 matured on November 30, 2013 and is in default.

As of December 31, 2013, $171,892 of the 14% convertible notes is payable to related parties.

12% Convertible Notes

Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that were scheduled to mature on November 30, 2011 and are currently in default.  The Company also issued 1,641,496 warrants to purchase common stock at an exercise price of $0.02 per share that expire at various dates through 2015. The notes are convertible into 28,282,534 shares of the Company’s common stock as of December 31, 2013.

On June 6, 2013, the Company issued 353,120 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible notes payable and 750,380 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 12% convertible note payable.  The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

Other Short-Term Debt

Other short term debt is comprised of a settlement of a note payable to an accredited investor in the amount of $43,280. The Company did not make its required payments during 2013 and the balance is in default.

On August 1, 2013, the Company entered in to an unsecured loan agreement in the amount of $20,000 with a private investor. The loan matures on February 1, 2014 and bears interest at an effective rate of 20%.   The Company made a $20,000 principal payment on this note bringing the unpaid principal balance as of December 31, 2013 to zero.

The Company also issued 200,000 warrants that bear an exercise price of $0.20 and expire on August 1, 2015.The Company valued the warrants at $12,000 using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The value of the warrants was recorded as a loan fee that was expensed during the year ended December 31, 2013.

GE Ionics

On August 31, 2010, the Company entered into a Settlement Agreement relating to a $2,100,000 note payable that was amended on October 30, 2011. On May 7, 2012, GE informed the Company that it had failed to make any required installment payment that was due and payable under the GE Note and that the Company’s failure to make any such installment payment(s) constituted an Event of Default under the GE Note.   Pursuant to the terms of the GE Note, upon the occurrence of an Event of Default for any reason whatsoever, GE shall, among other things, have the right to (a) cure such defaults, with the result that all costs and expenses incurred or paid by GE in effecting such cure shall bear interest at the highest rate permitted by law, and shall be payable upon demand; and (b) accelerate the maturity of the GE Note and demand the immediate payment thereof, without presentment, demand, protest or other notice of any kind.    Upon an event of default under the GE Note, GE shall be entitled to, among other things (i) the principal amount of the GE Note along with any interest accrued but unpaid thereon and (ii) any and all expenses (including attorney’s fees and expenses) incurred in connection with the collection and enforcement of any rights under the GE Note.  

F-18

Under the terms of the August 31, 2010 note, interest at the rate of WSJ prime plus 2% is due on the note, upon default, interest is due at the maximum legal rate which is 10% in the state of Texas. The note matured on September 1, 2013, and is in default. Interest on the note through December 31, 2013, has been accrued pursuant to the terms of the note through May 6, 2012, interest upon default on May 7, 2012, has been accrued at the maximum default rate in the state of Texas which is 10%.

As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the GE Note.  

On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”).  Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE, upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”).  As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote.

Deferred Compensation Notes

As of December 31, 2013, the Company has a balance of $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in-house counsel. The notes matured December 31, 2012, and the notes are in default.

Revenue Participation Notes

As of December 31, 2013, the Company has an outstanding balance of $852,702 of Revenue Participation Notes comprised as follows:

2012 Revenue Participation Notes	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500
2013 Revenue Participation Notes - STW Energy		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		203,202
Total revenue participation notes	$	852,702

These notes are described as follows:

2012 Revenue Participation Notes

During February 2012, the Company issued to certain accredited investors (the “Investors”) revenue participation interest notes with a principal amount of $165,000 (the “March 2012 Notes”). These March 2012 Notes mature on January 31, 2017 and carry an interest rate of 12%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received two times their investment amount and 10% of the net revenues thereafter until such time as they have received an additional $295,000 at which time the March 2012 Notes are retired in full. The Investors received warrants to purchase 165,000 shares of the Company’s common stock. These warrants have an exercise price of $0.20, are immediately exercisable and a two year maturity. The Company incurred cash fees of $16,500 which is recorded as a loan origination fee and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet and is being amortized to interest expense, and issued 16,500 warrants under the same terms as those received by the Investors. As of December 31, 2013, the Company has not generated revenue related to these revenue participating notes.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.33%; expected volatility of 100%. As the value of the warrants was not significant, the Company did not allocate any portion of the debt proceeds to the warrants and the value of the warrants were derivatives as of December 31, 2012.

F-19

2013 Revenue Participation Notes – STW Resources Salt Water Remediation Technology

During the nine month period ended September 30, 2013, the Company issued to ten (10) accredited investors revenue participation notes with an aggregate principal amount of $302,500. These notes mature five years from the date of issuance, and carry an interest rate of 12% and an effective interest rate of 13.5%.  Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water.  The Company will pay one-half (50%) of the Net Operating Revenues, after deducting project operational and equipment lease expenses, from the Water Processing Master Services Agreements (“MSA’s”) to all Participants generally (with each Participant’s percentage of the $302,500 investment being paid on a pro-rata basis) until such time as each Participant’s share of the $302,500 Note has been paid in full, and until such further time as an additional $302,500 has been paid to the Participants in relation to each Participant’s share of the $302,500  investment.  Thereafter, all further Revenue Fees shall cease and this Agreement shall be terminated in all respects.

The Company also issued 605,000 warrants in connection with this investment. These warrants have an exercise price of $0.20, are immediately exercisable and expire on various dates through June 30, 2015.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $33,398 and recorded this loan discount to be amortized to interest expense over the term of the loan.

2013 Original Issue Discount Notes with Revenue Participation Interest – STW Energy Services, LLC

During the year ended December 31, 2013, the Company issued to four (4) accredited investors revenue participation note with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These notes mature eighteen (18) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 9.4%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Energy services contracts. The Investor shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 91,000 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on various dates through June 30, 2015.

The 6% original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $325,000.  The Notes maintain an original issue discount of $75,000 and are due on or before March 26, 2015; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained.  The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Energy Services, LLC ("Energy Services") subsidiary, until each Note has been paid in full.   All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes.  If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full.   In consideration for the Note, the Company shall issue 2 year warrants to purchase one share of common stock for each two dollars of such holder's investment, at an exercise price of $0.30 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 162,500 shares.  The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.  

The Company valued the 91,000 warrants associated with the $182,000 notes using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $5,004 and recorded this loan discount to be amortized to interest expense over the term of the loan.

F-20

2013 Convertible Original Issue Discount Notes with Revenue Participation Interest – STW Oilfield Construction, LLC

On September 27, 2013, the Company issued to a related party accredited investor, Mr. Joshua Brooks, a convertible revenue participation notes with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries a stated interest rate of 6% and an effective interest rate of 14%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 131,608 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on September 27, 2015.  The notes are convertible into 548,367 shares of the Company’s common stock. On December 6, 2013, the Company and Mr. Brooks agreed to a mutual rescission of this note and related warrants agreement. The net proceeds of $50,618 from this note were recorded as Related Party Payable – Dufrane Nuclear, a Company controlled by Mr. Joshua Brooks.

2013 Convertible Original Issue Discount Notes with Revenue Participation Interest – STW Pipeline Maintenance and Construction, LLC

During the year ended December 31, 2013, the Company issued to two (2) accredited investors convertible revenue participation notes with an aggregate principal amount of $207,115 and an original issue discount of $27,015, yielding net cash proceeds of $180,100 to the Company. These notes mature seven (7) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 8.1%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Pipeline Maintenance &Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 414,230 warrants in connection with this investment. These two year warrants bear an exercise price of $0.30 per share.  The notes are convertible into 1,725,958 shares of the Company’s common stock.

The 6% convertible original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $207,000.  The Notes maintain an original issue discount of $27,000 and are due on or before May 18, 2014; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained.  The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Pipeline Maintenance & Construction, LLC ("Pipeline") subsidiary, until each Note has been paid in full.  All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes.  If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full.  The Notes are convertible into shares of the Company's common stock at $0.12 per share, subject to adjustment for standard anti-dilution features.  In consideration for the Notes, the Company issued 2-year warrants to purchase two shares of common stock for each one dollar of such holder's investment, at an exercise price of $0.20 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 414,000 shares.  The Company is required to reserve a sufficient number of shares to be able to issue all of the shares underlying the Notes if same are fully converted.  The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.  

The Company valued the 414,230 warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $27,153 and recorded this debt discount to be amortized to interest expense over the term of the loan agreement.

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of December 31, 2013, the Company had drawn down $683,036 of this loan facility.

F-21

The Company issued 4,000,000 warrants in connection with this loan agreement, in lieu of a cash loan fee. These warrants have an exercise price of $0.20, are immediately exercisable and a two year maturity.  The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $159,996 and recorded this loan fee a prepaid loan fee to be amortized to interest expense over the term of the loan.

Equipment Finance Contracts

During the year ended December 31, 2013, the Company financed the purchase of vehicles and other equipment with equipment finance contracts from various banks and finance institutions.  The contracts mature in three to five years and bear interest rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of December 31, 2013, the Company has an aggregate balance of $137,573 payable on these equipment finance contracts.

Capital lease obligation

During the year ended December 31, 2013, the Company entered into a capital lease of a modular office trailer. The lease contract calls for forty eight (48) monthly payments of $593 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $23,300 with an implicit interest rate in the lease of 10%.

For the years ended December 31, 2013 and 2012, interest expense on all notes payable described above was $1,205,338 and $655,371, respectively, which included $164,549 and $44,675, respectively, of amortization of debt discount and debt issuance costs.  There was no interest capitalized in 2013 and 2012. As of December 31, 2013 and 2012, net deferred loan costs were $185,428 and $45,667, respectively. The balance of unamortized discount at December 31, 2013 and 2012, respectively, were $107,221 and $80,735.

NOTE 6 - DERIVATIVE LIABILITIES

We apply the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments. On July 12, 2013, the Company increased its share authorization to 250,000,000 shares and removed this $1,977,372 derivative liability due to the availability of sufficient authorized shares to settle these outstanding contracts.

Management has used the simplified Black Scholes Merton model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation.

During the year ended December 31, 2012, the Company used a volatility rate of 100% to value its derivative instruments. This 100% volatility rate was based on management’s estimate of volatility due to the limited trading history of the Company and the fact that it was a development stage company. During the year ended December 31, 2013, the Company computed a historical volatility of 623% using daily pricing observations for recent periods. We applied a historical volatility rate during the year ended December 31, 2013, and future periods, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and embedded conversion features.

F-22

We currently have no reason to believe that future volatility over the expected remaining life of these warrants and embedded conversion features is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and embedded conversion features. The risk-free interest rate is based on one-year to five-year U.S. Treasury securities consistent with the remaining term of the warrants and embedded conversion features.

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of December 31, 2013 and December 31, 2012:

	For the year ended December 31, 2013			For the year ended December 31, 2012
Annual dividend yield		0	%		0	%
Expected life (years)		0.60– 0.47			0.50 – 3.40
Risk-free interest rate		0.11% - 0.25	%		0.15% - 0.51	%
Expected volatility		623	%		100	%

	December 31, 2013		December 31, 2012
Embedded Conversion features	$	1,467,579	$	962,815
Warrants		163,406		83,624
	$	1,630,985	$	1,046,439

The following table presents the changes in fair value of our warrants and embedded conversion features measured at fair value on a recurring basis for each reporting period-end.

	For the year ended December 31, 2013			For the year ended December 31, 2012
Balance beginning	$	1,046,439		$	1,491
Issuance of warrants and embedded conversion features					54,197
Reclassification of derivative liability due to increased share authorization		(1,977,372	)		--
Change in fair  value		2,561,918			990,751
Balance ending	$	1,630,985		$	1,046,439

NOTE 7– RELATED PARTY TRANSACTIONS

Officers’ Compensation

During years ended December 31, 2013 and 2012, we incurred $150,000 and $102,000, respectively, in officers’ consulting fees and $24,500 in commissions during the year ended December 31, 2012, due our Director, Chairman and CEO, Mr. Stanley Weiner.  As of December 31, 2013 and December 31, 2012, the balances of $263,083, and $155,583, respectively, were payable to Mr. Weiner for his officers’ salary.

During the years ended December 31, 2013 and 2012, we incurred $150,000 and $130,000, respectively, in officers’ consulting fees due our Director and Chief Operating Officer, Mr. Lee Maddox.  As of December 31, 2013 and December 31, 2012, the balances of $170,500, and $59,500, respectively, were payable to Mr. Maddox for his officers’ salary.

F-23

During the years ended December 31, 2013 and 2012, we incurred $90,000, and $60,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt.  As of December 31, 2013 and December 31, 2012, the balances of $121,083, and $108,866, respectively, were payable to Seabolt Law Group for these services.

During year ended December 31, 2013, we incurred $30,000 in officers’ consulting fees due our Vice President of Operations, Mr. Joshua Brooks.  As of December 31, 2013, the balance of $30,000, was payable to Mr. Brooks for his officers’ salary.

Board and Advisory Board Compensation

Directors are expected to timely and fully participate in all regular and special board meetings, and all meetings of committees that they serve on.  In December 2011, the Board voted to authorize the issuance of shares in lieu of cash compensation for past services.

Per the Director Agreements, the Company compensates each of the directors through the initial grant of 200,000 shares of common stock and the payment of a cash fee equal to $1,000 plus travel expenses for each board meeting attended, and $75,000 per year as compensation for serving on our board of directors. As of December 31, 2013, the Company recorded professional fees in the accompanying consolidated statement of operations of $602,849 and made payments of $43,500 in cash and issued 5,043,750 shares of its common stock having an accrued valued $302,625.  As of December 31, 2013, the Company has accrued compensation due to its directors (both current and former) of $491,724 and as of December 31, 2012 the Company had accrued $235,000, which is calculated based upon time of service and the number of Board meetings attended and is included in accrued compensation in the accompanying consolidated balance sheet.

The Company’s advisory board was comprised of three members. Each advisory board member was granted 56,250 shares upon joining the board and 75,000 shares annually thereafter.  The advisory board was dissolved on June 12, 2013.

Other related party transactions

During the year ended December 31, 2012, the Company incurred $73,500 in fees and expenses payable to Viewpoint, which was a related party based on one of their partners being a member of the Board of Directors, and granted a warrant to purchase 566,677 shares of the Company’s common stock with an exercise price of $0.20 per share for a period of two years from the date of issuance. At December 31, 2012, the Company had a balance due Viewpoint of $202,728 recorded in accounts payable.

During the year ended December 31, 2012, the Company incurred $63,199 in fees and expenses to Ascendiant Capital Markets, LLC, which was a related party based on one of their partners being a member of the Board of Directors, and granted a warrant to purchase 469,000 shares of the Company’s common stock with an exercise price of $0.20 per share for a period of two years from the date of issuance.

As of December 31, 2013, the Company has a $139,763 related party payable to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel.  This related party payable is comprised of cash advances of $276,804, net of $137,041 of accounts receivable.  During year ended December 31, 2013, the Company had sales of $347,550 to Black Pearl Energy, LLC, a related party.

As of December 31, 2013, the Company has a related party payable of $132,490 to Dufrane Nuclear, Inc. a company controlled by Mr. Josh Brooks, the Company’s vice president of operations.

F-24

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. No such shares are issued or outstanding and the Company does not currently have any plans to issue shares of such stock.

On March 7, 2013, the Company filed a certificate of designation to its articles of incorporation, as amended, with the Secretary of State of the State of Nevada whereby it designated 210,000 shares of preferred stock as series A-1 preferred stock (the “Series A-1 Preferred Stock”).  Except as otherwise expressly required by law, each holder of Series A-1 Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company and shall be entitled to one vote for each share of common stock deliverable upon conversion of the Series A-1 Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited.  Except as otherwise required by law, the holders of shares of Series A-1 Preferred Stock shall vote together with the holders of common stock on all matters and shall not vote as a separate class.

The Series A-1 Preferred Stock pays dividends of 16% per annum (10% cash and 6% paid-in-kind), payable quarterly in arrears.  Upon an Event of Default (as defined in the Certificate of Designation) the dividend rate shall increase to eighteen percent (18%) per annum, of which 12% is payable in cash and 6% paid-in-kind, until such time as the Event of Default is cured.  Each share of Series A-1 Preferred Stock has a stated value equal to $2.40 per share and is initially convertible at any time into shares of common stock at a conversion price equal to $0.12 per share, subject to adjustment under certain circumstances.   The conversion price of the Series A-1 Preferred Stock is subject to weighted average price adjustment for subsequent lower price issuances by the Company, subject to certain exceptions.   Notwithstanding the foregoing, a holder of Series A-1 Preferred Stock shall not have the right to convert any portion of the Series A-1 Preferred Stock, to the extent that, after giving effect to the conversion, such Holder would beneficially own in excess of 9.9% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of the common stock issuable upon conversion of Series A-1 Preferred Stock held by the applicable holder.  In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A-1 Preferred Stock will be entitled to receive an amount equal to two (2) times the original purchase price for the Series A-1 Preferred Stock, plus all declared and unpaid dividends.

Each share of Series A-1 Preferred Stock shall automatically convert into common stock, at the then applicable conversion price, upon the earlier to occur of (i) the closing share price of the Company’s common stock being at least $0.75 for 10 consecutive trading days, or (ii) the affirmative consent of the holders of at least a majority of the then outstanding shares of Series A-1 Preferred Stock.  The Company may, at any time, and upon providing a 30 days written notice, require the holders of Series A-1 Preferred Stock to sell all of their shares of Series A-1 Preferred Stock at a redemption price payable in cash equal to the sum of the outstanding principal and accrued but unpaid dividends, if any, multiplied by a factor such that each Holder receives an annualized return of 20%.  In addition, each holder of the Series A-1 Preferred Stock may, at their option upon certain events, require the Company to purchase all of the Series A-1 Preferred Stock held by such holder at a price payable in cash equal to the sum of the outstanding principal and accrued but unpaid dividends, if any, multiplied by a factor such that each holder receives an annualized return of 20%.

 Common Stock

The Company has authorized 250,000,000 shares of common stock with a par value of $0.001.  During the years ended December 31, 2013 and 2012, the Company issued common shares as follows:

Year ended December 31, 2012:

On March 20, 2012, pursuant to a debt settlement agreement, the Company issued 3,000,000 shares of its common stock to a note holder who sold these shares, and the net proceeds reduced the Company's liability to the note holder. The Company estimated the fair market value of the common stock to be $30,000 on the date of issuance (based on the closing share price on the issuance date) and recorded the amount in prepaid expenses and other current assets. The Company recorded the change in fair value of the shares still held by the note holder on each reporting date with the change in fair value being recorded as a change in fair value of shares issued to note holder within the consolidated statement of operations. The note holder sold all 3,000,000 shares for $18,626 which was used to reduce the amount of debt owed to the note holder. As of December 31, 2012, all shares held by the note holder were sold.

F-25

On March 23, 2012, the Board of Directors agreed to exchange their accrued and future compensation for fiscal 2012 for 29,478,000 shares of the Company’s common stock valued at $1,473,900. Total accrued compensation as of that date was $1,248,900, of which $1,173,900 was included in accrued compensation at December 31, 2011 and $300,000 of compensation expense being earned and recorded during the year ended December 31, 2012. The exchange price was agreed by both parties to be $0.05 per share.

On March 23, 2012, the Board of Directors authorized the Company to issue stock for consulting services to be performed on behalf of the Company. The Board authorized the issuance of 16,950,000 shares of common stock to various consultants, of which, 5,000,000 shares are to be  issued to Mr. Stan Weiner, the Company’s Chief Executive Officer, and 10,750,000 to be issued to the other various consultants. The Company cancelled 1,200,000 of the shares that were part of the original 16,950,000 shares to be issued for consulting services to be performed.  As of December 31, 2012, all shares related to these agreements have been issued related to the services to be performed pursuant to such consulting agreements. The Company estimated the fair value of the shares to be $786,000 based on the fair value of the share price on the commitment date. The Company will record the estimated fair value to expense for such services as they are performed ratably over the term of the consulting agreements. The consulting agreements mature on various dates through April 2013. During the year ended December 31, 2012, the Company expensed $696,000 in compensation for shares issued to consultants.

On March 23, 2012, the Board authorized the issuance of 425,000 shares of the Company’s common stock to its Advisory Board members. The Company estimated the fair market value to be $8,500 based on the closing share price on the date of issuance.

On March 23, 2012, the Company issued 18,750 shares to a consultant. The Company estimated the fair market value to be $375 based on the closing share price on the date of issuance.

In May 2012, the Company entered into a subscription agreement with accredited investors pursuant to which the Company sold 1,000,000 Units, each Unit consisting of one share of the Company’s common stock par value $0.001 and a warrant to purchase 0.375 shares of the Company’s common stock (the “Warrants”) for aggregate consideration of $50,000. The Warrants shall be exercisable for a period of two years from the date of issuance at an initial exercise price of $0.20. The Company incurred issuance costs of $5,000 and issued 150,000 warrants under the same terms.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.33%; expected volatility of 100%. As the value of the warrants is not significant, the Company did not allocate any portion of the proceeds to the warrants, however, the warrants were included in the derivative liability account at December 31, 2012 as the Company had insufficient authorized shares to settle the contract.

As of December 31, 2012, the Company has an aggregate of common stock issued and outstanding plus common stock equivalents which, if fully converted, would be in excess of the 100,000,000 authorized shares permitted by the articles of incorporation of the Company. Total common shares outstanding plus common stock equivalents (warrants and conversion features) totaled approximately 198,000,000 as of December 31, 2012. As a result, the Company has recorded substantially all common stock equivalents as a derivative liability in the accompanying consolidated balance sheet at December 31, 2012.

Year ended December 31, 2013:

On June 6, 2013, the Company issued 353,120 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible note payable and 750,380 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 14% convertible note payable.  The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

F-26

Prior to the July 12, 2013, amendment to our Articles of Incorporation to increase our authorized capital from 100,000,000 shares of common stock to 250,000,000 shares of common stock (the "Amendment"), we did not have sufficient shares of authorized capital to meet all of our outstanding security obligations.  Some of these obligations required us to issue shares of common stock to our officers and directors, pursuant to the agreements we maintain with them or board approved issuances to such persons; following the Amendment, on September 16, 2013 the company issued an aggregate of 5,043,750 shares of common stock, with a value of $297,581, as follows:

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		625,000	2012 Director Compensation
Manfred E. Birnbaum		625,000	2012 Director Compensation
D. Grant Seabolt, Jr.		625,000	2012 Director Compensation
Joseph I. O'Neill III		625,000	2012 Director Compensation
Audry Lee Maddox		356,250	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		625,000	2012 Director Compensation
Paul DiFrancesco		625,000	2012 Director Compensation
Bill G. Carter		625,000	2012 Director Compensation
Steven Schachman		156,250	2012 Advisory Board Compensation
Hunter Hill		156,250	2012 Advisory Board Compensation

On September 16, 2013, the Company issued 2,100,000 shares of its Common stock in payment of accrued consulting fees. These shares were authorized by the board of directors at a value of $0.10 per share based on the value on March 5, 2013, the date that the board of directors approved the payment in shares.  At the time of the March 5, 2013, board action to approve the payment of the accrued fees in stock, the Company did not have adequate shares authorized to settle the contracts so the issuance of shares was delayed until September 16, 2013.  These shares were issued on September 16, 2013, at a value at the time of issuance of $126,000, resulting in a reduction of accrued consulting fees expense of $84,000.

During August and October, 2013, the Company issued to four (4) accredited investors revenue participation notes with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These note mature eighteen (18) months from the date of issuance and carry stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Energy services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 91,000 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on various dates through June 30, 2015.

During September, 2013, the Company issued to a related party accredited investor convertible a revenue participation note with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 131,608 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on September 27, 2015.  The note is convertible into 548,347 shares of the Company’s common stock. On December 6, 2013, the Company and this investor agreed to a mutual rescission of this note and the related warrants.  The net cash proceeds of $50,418 are included in the total balance of $134,013 as Payable to Related Party, Dufrane Nuclear Shielding Inc., a company controlled by our Vice President of Operations, Mr. Joshua Brooks.

In the months of October and December 2013 seven (7) of the companies consultants were issued 6,500,000 shares in exchange for their invoice amounts due from the company.

On December 9, 2013, the Company issued 2,000,000 shares to an employee as a signing bonus under an employment contract.  The Company also issued 300,000 shares of its common stock to an employee of its subsidiary, STW Pipeline Maintenance & Construction, LLC, as an installment on a signing bonus under an employment contract with the subsidiary.

F-27

As of December 31, 2013, the Company had the following securities to acquire the Company’s common stock outstanding:

Security	Number of Underlying Common Shares		Exercise Price	Expire
Warrants issued for Professional Services		1,500,000	4.00		2014
Warrants associated with the January 14, 2009 Bridge Note		480,000	3.00		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		1,500,000	8.00		2014
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with 2012 Revenue Participation Notes		181,500	0.20		2014
Warrants associated with May 2012 Subscription Agreement		525,000	0.20		2014
Warrants associated with June-September 14% Convertible Notes		550,000	0.20		2014
Warrants associated with November 14% Convertible notes		2,777,500	0.20		2014
Warrants associated with 2013 Revenue Participation Notes		1,110,230	0.20 – 0.30		2015
Warrants issued to Crown Financial, LLC		4,000,000	0.20		2016
Warrants issued on $20,000 short term loan		200,000	0.20		2015
Warrants issued with November 2013 Unit Share Offering		3,875,000	0.20		2015
Sub-total of Warrants outstanding		18,340,726
Common stock associated with the 12% Convertible Notes plus accrued interest		27,765,417	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
12/31/2013 Accrued Default interest		517,118	0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		46,114,632	0.08		2015
12/31/2013 Accrued Default interest		198,299	0.08		2014
12/31/2013 Calibre Note interest		163,968	0.08		2014
Common stock associated with November 2013 Unit Share Offering		3,875,000	0.08		2015
Common stock payable as fees		3,649,673	various		2014
Total securities		102,350,791

F-28

Warrants

A summary of the Company’s warrant activity and related information during the years ended December 31, 2013 and 2012 follows:

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		29,803,434	$	0.94
Issued		4,034,000		0.20
Exercised		-
Forfeited		-
Cancelled		-
Expired		(1,430,000)		0.50
Outstanding at December 31, 2012		32,407,434	$	0.86	1.06	$	32,830
Exercisable		32,407,434	$	0.86	1.06	$	32,8300
Outstanding at January 1, 2013		32,407,434	$	0.86	1.06
Issued		9,316,838		0.21	2.0
Exercised		-
Forfeited		-
Cancelled		-
Expired		(23,383,546)		0.32
Outstanding at December 31, 2013		18,340,726	$	1.21	1.07	$	131,320
Exercisable		18,340,726	$	0.21	1.07	$	131,320

NOTE 9 – INCOME TAXES

The Company's net loss before income taxes totaled $7,032,955 and $3,598,684 for the years ended December 31, 2013 and 2012, respectively.

The total provision for income taxes, which consists solely of U.S. federal taxes, consists of the following:

	December 31, 2013		December 31, 2012
Current taxes	$	—	$	—
Deferred taxes		—		—
Total	$	—	$	—

F-29

A reconciliation of the tax on the Company's loss for the year before income taxes and total tax expense are shown below:

	Year Ended December 31,
	2013			2012
Income tax benefit at the U.S. statutory income tax	$	(2,391,205	)	$	(1,223,553	)
Change in fair value of derivative liability		871,052			336,855
Other differences		42,873			653
Changes in Valuation allowance		1,477,280			886,045
Total	$	—		$	—

Based on the weight of available evidence, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not be realized.  Therefore, the company has recorded a full valuation allowance against the net deferred tax assets.

The components of net deferred tax assets recognized are as follows:

	December 31, 2013			December 31, 2012
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,380,000		$	1,037,000
Accrued expenses		210,780			76,500
Valuation allowance		(2,590,780	)		(1,113,500	)
Total	$	—		$	—

Due to uncertainties surrounding the Company's ability to generate future U.S. taxable income to realize these assets, a full valuation allowance has been established to offset the net U.S. deferred tax asset.

The future utilization of the Company's federal net operating loss and tax credit carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future.  While the Company has not formally analyzed any NOLs to determine the maximum potential future tax benefit that might be available, the Company believes that the latest change date as defined under Section 382 occurred approximately in September 2012, and the annual limitation under Section 382 has been estimated to be approximately $120,000.The Company’s deferred tax assets have been adjusted to reflect the maximum benefit that might be available subject to this limitation.

At December 31, 2013, the Company had federal income tax net operating losses of approximately $18.4 million.  The federal net operating losses expire at various dates beginning in 2028.The Company files income tax returns in the U.S. federal jurisdiction and Texas.  Tax years 2008 forward remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. Tax years 2009 forward remain open to examination by the state taxing authority.

F-30

NOTE 10 – COMMITMENTS AND CONTINGINCIES

Lease Commitments

The Company leased its office facilities under an operating lease that commenced on October 1, 2013 and expires on September 30, 2020.  The lease calls for monthly payments of $9,750, plus payment by the Company of all operating expenses, insurance and taxes on the property.  The Company has an option until September 30, 2016, to purchase the land and building for $825,500

The Company entered into a capital lease for a mobile trailer office unit that commenced on October 16, 2013 and expires on September 16, 2017. The lease calls for forty-eight (48) monthly payments of $593, plus payment by the Company of all operating expenses, insurance and taxes on the property.  The Company has the option to purchase the property at the end of the term for zero.

Future minimum lease payments under the capital lease and operating lease as of December 31, 2013, are as follows:

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	7,116		$	117,000	$	124,116
2015		7,116			117,000		124,116
2016		7,116			117,000		124,116
2017		5,930			117,000		122,930
Thereafter		--			321,750		321,750
Total minimum lease payments		27,278			789,750		817,028
Less interest		(3,978	)
Capital lease obligation		23,300
Less current portion		(5,012	)
Long-term capital lease obligation	$	18,288

Rental expense for all property and equipment operating leases during the year ended December 31, 2013, was $78,558, including $49,308 of rental expense incurred with a related party.  Rental expense for all property and equipment operating leases during the year ended December 31, 2012, was $14,292.

Indemnities and Guarantees

In addition to the indemnification provisions contained in the Company’s charter documents, the Company will generally enter into separate indemnification agreements with the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.

F-31

Employment Agreements

On September 23, 2013, one of our wholly owned subsidiaries, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), entered into an Executive Employment Agreement with Adam Jennings to serve as Pipeline Maintenance's President (the "Jennings Agreement") for a term of one year, unless otherwise terminated or mutually extended.  The Company is a party to the Jennings Agreement only to the extent of the obligations it is required to perform under the Jennings Agreement.  Pursuant to the Jennings Agreement, Mr. Jennings may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent.  The Company also agreed to issue an aggregate of 1,200,000 shares of its common stock to Mr. Jennings as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following Mr. Jennings employment; provided however that the first installment shall be paid within 30 days of signing the agreement and if Mr. Jennings voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company.  The Company also has sole discretion to grant Mr. Jennings stock options in the Company.  Mr. Jennings is also entitled to receive 10% of Pipeline Maintenance's distributable limited liability company net profits during his employ.  The Company has sole rights to terminate Mr. Jennings' employment for cause.  The value of the first installment of the signing bonus of 300,000 shares of common stock was recorded on September 23, 2013 as fees payable in common stock.

On September 20, 2013, the Company entered into an Executive Employment Agreement with Joshua Brooks (the "Brooks Agreement"), to serve as the Company's Vice President of Operations, primarily focusing on the Company's oilfield construction, services and maintenance operations and to observe and learn the other activities that the Company is involved in including water processing.  The term of the Brooks Agreement is for a term of one year, unless otherwise terminated or mutually extended.  Pursuant to the Brooks Agreement, Mr. Brooks is entitled to an annual salary of $120,000, which shall be paid on a quarterly basis, in shares of the Company's common stock at a price per share equal to the weighted average trading value of such stock during the same quarter.   As incentive to help develop the operation and profitability of Pipeline Maintenance, Mr. Brooks is entitled to an aggregate of an additional 4,000,000 shares of the Company's common stock upon the occurrence of certain Company milestones in gross sales and/or profit.  As a signing bonus, the Company shall issue Mr. Brooks 2,000,000 shares of its common stock, which Mr. Brooks must return on a pro-rata basis, if he voluntarily resigns before March 20, 2014.  Mr. Brooks shall be entitled to bonuses and stock options, which the Company may award and grant in its sole discretion, and to the benefits offered to similarly situated executives.  The Company shall reimburse Mr. Brooks for reasonable business expenses he incurs while carrying out his duties under the Brooks Agreement, and they shall also reimburse him for use of his personal vehicle at standard mileage rates and provide him with a laptop computer and cellular phone, if needed to carry out such duties.  The Company shall indemnify Mr. Brooks to the fullest extent permitted under Nevada law.  Unless Mr. Brooks is terminated for cause by the Company, which they maintain the right to do, or as a result of disability, Mr. Brooks is entitled to certain severance as set forth in the Brooks Agreement.  Mr. Brooks maintains the right to terminate his employment at any time upon 30 days advance written notice and shall be entitled to all compensation payable up through such thirtieth day, after which all of the Company's obligations (other than indemnification and specific benefits) shall cease.  Pursuant to the Brooks Agreement, Mr. Brooks is under a 1 year non-compete/solicitation agreement.  The value of the signing bonus of $140,000 was recorded as fees payable in common stock on September 20, 2013.The Company has issued 2,000,000 shares of common stock to satisfy the obligation. As of December 31, 2013 there was no remaining obligation.

Service Agreement

On September 24, 2013, the Company entered into a service agreement with one of its executive officers pursuant to which the officer agreed to provide a personal guaranty to lenders and/or suppliers from which the Company's subsidiary, STW Oilfield Construction, LLC ("Oilfield Construction"), seeks to rent or purchase equipment, as specified in each agreement.  In consideration for the personal guaranty, the Company agreed to issue to the officer that number of shares of its common stock, valued at $0.12 per share, as is equal to the amount of the guaranty (the "Guaranty Shares").  The value of the 382,000 shares of common stock was recorded on September 24, 2013, as fees payable in common stock. The Company maintains the right to terminate these service agreements at any time with written notice.  The term of the agreement/guaranty is for 6 months.  The following table provides salient information about this service agreement, which is attached as an exhibit to this Report.

F-32

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, Vice President of Operations	September 24, 2013	$	45,800	(1)		382,000		382,000

(1) Pursuant to the service agreement with Mr. Brooks, any amounts due on a related defaulted lease in excess of 20% of the amount of the personal guaranty, shall be the Company's obligation.  If Brooks' employment with the Company is terminated, the Company shall use its best commercial efforts to have it or a third party assume Brooks' guarantee obligations. This obligation is still outstanding as of December 31, 2013.

Contingencies

Viewpoint Securities, LLC Arbitration.  On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP"), who entered into that certain engagement agreement, dated March 9, 2008, as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010, pursuant to which the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company.  The demand alleges breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement.  VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock.  The Company believes that it has valid defenses and intends to contest these claims vigorously.  On August 18, 2012, VP dismissed Stan Weiner from the claim with prejudice.  On February 5, 2013, the Company caused an answer to the complaint to be filed on behalf of the Company, denying the allegations and asserting, among other things, the course of business conduct, lack of FINRA status post termination and recognition of third party entitlement to amounts owed.  The arbitration has gone through the discovery phase and is set for a final hearing on February 3, 2014. A final arbitration hearing was held on February 3, 2014.   On April 1, 2014, the Arbitrator issued an Award in favor of Viewpoint for $196,727 on Viewpoint’s claim for $216,217 in fees and expenses, plus $5,541 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commencing April 1, 2014.

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”).   Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE (described more fully in Item 3 Legal Proceedings, GE Ionics Lawsuit, upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”).  As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote.

Marcus Muller and Roy Beach Promissory Notes.  On March 2, 2012, counsel for Marcus Muller and Roy Beach sent a demand letter to the Company demanding payment on two 12% Convertible Notes by the Company to Messrs. Muller and Beach.  The notes in an original principal amount of $25,000 each, were issued on August 13 and 18, 2010 and were in a default status.  Muller and Beach’s counsel threatened to initiate Chapter 7 Involuntary Bankruptcy proceedings against the Company, but did not disclose who the necessary third debtor was who had an alleged liquidated and uncontested claim.  Since that date, the Company has settled its obligation to Muller and Beach and the related matter has been resolved; however, an issue regarding attorneys’ fees in relation to this matter is now pending.  There has been no accrual for those fees.

F-33

NOTE 11 – SEGMENT INFORMATION

We have two reportable segments, (1) water reclamation services, and (2) oil & gas services, as described herein.

Water reclamation services

The Company provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations.

Oil and Gas Services

Our subsidiaries, STW Energy, STW Pipeline Maintenance & Construction, and STW Oilfield Construction Services offer a wide range of oilfield and pipeline construction, and support services. We employ qualified laborers with years of experience in the oil patch and Supervisor/Sales people with particular oil patch knowledge in the Permian and Delaware Basins of West Texas, Eastern New Mexico, and in the Eagle Ford of South Texas.

The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). The following is a list of methodologies that we use for segment reporting that differ from our external reporting:

· Corporate overhead is allocated among the segments based on the ratio of segment revenues to total revenues.

· Liabilities including accounts payable, notes payable, and other liabilities are managed at the corporate level and not included in segment operations.

· Interest expense and change in derivative liabilities are managed at the corporate level and not included in segment operations.

Segment Operations

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Water Reclamation			Oil & Gas Services			Water Reclamation			Oil & Gas Services
Revenues	$	536,735		$	1,408,896		$	--		$	--
Costs of revenues		472,978			1,202,336			--			--
Operating expenses		102,210			763,900			1,935,027			--
Non-allocable corporate overhead		--			2,603,374			--			--
Segment loss	$	(38,453	)	$	(3,160,713	)	$	(1,935,027	)	$	--

Segment Assets

	December 31, 2013				December 31, 2012
	Water Reclamation		Oil & Gas Services		Water Reclamation		Oil & Gas Services
Current Assets	$	--	$	579,541	$	--	$	--
Fixed assets				694,219		--		--
Segment Assets	$	--	$	1,273,760			$	--

F-34

NOTE 12 – SUBSEQUENT EVENTS

Management eveluated all activity of the Company through June 19, 2014, the date the consolidated financial statements were available to be issued and has concluded that no material subsequent events have occured that would require recognition in the financial statements or disclosures in the notes to the financial statements, except as discussed below.

Line of Credit

On March 19, 2014, we entered into a Line of Credit Agreement (the "Credit Agreement") with Black Pearl Energy, LLC ("Black Pearl"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt.  Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, approximately $1,010,000 has been advanced subsequent to December 31, 2013; the credit was issued in the form of a promissory note (the "Note").  We must pay back all advanced funds on or before August 1, 2014, although such date will be extended to September 30, 2014 if we do not receive gross proceeds of no less than $6,000,000 resulting from either or both of: (a) the consummation of one or more private placements of debt or equity securities, not including the funds received pursuant to the Credit Agreement; or (b) the filing of a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) for an initial public offering of our securities.  Interest accrues at 11% per annum.  To further induce Black Pearl to issue us the line of credit, we agreed to issue them 1,500,000 restricted shares of our common stock (after which, Black Pearl will own 1,500,000 (1%) of our common stock) and a $25,000 transaction fee to be paid on the final closing date of the credit line.

Upon an event of default, which includes nonpayment of any funds owed or bankruptcy, Black Pearl may cease making further advances to us until such default is cured; if the default is not cured, all of Black Pearl's obligations under the Agreement and the Note shall cease and terminate, and Black Pearl may: (i) declare the outstanding principal evidenced by the Note immediately due and payable; (ii) exercise any remedy provided for in the Credit Agreement; or (iii) (iv) exercise any other right or remedy available to it pursuant to the Credit Agreement or Note, or as provided at law or in equity.  Interest on the advanced funds shall increase to 18% until the default is cured.

Factoring Agreement

On January 13, 2014, we entered into an accounts receivable factoring facility (the “Factoring Facility”) with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement (the “Factoring Agreement”).  The Factoring Agreement is secured through a Security Agreement between the Company, two of our subsidiaries: STW Pipeline Maintenance & Construction, LLC and STW Oilfield Construction, LLC (collectively, the "Subsidiaries") and Crown,  by all of the instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment of the Company and the Subsidiaries.  The Factoring Facility includes a loan in the amount of $4,000,000.  Our Chief Operating Officer, Lee Maddox also personally guaranteed our full and prompt performance of all of our obligations, representations, warranties and covenants under the Factoring Agreement, pursuant to a Guaranty Agreement for and in consideration of Crown issuing us the Factoring Facility.

The Factoring Facility shall continue until terminated by either party upon 30 days written notice.  Under the terms of the Factoring Agreement, Crown may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to the Company up to 80% of the face amount of the account receivable (the "Purchase Price"); although Crown maintains the right to propose a change in that rate, which we can accept in writing, orally or by accepting funding based on such changed rate.  Additionally, based upon when each invoice gets paid, Crown shall pay us a rebate percentage of between 0-18% of the related invoice.  Crown will generally have full recourse against us in the event of nonpayment of any such purchased account.  Crown has the discretion to also accept a substitute invoice from us for uncollected invoices; if such substitute invoice is not accepted, we will be obligated to pay Crown the Purchase Price of such uncollected invoice plus interest at the maximum lawful interest rate per annum, minus any payments made on the invoice.

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening our mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of our repayment obligations or Crown enforcing its rights under the Security Agreement and taking possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

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Debt Extension

During 2012, the Company issued to certain accredited investors, new 14% Convertible Notes with an aggregate principal amount of $2,380,975.  The Company also issued 566,667 warrants to the placement agent under the same terms.  These notes were due on November 30, 2013 and otherwise have the same terms as the 14% Notes the Company issued in 2011.  In light of the Company's current cash position, we recently received consent to extend the maturity date of such notes (the "Extension") from the holders of approximately 56% of the outstanding principal amount of such notes. Pursuant to the Extension, the maturity date shall be extended to June 1, 2015.  In consideration for their consent to the Extension, the Company agreed to issue each of the consenting note holders additional shares of the Company's common stock in an amount equal to one half of the original principal amount of such holder's note. The Company negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, during January 2014, the Company issued an aggregate of 733,137 shares of its common stock valued at $67,354 and is obligated to issue an additional 67,836 shares of its common stock, for a total of 800,973 shares.

14% convertible notes Paid In Kind “PIK” interest offering

As part of our effort to free up critical capital necessary to carry out our business plans and increase shareholder value, the Company has recently received consent from certain of its outstanding note holders to receive accrued interest in shares of our common stock (the "PIK Shares"), rather than in cash as required by the related note agreement.  Upon consent, the PIK Shares are being issued at the rate of $0.08 per share.  As of the date of this Report, we have agreed to issue a total of 6,004,619 PIK Shares to those note holders who have consented to receiving same.  As of June 19, 2014, we have outstanding accrued interest in the amount of $751,428 for which we are seeking consent to pay in PIK Shares, to which if we receive consent, would require us to issue an additional 3,388,229 PIK Shares. As of the end of January 2014 we had issued 5,559,617 shares of common stock to satisfy the outstanding balance of $444,769 in interest.

Unit offering of Common Shares

Between January 1, and February 10, 2014, we sold an aggregate of 1,656,250 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to ten (10) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $132,500 in gross funding in the transaction (the "Offering"). 

On May 28, 2014, we sold an aggregate of 2,312,500 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to four (4) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $185,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants. Warrants in total came to 2,412,500.

The Purchase Agreements contain representations and warranties by the Company and the investors which are customary for transactions of this type such as, with respect to the Company: organization, good standing and qualification to do business; capitalization; subsidiaries, authorization and enforceability of the transaction and transaction documents; valid issuance of stock, consents being obtained or not required to consummate the transaction; litigation; compliance with securities laws; and no brokers used, and with respect to the investors: authorization, accredited investor status and investment intent.

Issuance of Common Shares to Consultants and Employees

On February 26, 2014, we issued 500,000 common shares valued at $55,000 to an investor relations consultant for services.

Conversion of 12% convertible notes payable

During January, 2014, we issued 6,824,500 shares of our common stock to two (2) accredited investors upon their conversion of $225,000 of principal and $116,225 accrued interest of the investors’ 12% convertible notes.

Conversion of 14% convertible notes payable

During January 2014 and March, 2014, a holder of $25,000 of our 14% convertible notes payable converted the note and related accrued interest into 498,106 shares of the Company’s common stock.

On May 22, 2014 the current holder of a  14% convertible note that was in default in the amount of $544,426 of principal and $197,486 of accrued interest converted into 9,273,902 shares of the Company’s common stock.

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

During the past two years, there was nodisagreement of the type described in paragraph (a)(1)(iv) or any reportable event as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K that is required to be disclosed under this Item 9.

ITEM 9A.  CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We performed an evaluation (“Evaluation”), under the supervision and with the participation of our management including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this evaluation and the existence of the material weaknesses discussed below in “Management's Report on Internal Control Over Financial Reporting,” our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and

· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2013, due to the existence of the material weaknesses discussed below. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5), or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Management identified the following material weaknesses that have caused management to conclude that as of December 31, 2013, our internal control over financial reporting was not effective:

1. Management determined that we do not have written documentation of our internal control policies and procedures, which provide staff with guidance or framework for accounting and disclosing financial transactions. This deficiency could result in insufficient recording and disclosure of complex transactions.

2. Management determined that we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions is performed by separate individuals.

3. Management determined that we had not effectively implemented comprehensive entity-level internal controls.

4. Management determined that the Company does not have a sufficient complement of personnel with appropriate training and experience in U.S. generally accepted accounting principles (“GAAP”) and lacks certain subject matter expertise related to accounting for income taxes, complex debt and equity transactions, and disclosures..

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5. Management determined that we did not implement financial controls that were properly designed to meet the control objectives or address all risks of the processes or the applicable assertions of the significant accounts.

6. Management determined that due to ineffective controls over payroll processing.

7. Management determined that its inability to file timely quarterly SEC forms 10Q and annual SEC forms 10K constitute material weaknesses in disclosure controls and internal control over financial reporting.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting due to permanent exemptions for smaller reporting companies.  Management’s report was not subject to such attestation pursuant to rules of the Securities and Exchange Commission that permits us to provide only management’s report in this Annual Report.

Remediation Plan for Material Weaknesses

While management believes that the Company’s financial statements previously filed in the Company’s SEC reports have been properly recorded and disclosed in accordance with GAAP, based on the control deficiencies identified above, we have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:

· We are in the process of further enhancing our internal finance and accounting organizational structure, which includes hiring additional resources that possess relevant accounting and financial reporting expertise.

· We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.

· We engaged an outside accounting firm, Miranda & Associates, to prepare and file our payroll tax returns and establish payment terms with the Internal Revenue Service of past payroll tax liabilities. We are now paying currently all of our payroll taxes.

· We have engaged the services of Miranda & Associates, an outside accounting firm, to provide the expertise to calculate the tax provision, complex transactions, deferred taxes, and related disclosures.

· We are in the process of strengthening our internal policies and enhancing our processes for ensuring consistent treatment and recording of estimates and that validation of our conclusions regarding significant accounting policies and their application to our business transactions are carried out by personnel with an appropriate level of accounting knowledge, experience and training.

We believe that these measures, if effectively implemented and maintained, will remediate the material weaknesses discussed above. We do not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated. We expect to complete this process during our annual testing for fiscal 2014.

Management has reviewed the consolidated financial statements and underlying information included herein in detail and believes the procedures performed are adequate to fairly present our financial position, results of operations and cash flows for the periods presented in all material respects.

Changes in Internal Control Over Financial Reporting

Other than as described above, there have been no changes in our internal control over financial reporting during the fourth quarter of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

ITEM 9B.  OTHER INFORMATION

[Not applicable]

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

There are no family relationships among our directors and executive officers. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified. Also provided herein are brief descriptions of the business experience of each director, executive officer and advisor during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws. None of our officers or directors is a party adverse to us or has a material interest adverse to us.

The following table and text set forth the names and ages of all directors and executive officers as of June 19, 2014.

Name	Age	Current Position
Stanley Weiner	59	Chief Executive Officer, President and Chairman
Lee Maddox	39	Director, Chief Operating Officer
Robert Miranda	61	Chief Financial Officer
D. Grant Seabolt, Jr.	59	Director, Outside Legal Counsel and Corporate Secretary
Joseph I. O’Neill	66	Director
Hon. Bill Carter	82	Director
Manfred Birnbaum	81	Director
Paul DiFrancesco	48	Director
Dale F. Dorn	69	Director
R.H. (Tibaut) Bowman	62	Director

Stanley Weiner. Mr. Weiner, a thirty (30) year veteran of the oil and gas industry, has explored, drilled and operated oil and gas properties in the United States and in South America. Previously, Mr. Weiner served as President and CEO of Molecular Solutions, LLC, and was also the founder and CEO of Weiner Investments, Inc. and American Crude Oil, Inc.

Lee Maddox. Mr. Maddox, a West Texas native, received his Bachelor of Business Administration in Marketing from Texas Tech University. Mr. Maddox has served as an Account Executive and Risk Manager for oil and gas operators and service contractors for fifteen (15) years. During his experience, he earned the designation as a Certified Risk Manager, was promoted to Vice President at Snyder Insurance Agency and received numerous awards for his leadership in sales and as a team leader with individual annual sales of $10,000,000. Mr. Maddox has been a partner and manager in several oil and gas service companies for the past five (5) years including JNC Energy, Viper Products and Services, and Black Wolf Enterprises. Mr. Maddox brings an extensive knowledge of the oilfield service business and network of contacts within the oil and gas industry.

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Robert J. Miranda. Mr. Miranda has over thirty-five (35) years of professional experience, encompassing accounting, auditing, business turnaround, finance operations, and management consulting. He is knowledgeable in a wide variety of industries, such as manufacturing, oil and gas, government, real estate, aerospace and defense, automotive, consumer products, distribution, engineering and construction, financial services, healthcare, and technology in both the private and public sectors for domestic and international organizations. Since August 2007, Mr. Miranda has been the managing director of Miranda & Associates, a professional accountancy corporation that has offices in San Diego and Newport Beach, California ("Miranda Associates"). From March 2003 through October 2007, Mr. Miranda was a Global Operations Director at Jefferson Wells, where he specialized in providing Sarbanes-Oxley compliance reviews for public companies. Mr. Miranda was a national director at Deloitte & Touche where he participated in numerous audits, corporate finance transactions, mergers and acquisitions. Mr. Miranda is a licensed Certified Public Accountant and has over 35 years of experience in accounting, including experience in Sarbanes- Oxley compliance, auditing, business consulting, strategic planning and advisory services, making him a well-qualified candidate to serve as the Company's CFO. He served as Chief Financial Officer of Balqon Corporation (BLQN) from October 2008 through October 2012. He served as Chief Executive Officer and Chief Financial Officer of Victory Energy Corporation (VYEY) from May 2009 through December 2011. He served as chairman of the board and audit committee of Victory Energy Corporation from December 2011 to October 2013. He served as chief financial officer and director of Saleen Automotive, Inc. (SLNN) from November 2011 through September 2013. Mr. Miranda has a bachelor’s degree in Business Administration from the University of Southern California, a certificate from the Owner/President Management Program from the Harvard Business School and membership in the American Institute of Certified Public Accountants. He is a certified public accountant licensed in California.

D. Grant Seabolt, Jr. Mr. Seabolt also serves as our general counsel. Mr. Seabolt is an “AV” Preeminent® rated, thirty-three (33) year law practitioner with the Seabolt Law Group based in Dallas, Texas, where he advises entrepreneurs, start-ups and mature companies in business transactions, including mergers and acquisitions, capital raising, securities law and corporate finance. He also represents U.S. clients in foreign business transactions and foreign clients in the U.S. He served in the U.S. Marine Corps Reserve and attained the rank of Colonel as an International Law Specialist for Europe and Africa. He holds an LL.M in International Law with highest honors from the National Law Center of George Washington University, 1984; a J.D. from the University of Alabama, School of Law, 1979; and a B.A. in Accounting from Birmingham-Southern College, 1976. Mr. Seabolt currently serves as the Company’s Outside General Counsel and Corporate Secretary. He additionally serves on the Company’s Audit, Compliance and Compensation Committees.

Joseph I. O’Neill III. Mr. O’Neill has nearly forty (40) years of experience in the oil and gas industry. He currently serves as Managing Partner of O’Neill Properties, a highly regarded Midland, Texas, oil and gas producer. Mr. O’Neill is the former Chairman of the Board of Texas Oil & Gas Association and is a Director of the Petroleum Club of Midland. He has served on the boards of numerous industries, civic, academic, political and charitable institutions. Mr. O’Neill graduated from Notre Dame University and formerly served on the Board of Directors as well as the President of the Notre Dame Alumni Association.

The Honorable Bill Carter. The Hon. Bill Carter is a former Member of the Texas House of Representatives (1984-2003) and is former Chairman of the Texas Public Safety Committee. In addition to receiving the 1997 American Legislative Exchange Council Legislator of the Year Award, Mr. Carter has received numerous state and national awards, including Outstanding Legislator Award from the Texas Chiropractic Association, the Legislative Excellence Award from the Texas Head Injury Association, the Greater Dallas Crime Commission Crime Fighter of the Year, the Outstanding Legislator in Texas from the Texas Association of Regional Councils, and the Presidential Achievement Award from President Ronald Reagan.

Manfred Birnbaum. Mr. Birnbaum’s career in power generation and industrial business spans thirty (30) years. His experience ranges from senior management positions at Westinghouse Electric Corporation to high tech start-up operations, power plant control, and electronic manufacturing services in both domestic and international markets. He currently serves on the Board of ZBB Energy Corp., a public company engaged in the design and manufacture of energy storage solutions to the renewable energy and electric utility markets.

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Paul DiFrancesco. Mr. DiFrancesco has over twenty (20) years of experience in the financial sector. From January 2012 to March 2014, Mr. DiFrancesco was a Managing Director at Ascendiant Capital, a registered broker-dealer that provides investment banking services to emerging growth companies. Prior to joining Ascendiant Capital, Mr. DiFrancesco was a Partner at Viewpoint Securities. In 2001, Mr. DiFrancesco co-founded and served as the President of Decision Capital Management, LLC. Prior to co-founding Decision Capital, Mr. DiFrancesco was Senior Managing Director of Preferred Capital Markets in San Francisco. During Mr. DiFrancesco's tenure, Preferred Capital Markets was named as one of the top 100 fastest growing private companies by Fortune several years running. In 1995, Mr. DiFrancesco joined Apodaca-Johnston Investment Group as Managing Director and as a member of the Investment Committee. In 1990, Mr. DiFrancesco joined Torrey Pines Securities, where he built and managed the trading desk.

Dale F. Dorn. Mr. Dorn brings more than forty 40 years of experience in the oil and gas industry. Most recently, he founded and serves as the CEO of Dale F. Dorn Oil & Gas Minerals, a privately held company that acquires and trades minerals, with which he has been for over ten (10) years. His previous oil and gas experience includes thirty (30) years in roles of increasing responsibility with the Forest Oil Corporation, rising from Landman to Vice President to Director and ultimately spending six (6) years as the President of Flare, Inc., Forest’s frontier exploration subsidiary. For two (2) years, Mr. Dorn worked in oil and gas investment banking, under Jim Glanville, with Lehman Brothers. He also founded Bradford Natural Gas Corp., a company that exported natural gas to Mexico.

R.H. (Tibaut) Bowman.  Mr. Bowman is an attorney and investor in San Antonio, Texas.  Mr. Bowman has been active in the practice of oil and gas law and in the oil and gas business for 40 years, previously as a partner in the firm of Gresham, Davis, Gregory, Worthy, and Moore, and, since 1993, in private practice.  Mr. Bowman is a graduate of the University of Texas (BBA- Finance ’69, JD ’72). He presently serves on the Boards and as a general counsel for two independent oil and gas exploration companies with headquarters in South Texas and operations in various states, and also on the Board of Kuper Sotheby’s International Realty.  Mr. Bowman also previously served on the Board and as general counsel for the NYSE Company Fox Photo, and has extensive experience in mergers, acquisitions, and divestures in various areas including real estate, retail, wholesale businesses, and oil & gas, in both public and private sectors.  He is the owner and Chairman of Coldwater Creek Cattle Company, a private family investment, ranching and real estate company.  Mr. Bowman has served on the Boards and/or President of numerous civic organizations, educational institutions, social clubs, and charitable organizations such as The Southwest Foundation for Biomedical Research (ex officio- President of the Argyle), The Bexar County Eagle Scout Review Board, The San Antonio Livestock Association (Lifetime Director Emeritus), The San Antonio Zoo, St. Mary’s Hall, and The Petroleum Club of San Antonio. 

Involvement in Certain Legal Proceedings

To the best of the Company's knowledge, other than as set forth herein, none of the following events occurred during the past ten years that are material to an evaluation of the ability or integrity of any of our executive officers or directors:

(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

 (i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

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 (ii) Engaging in any type of business practice; or

 (iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) above, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 (i) Any Federal or State securities or commodities law or regulation; or

 (ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 (iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Corporate Governance & Board Independence

Our Board of Directors consists of nine directors and has not established a Nominating or Governance Committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent. However, the Board has determined that Joseph O’Neill, Hon. Bill Carter, Manfred Birnbaum, and Dale F. Dorn are independent, as such term is defined in the Marketplace Rules of The NASDAQ Stock Market.

Due to our lack of operations and size, and since we are not currently listed on a national securities exchange, we are not subject to any listing requirements mandating the establishment of any particular committees; all functions of a nominating/governance committee  were performed by our whole board of directors.  Our board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by the national securities exchanges as necessary.

As of October 2013, our Board of Directors has two standing committees, Audit, and Compensation. We are currently working on the related charters for these committees, as such, as of the date of this Report, we do not have a written charter for either committee.

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· Audit Committee: The audit committee selects, on behalf of our Board of Directors, an independent public accounting firm to audit our financial statements, discusses with the independent auditors their independence, reviews and discusses the audited financial statements with the independent auditors and management, and recommends to the Board of Directors whether the audited financials should be included in our Annual Reports to be filed with the SEC. The membership of the Audit Committee is comprised of Mssrs. Birnbaum, Seabolt and DiFrancesco, the latter of whom acts as Chairman of the committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Moreover, the Company believes that it has inadequate financial resources at this time to hire such an expert. Nonetheless, the Company intends to continue searching for a qualified financial expert for hire.

During the year ended December 31, 2013, the audit committee, which was formed effective October 24 2013 did not hold any meetings.

Audit Committee Report

The audit committee has reviewed and discussed the audited financial statements included within this Report with management. The audit committee has discussed with our independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61 as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The audit committee has received the written disclosures and the letter from our independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. Based on the foregoing review and discussion, the audit committee recommended to the board that the audited financial statements be included in our annual report on Form 10-K for fiscal year 2013.

· Compensation Committee: The compensation committee reviews and approves (a) the annual salaries and other compensation of our executive officers, and (b) individual stock and stock option grants. The compensation committee also provides assistance and recommendations with respect to our compensation policies and practices and assists with the administration of our compensation plans. The membership of the Compensation Committee is comprised of Mssrs. Bowman, Birnbuam, Tucker and Weiner, the latter of whom acts as chairman.

During the year ended December 31, 2013, the compensation committee, which was originally formed on June 16, 2010, but recently re-aligned on October 24, 2013, held 1 meeting.

We do not have a policy regarding the consideration of any director candidates which may be recommended by our shareholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. Further, when identifying nominees to serve as director, while we do not have a policy regarding the consideration of diversity in selecting directors, our Board seeks to create a Board of Directors that is strong in its collective knowledge and has a diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, industry knowledge and corporate governance.  We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our shareholders, including the procedures to be followed.  Our Board has not considered or adopted any of these policies as we have never received a recommendation from any shareholder for any candidate to serve on our Board of Directors.  Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our shareholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees.  In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our Board.

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Board Leadership Structure and the Board’s Role in Risk Oversight.

The Board of Directors is led by the Chairman who is also the Chief Executive Officer. The Board determined that in the best interest of the Company the most effective leadership structure at this time is not to separate the roles of Chairman and Chief Executive Officer. A combined structure provides the Company with a single leader who represents the company to our stockholders, regulators, business partners and other stakeholders, among other reasons set forth below. Should the Board conclude otherwise, the Board will separate the roles and appoint an independent Chairman.

● This structure creates efficiency in the preparation of the meeting agendas and related Board materials as the Company’s Chief Executive Officer works directly with those individuals preparing the necessary Board materials and is more connected to the overall daily operations of the Company. Agendas are also prepared with the permitted input of the full Board of Directors allowing for any concerns or risks of any individual director to be discussed as deemed appropriate. The Board believes that the Company has benefited from this structure, and Mr. Weiner’s continuation in the combined role of the Chairman and Chief Executive Officer is in the best interest of the stockholders.

● The Company believes that the combined structure is necessary and allows for efficient and effective oversight, given the Company’s relatively small size, its corporate strategy and focus.

The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman, President and Chief Executive Officer and other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks.

Involvement in Certain Legal Proceedings

From time to time, we may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of the business. We may be named as a defendant in such lawsuits and thus become subject to the attendant risk of substantial damage awards. We believe that we have adequate liability insurance coverage. There can be no assurance, however, that we will not be sued, that any such lawsuit will not exceed our insurance coverage, or that we will be able to maintain such coverage at acceptable costs and on favorable terms.

Other than the litigation matters disclosed under Item 3 above, neither we nor any of our direct or indirect subsidiaries is a party to, nor is any of our property the subject of, any legal proceedings. There are no proceedings pending in which any of our officers, directors or 5% shareholders are adverse to us or any of our subsidiaries or in which they are taking a position or have a material interest that is adverse to us or any of our subsidiaries.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act, as amended, requires that our directors, executive officers and persons who own more than 10% of a class of our equity securities that are registered under the Exchange Act to file with the SEC initial reports of ownership and reports of changes of ownership of such registered securities.

It seems that most of the affected persons, as listed below, failed to file their Initial Statement of Beneficial Ownership on Form 3, then in light of their failure to report changes in such beneficial ownership on a Form 4, failed to file an Annual Statement of Changes in Beneficial Ownership on a Form 5 regarding such holdings and transactions that should have been so reported in the previous year. We have reminded these persons about their obligations and it is our understanding that if they have not already, they will file all beneficial ownership forms required to date in the coming weeks.

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The table below accounts for the missed Form 3, Form 4 and Form 5s of each person subject to Section 16(a).

Name	# of Late Reports		Transactions Not Timely Reported		Known Failures to File a Required Form
Mr. Weiner		3		4		3
Mr. Maddox		2		4		2	(1)
Mr. Seabolt		3		4		3	(1)
Mr. O'Neill		3		3		3
Hon. Carter		3		5		3
Mr. Birnbaum		3		3		3
Mr. DiFrancesco		4		4		4	(1)
Mr. Dorn		2		3		2
R.H. Bowman		3		4		3
Robert Miranda		1		1		1

(1) As of the date of this Report, we believe this person has filed all forms required pursuant to Section 16(a).

Code of Business Conduct, Code of Ethics and Code of Ethics for Financial Professionals

The Company has not adopted a Code of Ethics which applies to our directors, officers, employees and representatives due to the fact that we are in the developmental stage of our operations and have a limited number of employees. We intend to adopt a code of ethics during fiscal year 2014.

ITEM 11.  EXECUTIVE COMPENSATION

The following tables set forth, for each of the last two completed fiscal years of the Company, the total compensation awarded to, earned by or paid to any person who was a principal executive officer during the preceding fiscal year and every other highest compensated executive officers earning more than $100,000 during the last fiscal year (together, the “Named Executive Officers”). The tables set forth below reflect the compensation of the Named Executive Officers.

Summary Compensation Table

Name and Principal Position	Year Ended Dec. 31	Salary ($)			Bonus ($)	Stock Award(s) ($)		Option Awards ($)	Non- Equity Incentive Plan Compen- sation	Non- Qualified Deferred Compen- sation Earnings ($)	All Other Compen- sation ($)		Total ($)
(a)	(b)	(c)			(d)	(e)		(f)	(g)	(h)	(i)		(j)
Stanley Weiner(1)	2013		150,000			75,000	(12)						225,000
	2012		102,000	(6)		200,000	(6)				24,500	(15)	326,500
Lee Maddox(2)	2013		150,000			137,754	(12)						287,754
	2012		105,000	(7)		80,000	(7)				25,000	(15)	210,000

Robert Miranda (3)	2013	63.107	(8)	-	-	-	63.107
	2012	-		-	-	-	-
Joshua Brooks(4)	2013	30,000	(9)	140,000	-	-	170,000
	2012	-
Adam Jennings (5)	2013	18,461	(10)	51,000(45)			69,461
	2012	-		--

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(1)	Mr. Weiner has served as our Chief Executive Officer since March 28, 2012.
(2)	Mr. Maddox has served as our Chief Operating Officer since March 28, 2012.
(3)	Mr. Miranda was appointed as our Chief Financial Officer on October 21, 2013.
(4)	Mr. Brooks was appointed Vice President of Operations, effective September 20, 2013
(5)	Mr. Jennings was appointed as the President of our wholly owned subsidiary: STW Pipeline Maintenance & Construction, LLC on September 23, 2013.
(6)	For fiscal year ended 2012, the Company paid to Mr. Weiner $70,500 and accrued the remainder of his salary.
(7)	For fiscal year ended 2012, the Company paid to Mr. Maddox $69,000 and accrued the remainder of his salary.
(8)	Mr. Miranda is serving as our CFO as part of our agreement with Miranda & Associates, an accounting corporation that serves as our accountant pursuant to an engagement agreement with us (the "Engagement Agreement").  Under the Engagement Agreement, we shall pay Miranda & Associates $50,000 for their initial work and it expected that annual amounts payable to them for Mr. Miranda's continuing CFO services will likely exceed $120,000. During the year ended December 31, 2013, we incurred $63,107 and paid $39,047 in fees with Miranda & Associates, leaving an unpaid balance of $24,060 as of December 31, 2013.
(9)	In lieu of cash payments, Mr. Brooks receives shares of the Company’s common stock at the price of the weighted average trading value over the three (3) months leading up to the end of the (3) month pay period; however, all of the Mr. Brooks' 2013 compensation was and continues to be accrued.
(10)	Mr. Jennings' salary was pro-rated based on his start date; his annual salary is set at $120,000 and therefore he is one of the Company's most highly compensated individuals.
(11)	These shares represent shares of common stock Mr. Weiner received pursuant to his Board of Director agreement.
(12)	The Company issued to Mr. Weiner and Mr. Maddox shares totaling 5,000,000 and 2,000,000, respectively, during 2012.
(13)	These shares include 356,250 shares of common stock Mr. Maddox received pursuant to his Board of Director agreement.
(14)	Pursuant to Mr. Jennings executive employment agreement, he is entitled to an aggregate of 1,200,000 shares of our common stock as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following his start date; provided however that the first installment shall be paid within 30 days of signing the agreement and if he voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company.
(15)	For fiscal year ended 2012, the Company accrued commissions in the accrued consulting fees-officer related to the Ranchland Golf Club Agreement.

Pension Benefits

Nonqualified Deferred Compensation

Retirement/Resignation Plans

As of the December 31, 2013, none of the persons included the table above are entitled to receive any pension benefits, nonqualified deferred compensation or are part of any other retirement/resignation plans.

Outstanding Equity Awards at 2013 Year-End

As of the year ended December 31, 2013, there were no unexercised options, stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

Independent Contractor and Executive Employment Agreements

Stanley Weiner

On March 28, 2012, the Company entered into an independent contractor agreement with Mr. Weiner whereby he served as the Chief Executive Officer until December 31, 2012 (the “Weiner Agreement I”). Under the Weiner Agreement I, he received as compensation five million (5,000,000) shares of the Company’s common stock.  Mr. Weiner received reimbursements for out-of-pocket business expenses incurred on behalf of the Company pursuant to the Maddox Agreement I. The Company could terminate the Weiner Agreement I at any time upon 60 day written notice.

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Prior to the end of the employment term under the Weiner Agreement I, the Company and Mr. Weiner negotiated a new independent contract agreement. On July 1, 2012, the Company entered into an independent contractor agreement with Mr. Weiner effective July 1, 2012, whereby Mr. Weiner served as the Company’s Chief Executive Officer until December 31, 2012.  Pursuant to the Weiner Agreement II, he received $16,000 as compensation on a monthly basis. As with his earlier agreement, Mr. Weiner was also reimbursed for out-of-pocket business expenses incurred on behalf of the Company.

Subsequently on March 7, 2013, the Company entered into another independent contractor agreement with Mr. Weiner (the “Weiner Agreement III”) effective January 1, 2013, to serve as the Company’s CEO until June 30, 2013 (the “Weiner 2013 Term”). During the Weiner 2013 Term, the Company could terminate the Weiner Agreement III at any time upon 60 day written notice to Mr. Weiner. The Weiner Agreement III provided that he receive monthly compensation equal to $10,000 per month during the Weiner 2013 Term, subject to the right of the Company’s Board of Directors to revise such compensation based on changed circumstances. The Company also reimbursed Mr. Weiner for reasonable and approved out-of-pocket expenses incurred by him on behalf of the Company in the performance of his duties hereunder during the Weiner 2013 Term. Although the Weiner Agreement III is no longer active, Mr. Weiner continues to act as our CEO, and we are currently negotiating a new agreement with him.

Lee Maddox

On March 28, 2012, the Company entered into an independent contractor agreement with Mr. Maddox whereby he served as the Director of Operations until December 31, 2012 (the “Maddox Agreement I”).  Under the Maddox Agreement I, he received 2,000,000 shares of the Company’s common stock as compensation.  Mr. Maddox received reimbursements for out-of-pocket business expenses incurred on behalf of the Company pursuant to the Maddox Agreement I. The Company could terminate the Maddox Agreement I at any time upon 60 day written notice.

Prior to the end of the employment term under the Maddox Agreement I, the Company and Mr. Maddox negotiated a new independent contract agreement. On July 1, 2012, the Company entered into an independent contractor agreement (the “Maddox Agreement II”), pursuant to which Maddox would serve as the Chief Operating Officer until December 31, 2012. Under the Maddox Agreement, the Company could terminate the Maddox Agreement at any time upon 60 day written notice to Maddox. The Maddox Agreement also provided that Maddox receive monthly compensation equal to $15,000 per month during the term, subject to the right of the Company’s Board of Directors to revise such compensation based on changed circumstances. Under the Maddox Agreement, the Company could terminate the Maddox Agreement at any time upon 60 day written notice to Maddox.

On January 1, 2013, The Company entered in to an independent contractor agreement with Maddox (the “Maddox Agreement III”) whereby he served as the Director of Operations until June 30, 2013.  Pursuant to the Maddox Agreement III, he received $10,000 on a monthly basis.  The Company could terminate the Maddox Agreement III at any time upon 60 day written notice.  Subsequent to the end of the term, Mr. Maddox continued serving as the Director of Operations until the following agreement was negotiated.

Joshua Brooks

On September 20, 2013, the Company entered into an employment Agreement with Joshua Brooks (the “Brooks Agreement”), pursuant to which Mr. Brooks would serve as the Vice President of Operations through September 20, 2014.  Under the Brooks Agreement, Mr. Brooks receives a salary of $120,000 per year, which is paid in shares of the Company’s common stock at the price of the weighted average trading value over the three (3) months leading up to the end of the (3) month pay period. As a signing bonus, Mr. Brooks received two million (2,000,000) shares of common stock.  He is eligible to receive incentive bonuses based upon the achievement of performance benchmarks set forth in the Brooks Agreement.  Under the Brooks Agreement, the Company reimburses Mr. Brooks for reasonable business expenses incurred by him on behalf of the Company in the performance of his duties The Company may terminate Mr. Brooks’ employment for cause as provided in the Brooks Agreement.

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Robert Miranda

We maintain an agreement with Miranda & Associates, to provide management oversight services of a qualified CFO and provide related professional accounting and advisory services, as we request (the "Accounting Agreement") through the filing of this Report.  Pursuant to the Accounting Agreement, Robert Miranda agreed to serve as our Chief Financial Officer, until he is terminated through disability, death or earlier terminated for cause or upon 30 days written notice by either party.  Robert Miranda is the President of Miranda & Associates.  Under the Accounting Agreement, we shall pay Miranda & Associates approximately $50,000 for all of the work they agreed to provide to us, including Mr. Miranda's service as CFO.

On March 14, 2014, we entered into an Addendum to the Accounting Agreement in light of the amount of additional time and expense Miranda and Associates spent helping us prepare and file our periodic reports over the past year.  Pursuant to the Addendum, we agreed to issue to Robert Miranda 721,750 shares of our common stock that represents $57,740 value of their services.  Additionally, we agreed that they shall bill us on a bi-weekly basis for all fees incurred as a result of their services in connection with the closing of our financial statements, management of the independent audit, and preparation of this Report, each of which shall be due within 30 days of the date issued.  We further agreed to indemnify Mr. Miranda, individually, and Miranda & Associates, from any liabilities that may arise from his services as Chief Financial Officer of our company, including our failure to timely file and pay approximately $430,000 of federal payroll tax liabilities.

Adam Jennings

On September 23, 2013, one of our wholly owned subsidiaries, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), entered into an Executive Employment Agreement with Adam Jennings to serve as Pipeline Maintenance's President (the "Jennings Agreement") for a term of one year, unless otherwise terminated or mutually extended.  The Company is a party to the Jennings Agreement only to the extent of the obligations it is required to perform under the Jennings Agreement; Mr. Jennings is not an employee of the Company.  Pursuant to the Jennings Agreement, Mr. Jennings may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent.  The Company also agreed to issue an aggregate of 1,200,000 shares of its common stock to Mr. Jennings as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following Mr. Jennings employment; provided however that the first installment shall be paid within 30 days of signing the agreement and if Mr. Jennings voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company.  The Company also has sole discretion to grant Mr. Jennings stock options in the Company.  Mr. Jennings is also entitled to receive 10% of Pipeline Maintenance's distributable limited liability company net profits during his employ.  The Company has sole rights to terminate Mr. Jennings' employment for cause.

Compensation of Directors

Per the Director Agreements, the Company compensates each of the directors through the initial grant of 200,000 shares of common stock and the payment of a cash fee equal to $1,000 plus travel expenses for each board meeting attended, and $75,000 per year as compensation for serving on our board of directors.

As of December 31, 2013, the Company has accrued compensation due to its directors (both current and former) of $491,724, which is calculated based upon time of service and the number of Board meetings attended.

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The following table sets forth all cash compensation paid by us, as well as certain other compensation paid or accrued, in 2013, to each of the following named directors.

Name	Fees Earned or Paid in Cash ($)			Stock Awards ($)	Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Paul DiFrancesco		75,000
Bill Carter		75,000
Joseph O’Neill		75,000
Manfred Birnbaum		75,000
Dale Dorn		75,000
D. Grant Seabolt		75,000				-		-		-		-		75,000
R.H. Bowman		1,090,500	(1)

(1) Mr. Bowman received 1,088,000 shares for the services he provided to us a Board member from December 2010 until he voluntarily resigned in August 2011.  Mr. Bowman was re-appointed as a director on October 24, 2013; accordingly, he was only entitled to two months of the director's annual salary of $75,000.  Mr. Bowman verbally agreed to defer all of his compensation until such time as our cash position improves.

Indemnification Agreements

We entered into indemnification agreements with each of our directors pursuant to which we have agreed to indemnify such party to the full extent permitted by law, subject to certain exceptions, if such party becomes subject to an action because such party is our director.

We entered into an indemnification agreement with our Chief Financial Officer, Robert Miranda and his accounting firm, Miranda & Associates, in relation to all actions taken while Mr. Miranda has served as CFO of the Company, including any potential liability to federal and state tax authorities due to our failure to file and pay federal and state payroll tax trust funds on a timely basis.

Compensation Policies and Practices as they Relate to Risk Management

We believe that our compensation policies and practices do not encourage excessive or unnecessary risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.  The design of our compensation policies and practices encourages our employees to remain focused on both our short- and long-term goals.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of June 19, 2014 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. 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 June 19, 2014.  For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of June 19, 2014 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

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As of June 19, 2014 we had 151,118,930 shares of common stock issued and outstanding.  Unless otherwise indicated, the business address of each person listed is in care of the Company at its corporate address. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner			Percent of Class (1)
Common Stock	Stanley Weiner		20,860,930	(2)		14	%
Common Stock	Paul DiFrancesco		9,194,480			6	%
Common Stock	Joseph O’Neill		7,706,818			5	%
Common Stock	Hon. Bill Carter		8,274,818			5	%
Common Stock	Manfred Birnbaum		3,876,818			3	%
Common Stock	D. Grant Seabolt, Jr.		3,443,618	(3)		2	%
Common Stock	Dale F. Dorn		5,024,466			3	%
Common Stock	Lee Maddox		3,056,818	(4)		2	%
Common Stock	R.H. Bowman		4,011,083			3	%
Common Stock	Robert Miranda		721,750	(5)		*
Common Stock	Joshua Brooks		4,416,250			3	%
Common Stock	All Directors and Officers as a Group (10 Persons)		71,487,740			47	%
Common Stock	Adam Jennings		900,000	(6)		*

(1)  Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

(2)  Includes 5,000,000 shares received pursuant to our consulting agreement with Mr. Weiner.

(3) Includes 1,000,000 shares received pursuant to our consulting agreement with Mr. Seabolt.

(4) Includes 2,000,000 shares received pursuant to our consulting agreement with Mr. Maddox.

(5) As the President of Miranda & Associates, A PC, Mr. Miranda beneficially owns the 721,750 shares of our common stock we issued to him as per our agreement with Miranda & Associates.

(6) As a name executive officer included in Item 11, we are required to include Mr. Brooks and Mr. Jennings in this table.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of December 31, 2013.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Plan category
Plans approved by our shareholders:
2010 Stock Option and Award Incentive Plan		0		n/a		n/a
Plans not approved by shareholders:		0		n/a		n/a

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ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

Other than the relationships and transactions discussed below, we are not a party to, nor are we proposed to be a party, to any transaction since the beginning of the fiscal year ending December 31, 2013 involving an amount that exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years and in which a related person, as such term is defined by Item 404 of Regulation S-K, had or will have a direct or indirect material interest.

Transactions with Officers and Directors

During 2012, Stan Weiner, Chief Executive Officer, and Lee Maddox, Chief Operating Officer, earned commissions totaling $49,500 related to the Ranchland Hills Golf Club contract.

As of January 2012, the Company maintains an investment banking agreement with Ascendiant Capital Markets LLC, a FINRA & SIPC member firm (“Ascendiant”), over which one of our directors (Mr. DiFrancesco) was Managing Director, which entitles Ascendiant to cash commissions and warrant coverage for financings they place for us.  As of the date of this Report, pursuant to this agreement, we have paid Ascendiant approximately $50,000 in cash, but no warrants have been issued or accrued. Ascendiant has waived commissions for transactions with all officers, directors, insiders, all other individuals, (accredited or not) and if a fee is not attainable as determined by an institutional investor. Institutional investors are not waived but fees are limited to the acceptance of the investor. There are no accrued balances for fees, commissions, warrants or common stock. Ascendiant Capital Partners, LLC has been issued 1,000,000 shares pursuant to a consulting agreement the Company maintains with them. In March 2014, Mr. DiFrancesco resigned from all of his positions with Ascendiant.

We maintain a convertible note, with a current balance of approximately $139,000 with our CEO.

The Seabolt Law Group, which serves as our General Counsel, is owned by one of our Directors: Mr. Grant Seabolt.  As of the date of this Report, we have an outstanding balance of $4,179 payable to Seabolt Law Group for their services as our General Counsel.

On September 24, 2013, the Company entered into a service agreement with one of its executive officers pursuant to which the officer agreed to provide a personal guaranty to lenders and/or suppliers from which the Company's subsidiary, STW Oilfield Construction, LLC ("Oilfield Construction"), seeks to rent or purchase equipment, as specified in each agreement.  In consideration for the personal guaranty, the Company agreed to issue to the officer that number of shares of its common stock, valued at $0.12 per share, as is equal to the amount of the guaranty (the "Guaranty Shares").  The value of the 382,000 shares of common stock was recorded on September 24, 2013, as fees payable in common stock. The Company maintains the right to terminate these service agreements at any time with written notice.  The term of the agreement/guaranty is for 6 months.  The following table provides salient information about this service agreement:

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, Vice President of Operations	September 24, 2013	$	45,800	(1)		382,000		382,000

(1) Pursuant to the service agreement with Mr. Brooks, any amounts due on a related defaulted lease in excess of 20% of the amount of the personal guaranty, shall be the Company's obligation.  If Brooks' employment with the Company is terminated, the Company shall use its best commercial efforts to have it or a third party assume Brooks' guarantee obligations.

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On September 26, 2013, Oilfield Construction entered into an accounts receivable factoring facility (the “Factoring Facility”) with Mr. Joshua Brooks, the Company's Vice President of Operations, pursuant to a Loan Agreement (the “Factoring Agreement”), which shall not be deemed an account purchase agreement pursuant to the Texas Finance Code.  The Factoring Facility includes a loan in the amount of $225,000.  The Factoring Facility shall continue until terminated by either party upon 30 days written notice.  The Factoring Facility is secured by a security interest in substantially all of Oilfield Construction's assets pursuant to the terms of a Security Agreement. Under the terms of the Factoring Agreement, Joshua Brooks may, at his sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Brooks will advance to Oilfield Construction up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Mr. Brooks shall pay Oilfield Construction a rebate percentage of between 0-18.5% of the related invoice. Each account receivable purchased by Mr. Brooks will be subject to a factoring fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Mr. Brooks will generally have full recourse against Oilfield Construction in the event of nonpayment of any such purchased account.

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Joshua Brooks as attorney in fact for various activities associated with the purchased accounts receivable, including opening Oilfield Construction's mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of Oilfield Construction or Mr. Brooks enforcing its rights under the Security Agreement and take possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

The Company has guaranteed performance of certain of Oilfield Construction's obligations under the Factoring Agreement, pursuant to a Guaranty Agreement with Mr. Brooks, pursuant to which the Company shall guaranty payment of the loan and the related indebtedness thereon.  Pursuant to the Guaranty Agreement, Mr. Brooks may take all reasonable steps to take and hold security for the payment of the obligations under the Guaranty Agreement and the Company granted Mr. Brooks a security interest in any claims the Company may have against Mr. Brooks or Energy Services, as well as the proceeds of any of the foregoing, any of which Mr. Brooks may retain without notice at any time until the guaranteed obligations are paid in full.  Pursuant to the Guaranty Agreement, the Company may not, without Mr. Brooks' prior written consent, transfer or otherwise dispose of a material portion of the Company's assets or any interest thereon.

As of December 31, 2013, the Company has a related party payable of $132,490 to Dufrane Nuclear, Inc. a company controlled by Mr. Josh Brooks, the Company’s vice president of operations.

On January 13, 2014, we entered into an accounts receivable factoring facility (the “Factoring Facility”) with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement (the “Factoring Agreement”).  Crown maintains a 25% non-controlling interest in our subsidiary: STW Energy Services, LLC. The Factoring Agreement is secured through a Security Agreement between the Company, two of our subsidiaries: STW Pipeline Maintenance & Construction, LLC and STW Oilfield Construction, LLC (collectively, the "Subsidiaries") and Crown,  by all of the instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment of the Company and the Subsidiaries.  The Factoring Facility includes a loan in the amount of $4,000,000.  Our Chief Operating Officer, Lee Maddox also personally guaranteed our full and prompt performance of all of our obligations, representations, warranties and covenants under the Factoring Agreement, pursuant to a Guaranty Agreement for and in consideration of Crown issuing us the Factoring Facility.

The Factoring Facility shall continue until terminated by either party upon 30 days written notice.  Under the terms of the Factoring Agreement, Crown may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to the Company up to 80% of the face amount of the account receivable (the "Purchase Price"); although Crown maintains the right to propose a change in that rate, which we can accept in writing, orally or by accepting funding based on such changed rate.  Additionally, based upon when each invoice gets paid, Crown shall pay us a rebate percentage of between 0-18% of the related invoice.  Crown will generally have full recourse against us in the event of nonpayment of any such purchased account.  Crown has the discretion to also accept a substitute invoice from us for uncollected invoices; if such substitute invoice is not accepted, we will be obligated to pay Crown the Purchase Price of such uncollected invoice plus interest at the maximum lawful interest rate per annum, minus any payments made on the invoice.

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The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening our mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of our repayment obligations or Crown enforcing its rights under the Security Agreement and taking possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

Transactions with Black Pearl

On January 8, 2013, the Company and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, entered into an equity exchange agreement (the “Exchange Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock (the "Pearl Shares"). The Pearl Shares, although supposed to be issued after we amended our articles of incorporation to increase our authorized share capital, were never issued. Other than the Pearl Shares, the Exchange Agreement did not obligate STW to provide any other assets or commitments in consideration of the transaction contemplated thereby. The transaction contemplated by the Agreement - the transfer of ownership in Black Wolf - closed on January 8, 2013. At the time of the Exchange Agreement, Black Wolf commercialized the expertise and services of Lone Wolf Resources, LLC, an environmental and civil construction company operating in the oil and gas industry (“Lone Wolf”). Lone Wolf has worked with the Department of Transportation and the Texas Commission on environmental quality to shape the standards for processing hydrocarbon-impacted soils to a reusable road base. Lone Wolf has completed projects internationally and throughout the United States, including the world's largest in-situ thermal remediation project. BPE is an oilfield service company that has developed an evaporation cover that is conservation friendly, economical and can be floated on to existing ponds or installed during construction for the elimination of evaporation on frac ponds used throughout the oilfield. BPE also provides high quality liners with fusion-welded seams, quality control testing including air tests of seams and destruction testing in West Texas and Eastern New Mexico, and intends to expand into South Texas during the first quarter of this year. Black Wolf combines Lone Wolf’s and BPE’s services and constructs drill sites, reserve pits, frac ponds, roads, pit closings, liners, leak detection systems, evaporation covers, and provides associated maintenance. Black Wolf also offers turnkey services for H-11 permitted ponds, including surveys, engineering and design, and permitting for storage of produced and brine waters as well as utilizes proprietary technologies employed by Lone Wolf in the reclamation of hydrocarbon-impacted soils. Black Wolf is currently negotiating on a number of multi-well packages with many of the largest oil and gas producers in West Texas.  As of the date of filing this Amendment however, after 4 months of operations, Lone Wolf initiated their termination clause with Black Pearl and Black Wolf. As a result, Black Wolf was dissolved and we are currently seeking to terminate the Exchange Agreement since our investment would no longer be of any value. As of the date of this Amendment, BPE has verbally agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we shall not be required to issue the Pearl Shares and BPE shall agree to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

On March 19, 2014, we entered into a Line of Credit Agreement (the "Credit Agreement") with Black Pearl Energy, LLC ("Black Pearl"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt.  Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, approximately $1,010,000 of which has already been advanced to us; the credit was issued in the form of a promissory note (the "Note").  We must pay back all advanced funds on or before August 1, 2014, although such date will be extended to September 30, 2014 if we do not receive gross proceeds of no less than $6,000,000 resulting from either or both of: (a) the consummation of one or more private placements of debt or equity securities, not including the funds received pursuant to the Credit Agreement; or (b) the filing of a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) for an initial public offering of our securities.  Interest accrues at 11% per annum.  To further induce Black Pearl to issue us the line of credit, we agreed to issue them 1,500,000 restricted shares of our common stock (after which, Black Pearl will own 1,500,000 (1%) of our common stock) and a $25,000 transaction fee to be paid on the final closing date of the credit line.

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Upon an event of default, which includes nonpayment of any funds owed or bankruptcy, Black Pearl may cease making further advances to us until such default is cured; if the default is not cured, all of Black Pearl's obligations under the Agreement and the Note shall cease and terminate, and Black Pearl may: (i) declare the outstanding principal evidenced by the Note immediately due and payable; (ii) exercise any remedy provided for in the Credit Agreement; or (iii) (iv) exercise any other right or remedy available to it pursuant to the Credit Agreement or Note, or as provided at law or in equity.  Interest on the advanced funds shall increase to 18% until the default is cured.

As of December 31, 2013, the Company has a $139,763 related party payable to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel.  These related party payable is comprised of cash advances of $245,377, net of $137,041 of accounts receivable.  During year ended December 31, 2013, the Company, had sales of $332,860 to Black Pearl Energy, LLC, a related party.

Promoters and Certain Control Persons

None of our management or other control persons were “promoters” (within the meaning of Rule 405 under the Securities Act), and none of such persons took the initiative in the formation of our business or in connection with the formation of our business and received 10% of our debt or equity securities or 10% of the proceeds from the sale of such securities in exchange for the contribution of property or services, during the last five years.

Director Independence

Although we are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent, the Board determined that Joseph O’Neill, Hon. Bill Carter, Manfred Birnbaum, and Dale F. Dorn are independent, as such term is defined in the Marketplace Rules of The NASDAQ Stock Market.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table represents aggregate fees billed to us for fiscal years ended December 31, 2013 and 2012, by Marcum LLP our new principal accountant for 2013.

	2013		2012
Audit Fees	$	100,000	$	0
Audit-Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0
Total	$	100,000	$	0

The following table represents aggregate fees billed to us for fiscal years ended December 31, 2013 and 2012, by KMJ Corbin and Company LLP our principal accountant for 2012.

	2013		2012
Audit Fees	$	65,800	$	78,100
Audit-Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0
Total	$	65,800	$	78,100

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

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Audit-Related Fees — this category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

Tax Fees — this category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All Other Fees — this category consists of fees for other miscellaneous items.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm.  Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services.  Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board.  Any such approval by the designated member is disclosed to the entire Board at the next meeting.  The audit and tax fees paid to the auditors with respect to 2013 were pre-approved by the entire Board of Directors.

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit No.	Description
2.1	Order Confirming the Second Amended Plan of Reorganization of Woozyfly, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.
2.2	Agreement and Plan of Merger for proposed merger between Woozyfly, Inc. Merger Sub, and STW Resources, Inc. dated January 17, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 26, 2010.
3.1	Articles of Incorporation	Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the Securities and Exchange Commission on September 26, 2006.
3.2	Certificate of Amendment to the Articles of Incorporation	Incorporated by reference to the Registrant’s Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on September 4, 2008.
3.3	Certificate of Amendment to the Articles of Incorporation – March 1, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2010.
3.4	Articles of Merger between STW Acquisition, Inc. and STW Resources, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.
3.5	Articles of Merger filed with the State of Nevada on March 3, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.
4.1	Form of 12% Convertible Note dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
4.2	Form of Warrant dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
4.3	Form of Promissory Note dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.
4.4	Form of Warrant for December 2010 Financing	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.
4.5	Extension of Note, by and between STW Resources Holding Corp. and GE Ionics, Inc., dated October 28, 2011	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
4.6	Amended and Restated Note effective October 1, 2011 in favor of GE Ionics, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
4.7	Form of November 2011 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.
4.8	Note Exchange Form of New Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
4.9	Note Exchange Form of New Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
4.10	Form of May 2012 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.
4.11	Form of November 2012 14% Convertible Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
4.12	Form of November 2012 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
4.13	Form of April 30 2013 Revenue Participation Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013
4.14	Note of STW Energy Services, LLC in name of Crown Financial, LLC dated June 26, 2013,	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
4.15	Form of 6% Convertible Original Issue Discount Notes with Revenue Participation Interests	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
4.16	Form of Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
4.17	Form of 6% Convertible Original Issue Discount Notes with Revenue Participation Interests	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.
4.18	Form of Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.
10.1	Form of securities Purchase Agreement dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.
10.2	Form of Escrow Agreement by and between the Company, Viewpoint, and TD Bank, N.A. dated March 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
10.4	Form of Settlement Agreement by and between STW Resources Holding Corp and GE Ionics, Inc., dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.
10.5	Form of Subscription Agreement for December 2010 Financing	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.
10.6	Letter of Intent dated April 17, 2011	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2011.
10.7	Amendments to Settlement Agreement dated October 30, 2011, by and between STW Resources Holding Corp. and GE Ionics, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
10.8	Form of November 2011 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.
10.9	Note Exchange Cover Letter	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.10	Note exchange Subscription Agreement Form	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.11	Master Note Agreement with Revenue Participation Subscription Package	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.12	Form of May 2012 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.
10.13	Form of November 2012 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
10.14	Form of April 30, 2013 Revenue Participation Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013
10.15	Form of April 30, 2013 Revenue Participation Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013
10.16	Loan Agreement, dated June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.17	Security Agreement, dated June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.18	Guaranty, dated June 26, 2013 by STW Resources Holding Corp. in favor of Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.19	Account Purchase Agreement, effective June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.20	Executive Employment Agreement with Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.21	Employment Agreement between STW Pipeline Maintenance & Construction, LLC and Adam Jennings	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.22	Form of Service Agreement with Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.23	Form of Service Agreement with Lee Maddox	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.24	Rescission Agreement between the Company and Black Pearl Energy, LLC dated October 14, 2013	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.25	Form of Guaranty Agreement between the Company and Joshua C. Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.26	Form of Loan Agreement between STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.27	Form of Account Purchase Agreement between STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.28	Form of Escrow Agreement between the Company and Seabolt Law Group	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.29	Form of Security Agreement STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.30	Form of Engagement Agreement with Miranda & Associates, LLC, including the Addendum	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.31	Form of Board of Directors Appointment Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.32	Form of Share Purchase Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.
10.34	Form of Account Purchase Agreement between the Company and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.35	Form of Security Agreement between the Company, STW Pipeline Maintenance & Construction, LLC, STW Oilfield Construction, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.36	Form of Security Agreement between the Company, STW Pipeline Maintenance & Construction, LLC, STW Oilfield Construction, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.37	Form of Line of Credit Agreement between the Company and Black Pearl Energy, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.38	Form of Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.39	Form of Addendum to Agreement with Miranda & Associates, PCA	Filed Herewith
10.40	Form of Securities Purchase Agreement	Filed Herewith
10.41	Form of Warrant	Filed Herewith
10.42	Form of Escrow Agreement	Filed Herewith
16.1	Letter from Weaver & Martin LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 5, 2010.
16.2	Letter from Weaver and Tidwell, LLP	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2012.
16.3	Letter from KMJ Corbin & Company LLP	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 31, 2013.
20.1	Letter to Shareholders dated November 14, 2013	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 24, 2013
21.1	List of Subsidiaries	Filed as part of this Report.
31.1	Certification of the Chief Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed as part of this Report.
32.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed as part of this Report.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

Pursuant to the requirements of 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.

	STW Resources Holding Corp.
June 19, 2014	By: Stanley Weiner
	Stanley Weiner, CEO

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

Name	Positions	Date
Stanley Weiner Stanley Weiner	Chief Executive Officer, President, [Director], principal executive officer	June 19, 2014
Robert Miranda Robert Miranda	CFO	June 19, 2014
Lee Maddox Lee Maddox	Director	June 19, 2014
D. Grant Seabolt D. Grant Seabolt	Director	June 19, 2014
Joseph I. O'Neill Joseph I. O'Neill	Director	June 19, 2014
Hon. Bill Carter Hon. Bill Carter	Director	June 19, 2014
Manfred Birnbaum Manfred Birnbaum	Director	June 19, 2014
Paul DiFrancesco Paul DiFrancesco	Director	June 19, 2014
Dale F. Dorn Dale F. Dorn	Director	June 19, 2014
R.H. (Tibaut) Bowman R.H. (Tibaut) Bowman	Director	June 19, 2014

EX-10.39

Exhibit 10.39

ENGAGEMENT LETTER ADDENDUM

THIS ADDENDUM MODIFIES THE AGREEMENT ENTERED INTO ON OCTOBER 14, 2013, by and between STW Resources Holding Corporation (hereinafter “STW”) and Miranda and Associates, A Professional Accounting Corporation (hereinafter “Miranda & Associates”).  STW and Miranda & Associates are hereinafter collectively referred to as the “Parties.”

May it be known that the undersigned Parties, for good consideration, do hereby agree to make the following additions outlined below.  These additions shall be made valid as if they are included in the original stated contract.

AGREEMENTS:

1.STW acknowledges and accepts the cost overrun totaling $57,740 incurred by Miranda & Associates for the preparation of the Security and Exchange Commission Form 10-Qs.   STW hereby agrees to immediately issue 721,750 common shares of its stock to Robert J. Miranda in full payment of the overrun incurred in preparing the Security and Exchange Commission Form 10-Qs for STW.

2.All services provided by Miranda & Associates shall be on a time and material basis effective November 1, 2013.

3.​STW hereby accepts the below listed invoices for services rendered by Miranda & Associates beginning on November 1, 2013 and ending February 20, 2014 totaling $36,700:

a.   Invoice number 71441, dated November 30, 2013, totaling  ​$5,492.50​;

b.   Invoice number 71549, dated December 31, 2014, totaling ​$18,567.50; and

c.   Invoice number 71554, dated February 20, 2014, totaling $12,640.

4.As of March 10, 2013, STW has paid invoice number 71441 in the amount of $5,492.50, leaving an unpaid balance of $31,207.50. STW shall pay this balance as follows:

a.   A payment of $10,402.50 on March 14, 2014;

b.   A payment of $10,402.50 on March 21, 2014; and

c.   A payment of $10,402.50 on March 28, 2014.

5.Miranda & Associates shall bill STW bi-weekly for the fees incurred in closing of STW’s 2013 accounting records, managing the external audit process, and preparing the Securities and Exchange Commission Form 10-K.  All invoices shall be due within 30 days of the date issued.

6.STW shall defend, indemnify, and hold harmless Miranda & Associates, its officers and employees from any and all claims, injuries, damages, losses, judgments, expenses, demands, legal actions, suits, attorney fees, arising out of or in connection with the performance of this Agreement.

The undersigned agree to proceed on the above terms and conditions.

Signature: ___________________________

Title: _______________________________

Date: _______________________________

Signature: ___________________________

Title: _______________________________

Date: _______________________________

EX-10.40

Exhibit 10.40

NEITHER THE COMMON STOCK NOR THE UNDERLYNG COMMON SHARES FOR THE WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THE COMMON STOCK NOR THE WARRANTS MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT. INVESTMENT IN THE COMMON STOCK AND WARRANTS OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION".

THE OFFERING IS BEING MADE SOLELY TO "ACCREDITED INVESTORS", AS SUCH TERM IS DEFINED IN REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR FOREIGN RESIDENTS UNDER REGULATION S. NEITHER THE UNITS OR THE SHARE SHARES OF COMMON STOCK UNDERLYING SUCH UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION AND WILL ONLY BE OFFERED AND SOLD IN RELIANCE ON AVAILABLE EXEMPTIONS THEREFROM

THE SHARES AND WARRANTS OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR EQUIVALENT AUTHORITIES OF ANY OTHER JURISDICTION NOR HAVE ANY SUCH AUTHORITIES PASSED UPON, CONFIRMED OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR THE ADEQUACY OF THIS MEMORANDUM.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

STW Resources Holding Corp, a Nevada corporation (the "Company") hereby offers (the "Offering") up to $500,000 (the "Maximum Offering") or 6,250,000 units (the "Units"), each unit consisting of one share of common stock, par value $0.001 per share and one common stock purchase warrant exercisable at $0.20 per share.  Each Unit is offered for sale at a price of $0.08, on a "best efforts" basis to selected, qualified investors during an offering period expiring on  June 30, 2014 (the "Offering Period"). Each Warrant entitles the holder to purchase one share of Common Stock from the Company at an exercise price of $0.20 per share and is exercisable for a period of two (2) years. The Company reserves the right to terminate the Offering at any time.  A minimum of $25,000 is necessary to participate in this Offering, subject to smaller investments with the consent of the Company.  All proceeds from this offering will capitalize ongoing administrative expenses for the company.

STW Resources Holdings Corp.

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (this “Agreement”) is entered into as of _________________ 2014, between STW Resources Holdings Corp.(the “ Company”), and _________________ (the “Purchaser”).

W I T N E S E T H:

WHEREAS, the Company desires to sell to Purchaser, and Purchaser desires to buy from the Company, ____________ Units at a purchase price of $0.08 per Unit, with said Units consisting of ___________ shares (the “Shares”) of restricted common stock, par value of $.001 (the “Common Stock”), of STW Resources Holding Corp. and ___________ Warrants for the purchase of the Company’s Common Stock at $0.20 per share (the "Warrants").

WHEREAS, The Seabolt Law Group ("Seabolt") shall act as the Escrow Agent ("Escrow Agent") for the Offering and shall receive and hold all consideration received from the Purchaser for the Units in a designated escrow account, unless other arrangements are agreed to by all parties.

NOW, THEREFORE, in consideration of and subject to the mutual agreements, terms and conditions herein contained the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser agree as follows:

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1.           PURCHASE AND SALE OF UNITS (SHARES AND WARRANTS)

1.111           Purchase of Units (Shares and Warrants).   Subject to the terms and conditions set forth herein, Purchaser hereby subscribes for and agrees to purchase ______ Units from the Company for an aggregate consideration of $________________ (the “Purchase Price”), and the Company hereby agrees to sell, assign, transfer and deliver to Purchaser, __________ Shares plus, in conjunction with the issuance of the Shares, the Company shall issue to Purchaser a Warrant in a form enclosed hereto as Exhibit A to purchase up to ___________________ shares of Common Stock (the "Warrant Shares," together with the Shares, the "Securities") at an exercise price of $0.20 and a maturity date of two years from the date of Purchaser’s closing on purchase of the Units.

1.2           Escrow Agent.  On this same date, the Company, the Purchaser and The Seabolt Law Group ("Seabolt") shall enter into that certain escrow agreement, in the form of Exhibit B annexed hereto and made a part hereof (the "Escrow Agreement"), pursuant to which Seabolt shall act as the Escrow Agent in this Offering and release the funds in accordance with the terms of such Escrow Agreement.

1.3           Closing. The closing of the transactions contemplated hereby shall take place on a rolling close basis, so long as least $50,000 (the "Minimum Purchase Amount") is received in the Escrow Account (as hereinafter defined) before any closing may occur. The offering period and final closing date will be no later than 10:00 a.m. EST, on June 30, 2014 (the "Final Closing Date"), or at such other location, date and time, as may be agreed upon between Purchaser and the Company, or by facsimile or other electronic means (such closing being called the “Closing” and such date and time being called the “Closing Date”).

a)   If the Minimum Purchase Amount is received by the Escrow Agent on or before the Final Closing Date, all escrowed proceeds, net of commissions, if any, and other offering expenses, will be remitted to the Company (the "Initial Closing").  If the Minimum Purchase Amount is not received by the Escrow Agent by the Final Closing Date, the Offering will terminate and all escrowed proceeds will be returned to subscribers without interest or deduction.

b)   Following the Initial Closing, the Company may hold subsequent Closings up to and including the Final Closing Date for all or any portion of the remaining amount of the Offering not sold at the time of the Initial Closing or any subsequent Closing, provided, however, that such subsequent Closings must occur no later than the Final Closing Date.

c)   On the Initial Closing Date and at each subsequent Closing until the Final Closing Date, each Purchaser shall deliver to the Escrow Agent, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Purchase Price as set forth on the Investor Questionnaire executed by such Purchaser.  The Company shall deliver to each Purchaser his or its respective Shares and a Warrant, as determined pursuant to the details first set forth above, and the Company and each Purchaser shall deliver the other items set forth in Section 4.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 4.1 and 4.2, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.

d)   Purchasers shall remit the Purchase Price to the Escrow Agent as follows:

WIRE TRANSFERS:

Bank Name & Address:

ABA No.:

Account No.:

Account Name:

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CHECKS:

Made payable to: Seabolt Law Group, as escrow agent for STW Resources Holding Corp..

Mail to:                               Seabolt Law Group

Attn: D. Grant Seabolt, Jr.

5307 E. Mockingbird Lane

5th Floor, Mockingbird Station

Dallas, TX 75206

e)   All such checks and wire transfers remitted to the Escrow Agent shall be accompanied by information identifying each Purchaser, subscription, the Purchaser’s social security or taxpayer identification number and address.  In the event the Purchaser’s address and/or social security number or taxpayer identification number are not provided to Escrow Agent by the Purchaser, then the Company agrees to promptly provide Escrow Agent with such information in writing.  The checks or wire transfers shall be deposited into a non interest-bearing account at The Seabolt Law Group, as Escrow Agent for this Offering (the “Escrow Account”). 

f)   Subject to receipt of the Minimum Purchase Amount, at the Initial Closing, the Escrow Agent is hereby expressly and irrevocably authorized by each Purchaser executing this Agreement and delivering his, its or their respective Subscription Amounts to the Escrow Account, to remit upon receipt of written instructions from the Company (i) amounts representing commissions, if any, which amount shall not exceed $50,000 and (iii) the balance of such amounts (the "Net Proceeds") to the Company or any other Person as the Company shall direct in writing to such Escrow Agent.

g)   Upon completion of the Minimum Purchase Amount and until the Final Closing Date, the Purchasers shall continue to wire funds and/or deliver checks payable to the Escrow Account.  At each subsequent Closing to be held on or before the Final Closing Date, all additional escrowed subscription proceeds from the sale of Units in excess of the Minimum Purchase Amount, net of any commissions or other offering expenses, will be remitted to the Company.  Such Escrow Agent is hereby expressly and irrevocably authorized by each Purchaser executing this Agreement and delivering his, its or their respective Subscription Amounts to the Escrow Account, to remit upon receipt of written instructions from the Company (i) amounts representing commissions, if any, which amount shall not exceed $50,000 and (iii) the balance of such amounts (the "Net Proceeds") to the Company or any other Person as the Company shall direct in writing to such Escrow Agent.

22.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Purchaser that:

2.1           Authorization.  The Company has all requisite power, authority and legal capacity to execute and deliver this Agreement, and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by the the Company in connection with the consummation of the transactions contemplated by this Agreement. This Agreement constitutes the legal, valid, and binding obligation of the Company enforceable in accordance with its terms, except to the extent limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application related to the enforcement of creditors’ rights generally and (b) general principles of equity, and except that enforcement of rights to indemnification contained herein may be limited by applicable federal or state laws or the public policy underlying such laws, regardless of whether enforcement is considered in a proceeding in equity or at law.

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2.2           No Conflict.  The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under any provision of any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or his properties or assets.  Neither the execution and delivery of this Agreement by the Company, nor the consummation of the transaction contemplated hereby, will result in the imposition of any security interest upon the Shares.

2.3           Title to Shares. the Company owns beneficially and of record, and has good and indefeasible title to, the Shares, free of all security interests, pledges, charges, liens, or encumbrances of any kind.  the Company did not acquire any of the Shares in violation of any preemptive right of any person. 

2.4           Securities Compliance and Restricted Shares. The Shares were acquired by the Company in a transaction that complies with all applicable federal and state securities laws and regulations under Rule 144.  All shares are restricted in compliance with Rule 144 promulgated under the Securities Act of 1933, as amended.

2.4           No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Units by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

33.           REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to the Company as follows:

3.1           Organization. Purchaser is an individual, and not a corporate entity or a trust

3.2           Authority. Purchaser has the authority, as an individual, necessary for the authorization, execution, delivery and performance of this Agreement.  This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, except to the extent limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application related to the enforcement of creditors’ rights generally and (b) general principles of equity, and except that enforcement of rights to indemnification contained herein may be limited by applicable federal or state laws or the public policy underlying such laws, regardless of whether enforcement is considered in a proceeding in equity or at law.

3.3           Purchase Entirely for Own Account. This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the Company, which by Purchaser’s execution of this Agreement, Purchaser hereby confirms that the Units to be acquired by Purchaser will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, Purchaser further represents that Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Units.

3.4           Purchaser Status. At the time Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises the Warrants it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.  The Purchaser has truthfully and accurately completed the Investor Questionnaire requested in this Agreement, which is hereby incorporated by reference, and will submit to the Company such further assurances of such status as may be reasonably requested by the Company.

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3.5           Experience of Purchaser. Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Units, and has so evaluated the merits and risks of such investment.  The Purchaser is able to bear the economic risk of an investment in the Units and, at the present time, is able to afford a complete loss of such investment.

3.6           Ability to Bear Risk. Purchaser understands and agrees that purchase of the Units is a high risk investment and Purchaser is able to afford and bear an investment in a speculative venture having the risks and objectives of the Company, including a risk of total loss of such investment. Purchaser must bear the substantial economic risks of the investment in the Units indefinitely because none of the Securities may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration(s) are available.

3.6           Disclosure of Information. Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the Offering of the Units with the Company’s management and has had an opportunity to review the Company’s business and has received satisfactory answers to all of his/her questions and inquiries. The Purchaser has had access to the Company's current and periodic reports filed with the U.S. Securities and Exchange Commission, and has reviewed sufficient information to allow him/her to evaluate the merits and risks of his/her investment in the Units.  The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchasers to rely thereon.

3.7.           No other documents.In evaluating the suitability of an investment in the Company, the Purchaser has not relied upon any representation or other information (oral or written) other than as stated in this Agreement or as contained in documents so furnished to the Purchaser or its Advisors, if any, by the Company in writing.  The Purchaser specifically represents that it has not received an offering memorandum or similar document related to the Company, its business or further describing the details of this offering of the Units.

3.7           Restricted Securities. Purchaser understands that neither the Shares nor Warrant Shares have been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act, which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Purchaser’s representations as expressed herein. Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  Purchaser acknowledges that the Company has no obligation to register or qualify the Securities. Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company that are outside of Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

3.8           No Public Market. Purchaser understands that no public market now exists for the Units or the Securities, and that the Company has made no assurances that a public market will ever exist for the Securities.

3.9           Legends. Purchaser understands that the Securities and the Warrants may be notated with one or all of the following legends:

(a)   “THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(b)   Any legend required by the securities laws of any state to the extent such laws are applicable to the Securities represented by the stock certificate, instrument, or book entry so legended.

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3.10           No General Solicitation. The Purchaser is not purchasing the Units as a result of any advertisement, article, notice or other communication regarding the Units published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement..

3.12           Exculpation Among Purchasers. Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.  Purchaser agrees that Purchaser is not liable to any other Purchaser for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Units.

3.13           Residence.  Purchaser is presently a bona fide resident of the state or country represented on the signature page hereof and has no present intention of becoming a resident of any other state, country, or jurisdiction, and the address and Social Security Number/National Insurance Number (or other applicable number) or Employer Identification Number/Corporate Tax Reference Number (or other applicable number) set forth on the signature page hereof are Purchaser’s true and correct residential or business address and Social Security Number/National Insurance Number (or other applicable number) or Employer Identification Number/Corporate Tax Reference Number (or other applicable number).

3.14           U.S. Person.  If Purchaser is a “U.S. Person,” Purchaser: (i) if an individual, is at least 21 years of age; (ii) if an individual, is a citizen or resident of the United States; (iii) has adequate means of providing for Purchaser’s current needs and personal contingencies; (iv) has no need for liquidity in Purchaser’s investments; (v) maintains Purchaser’s principal residence or business at the address shown on the signature page hereof; (vi) warrants that all investments in and commitments to non-liquid investments are, and after Purchaser’s acquisition of the Securities will be, reasonable in relation to Purchaser’s net worth and current needs; and (vii) warrants that any financial information that is provided herewith by Purchaser, or is subsequently submitted by Purchaser at the request of the Company, does or will accurately reflect Purchaser’s financial condition with respect to which Purchaser does not anticipate any material adverse change.

44.           CONDITIONS PRECEDENT TO CLOSING

44.11           Conditions to Obligations of Purchaser.  Purchaser’s obligation to purchase the Shares pursuant to this Agreement is subject to the satisfaction or waiver, at or prior to the Closing Date, of each of the following conditions:

(a)           Representations and Warranties. The representations and warranties of the Company under Section 2 of this Agreement shall be true, complete and correct on and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of such date, and the Company shall have certified to such effect to Purchaser in writing.

(b)           No Order Pending.  There shall be no order, ruling, judgment or decree in effect, including of any regulatory agency, which would enjoin or prohibit the transactions contemplated hereby.

(c)           Delivery of Stock Certificates. The Company shall have delivered a stock certificate or stock certificates representing the Shares and the Warrants.

(d)           Agreements, Conditions and Covenants.  The Company shall have performed or complied in all respects with all agreements, conditions and covenants required by this Agreement to be performed or complied with by it on or before the Closing Date.

(e) this Agreement duly executed by the Company.

(f) the Escrow Agreement, duly executed by the Escrow Agent and the Company.

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44.22           Conditions to Obligations of The Company.  The Company’s obligation to sell and transfer the Shares pursuant to this Agreement is subject to the satisfaction or waiver at or prior to the Closing Date of the following conditions:

(a)           this Agreement duly executed by the Purchaser.

(b)           Representations and Warranties. The representations and warranties of Purchaser under Section 3 of this Agreement and in the Investor Questionnaire, as well as the other information contained therein, shall be true, complete and correct on and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of such date.

(b)           No Order Pending.  There shall be no order, ruling, judgment or decree in effect, including of any regulatory agency, which would enjoin or prohibit the transactions contemplated hereby.

(c)           Agreements, Conditions and Covenants.  Purchaser shall have performed or complied in all respects with all agreements, conditions and covenants required by this Agreement to be formed or complied with by it on or before the Closing Date, including but not limited to remittance of the Purchase Price to the Escrow Account.

(d)           Investor Questionnaire.  The Purchaser shall have submitted a complete Investor Questionnaire to the Company as per the instructions contained therein.

55.           COVENANTS

5.1           Both parties hereby acknowledge and covenant that:

(a) Each of us may be, and both are proceeding on the assumption that each of us are, in possession of material, non-public information concerning the Company and its direct and indirect subsidiaries (the “Non-Public Information”), which is not or may not be known to either party and that none of us have disclosed to the other party;

(b) Purchaser is voluntarily assuming all risks associated with the purchase of the Shares and expressly warrants and represents that (x) none of us have made, and Purchaser disclaims the existence of or its reliance on, any representation by any of us concerning the Company or the Shares and (y) Purchaser is not relying on any disclosure or non-disclosure made or not made, or the completeness thereof, in connection with or arising out of the purchase of the Shares, and therefore has no claims against any of us with respect thereto;

(c) if any such claim may exist, Purchaser, recognizing its disclaimer of reliance and each of our reliance on such disclaimer as a condition to entering into this transaction, covenants and agrees not to assert it against any of us or any of our respective partners, representatives, agents or affiliates; and

(d) none of us shall have liability, and Purchaser waives and releases any claim that it might have against any of us or any of our respective partners, representatives, agents and affiliates whether under applicable securities law or otherwise, based on our knowledge, possession or nondisclosure to Purchaser of the Non-Public Information.

(e) we are each relying upon the above acknowledgements and representations contained in this Agreement as a condition to entering into the transaction contemplated by this Agreement.

5.2           The parties will use their reasonable best efforts to complete the transactions contemplated hereby no later than June 30, 2014.  At Closing, the parties will deliver such documentation as may be reasonably requested by the other party’s counsel to effect the transactions contemplated herein.

5.3           The Company agrees to use the Net Proceeds from the Offering to cover the following expenses over the next three (3) months as follows: debt service; service providers, including legal and accounting, consultants - executives, in-house legal, public relations; investor relations; staffing; governance expenses; and general operating expenses, such as rent, utilities, etc, or as otherwise specified in written requests signed by Mr. Stanley Weiner submitted to the escrow agent.  The Company covenants that it shall not use the Net Proceeds for or on behalf of any of the Company's subsidiaries.

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5.4           Until the earlier of the termination hereof, the Closing, or the mutual written agreement of the parties, the parties agree as follows:

(a)Each party shall keep confidential any information obtained in connection with the transactions contemplated herein, unless such information has been rightfully obtained from a third party or is generally available to the public. In the event that public disclosure is required to be made by any regulation or law, or by any regulatory filing in connection with the transactions contemplated herein, such disclosure shall be agreed by all parties, including, without limitation, approval as to form and content.

(b)The Company shall provide Purchaser and its representatives with access to financial and other information relating to Company as may be reasonably necessary in order for Purchaser to make informed decisions as to the viability of the business arrangements contemplated herein.

6.           MISCELLANEOUS

6.11           Representations and Warranties. The representations and warranties of the Company and Purchaser shall survive the Closing and delivery of the Securities and the Warrants.

6.2           Indemnification. Purchaser agrees to indemnify and hold harmless the Company and each director, officer or agent thereof from and against any and all losses, damages, liabilities and expenses arising out of or in connection with any breach of, or inaccuracy in, any representation or warranty of the undersigned, whether contained in this Agreement or otherwise.

6.2           Waiver, Amendment.  Neither this Agreement nor any provisions hereof shall be waived, modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, change, discharge or termination is sought.

6.3           Assignability.  Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by either Company or Purchaser without the prior written consent of each other party.

6.4           Section and Other Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

6.5           Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas, without regard to principles of conflicts of laws thereof.

6.6           Counterparts.   This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.

6.7           Notices.  All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid:

(a) if to Purchaser:

The address included on the Investor Questionnaire.

(b) if to The Company:

STW Resources Holding Corp.

3424 SCR 1192

Midland, TX 79706

Attn:  Stanley Weiner, CEO

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with a copy to (which shall not constitute notice):

Hunter Taubman Weiss

130 W. 42nd Street, Suite 1050

New York, NY 10036

Attn: Rachael Schmierer

6.9           Binding Effect.  The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, permitted successors and assigns.

6.10.           Additional Disclosures:  (a) It is possible that some of the purchasers of Units will be sourced through registered brokers, and if so, such registered brokers may be paid commissions of up to 8% of the amount(s) invested; and (b) Paul DiFrancesco, a Director of the the Company is affiliated with registered broker which may source one or more purchasers of Units.

6.11           Entire Agreement. This Agreement (including the Exhibits hereto), the Warrant and the Investor Questionnaire constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

6.12           Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

6.13           Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Company will be entitled to specific performance under this Agreement.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in this Agreement and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

6.14           Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise this Agreement and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments thereto.

6.15           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

6.16           SIGNTUARE PAGE.  It is hereby agreed that the execution by a Purchaser of this Agreement, in the place set forth herein, will constitute agreement to be bound by the terms and conditions hereof.  It is hereby agreed by the parties hereby that the execution by the Purchaser of this Agreement, in the place set forth herein, will be deemed and constitute the agreement by the Purchaser to be bound by all of the terms and conditions of this Agreement, as well as by the Investor Questionnaire, the Warrants and all of the other documents constituting the Transaction Documents and will be deemed and constitute the execution by the Purchaser of all such Transaction Documents without requiring the Purchaser's separate signature on any of such Transaction Documents. Further, such signature will constitute the Purchaser's agreement that the information contained in the Investor Questionnaire is complete and accurate.

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IN WITNESS WHEREOF, Company and Purchaser have executed this Agreement as of the date first written above.

                      STW RESOURCES HOLDING CORP.

By: ______________________________

                 Name: Stanley Weiner

                 Title: CEO

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

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STW RESOURCES HOLDING CORP.

PURCHASER SIGNATURE PAGE TO

PURCHASE AGREEMENT

Purchaser hereby elects to purchase a total of ___________ Units for $_____________.

Date (NOTE: To be completed by the Purchaser):  , 2014

If the Purchaser is an INDIVIDUAL, and if purchased with a SPOUSE, or as JOINT TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY:

Print Name(s)                                                      Social Security Number(s)

Signature(s) of Purchaser(s)                                                      Signature

Date                                                      Address

If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or TRUST:

Name of Partnership,                                                      Federal Taxpayer Corporation, LimitedIdentification Number Liability Company or Trust

By:                                                  

Name:                                                State of Organization

Title:

Date                                                      Address

EX-10.41

Exhibit 10.41

Exhibit “A”

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

COMMON STOCK PURCHASE WARRANT

 STW RESOURCES HOLDING CORP.

Warrant Shares: ____________                                                                                Initial Exercise Date: __________, 2014

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _________________, or his registered assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the two year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from STW RESOURCES HOLDING CORP., a Nevada corporation (the “Company”), up to ___________ shares (the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.                      Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the  Share Purchase Agreement (the “SPA”), dated ________________, among the Company and the Purchaser’s signatory thereto.

Section 2.                      Exercise.

a)Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received  payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

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b)Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.20, subject to adjustment hereunder (the “Exercise Price”).

c)Mechanics of Exercise.

i.Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (the “Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(v) prior to the issuance of such shares, have been paid.

ii.Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii.Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.

iv.No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

v.Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

vi.Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

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Section 3.                      Certain Adjustments.

a)           Reorganization, Consolidation, Merger, etc.; Reclassification.  In case at any time or from time to time, the Company shall effect any merger, reorganization, restructuring, reverse stock split, consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, a “Fundamental Change”), then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Warrant, on the exercise hereof, at any time after the consummation of such Fundamental Change, shall receive, in lieu of the  Warrant Shares issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation of a Fundamental Change if such Holder had so converted this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 3(d).

If the Company at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Warrant, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

b)           Dissolution.  In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Warrant after the effective date of such dissolution pursuant to this Article to a bank or trust company (a “Trustee”) as trustee for the Holder of this Warrant.

c)           Continuation of Terms. Upon any Fundamental Change or transfer (and any dissolution following any transfer) referred to in this Article, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to any other securities and property receivable on the exercise of this Warrant after the consummation of such Fundamental Change or transfer or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 3(c). In the event this Warrant does not continue in full force and effect after the consummation of the transaction described in this Section 3, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by the Holder of the Warrants be delivered to the Trustee as contemplated by Section 3(b).

d)           Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(d). The number of Warrant Shares that the Holder of this Warrant shall thereafter, on the exercise hereof as provided herein, be entitled to receive shall be adjusted to a number determined by multiplying the number of Warrant Shares that would otherwise (but for the provisions of this Section 3(d)) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 3(d) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise.

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       e)           Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

Section 4.                      Transfer of Warrant.

a)Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Subscription Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Subscription Agreement.

Section 5.                      Miscellaneous.

a)No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(e)(i), and only entitles Holder such rights as a stockholder on the shares issued pursuant to and upon the exercise of this Warrant.

b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

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c)Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

d)Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Subscription Agreement.

f)Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

g)Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

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h)Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

i)Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j)Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k)Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

l)Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders holding Warrants at least equal to 50% of the Warrant Shares issuable upon exercise of all then outstanding Warrants.

m)Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n)Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

(Signature Pages Follow)

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

STW RESOURCES HOLDING CORP.

By:__________________________________________

     Name:

     Title:

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NOTICE OF EXERCISE

TO:           STW RESOURCES HOLDING CORP.

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of  lawful money of the United States.

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

(4)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

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ASSIGNMENT FORM

(To assign the foregoing Warrant, execute

this form and supply required information.

Do not use this form to exercise the Warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:     _____________________________

Holder’s Address:     _____________________________

   _____________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.42

Exhibit 10.42

EXHIBIT “B”

ESCROW AGREEMENT

This Escrow Agreement (this “Agreement”), dated as of ________, 2014, is by and among STW Resources Holding Corp., a Nevada corporation (the “Company”); and D. Grant Seabolt, Jr., Esq., of the Seabolt Law Group, a Texas licensed lawyer (the “Escrow Agent”), as escrow agent, for the benefit of the Participants (the “Participants”) in the Company’s Share Purchase Agreement dated ________, 2014 (the “SPA”)  (“Company and Participants are collectively referred to as the Parties).

W I T N E S S E T H:

WHEREAS, the Company and the Participants are entering into the SPA to raise up to $500,000.00 or 6,250,000 units (the "Units"), each unit consisting of one share of common stock, par value $0.001 per share and one common stock purchase warrant exercisable at $0.20 per share, with all purchases resulting in cash proceeds to be used for the Company’s benefit as set forth in the SPA (the “Cash Proceeds”);

WHEREAS, Paragraph 5.3 of the SPA requires the Cash Proceeds to be used as follows:

The Company agrees to use the Net Proceeds from the Offering to cover the following expenses over the next three (3) months as follows: debt service; service providers, including legal and accounting, consultants - executives, in-house legal, public relations; investor relations; staffing; governance expenses; and general operating expenses, such as rent, utilities, etc.  The Company covenants that it shall not use the Net Proceeds for or on behalf of any of the Company's subsidiaries;

WHEREAS, the parties desire to set forth in this Agreement the terms and conditions pursuant to which the Escrow Amount will be deposited, held in and disbursed from the Escrow Account; and

WHEREAS, the Company and the Participants desire to secure the services of the Escrow Agent, and the Escrow Agent is willing to provide such services, pursuant to the terms and conditions of this Agreement;

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the parties hereto agree as follows:

1.  Appointment of Escrow Agent; Resignation and Successor.

1.1.  Appointment of Escrow Agent.  The Participants and the Company hereby appoint the Escrow Agent as, and the Escrow Agent hereby accepts its appointment and designation as, Escrow Agent pursuant to the terms and conditions of this Agreement.

1.2.  Resignation of Escrow Agent; Appointment of Successor. The Escrow Agent may resign at any time by giving at least 30 days’ prior written notice of resignation to the Parties, such resignation to be effective on the date specified in such notice, whereupon the Escrow Agent will be discharged of and from any and all further obligations arising in connection with this Agreement.  Upon receipt of such notice, the Parties shall appoint a bank or trust company or title insurance company as successor escrow agent by a written instrument executed by the Parties delivered to the resigning Escrow Agent.  In the absence of a joint designation by the Parties, the Escrow Agent will use reasonable efforts to appoint a successor Escrow Agent, which shall be a bank, trust company or other financial institution with combined capital and surplus of at least $50,000,000.00, unless otherwise agreed by the Parties.  The successor Escrow Agent shall succeed to all of the rights and obligations of the resigning Escrow Agent as of the effective date of the resignation as if originally named in this Agreement.  Upon assignment of this Agreement, the resigning Escrow Agent shall duly transfer and deliver to the successor Escrow Agent the Escrow Fund (as defined in Section 2.1 of this Agreement) at the time held by the resigning Escrow Agent; provided, that if no successor Escrow Agent has been appointed on the effective date of resignation of the resigning Escrow Agent pursuant to this Agreement, the resigning Escrow Agent may deliver the Escrow Fund into a court of competent jurisdiction.  Upon completion of the alternative requirements of the immediately preceding sentence, Escrow Agent shall be discharged and released from all further duties, obligations, liabilities and responsibilities imposed upon Escrow Agent pursuant to the terms and provisions of this Agreement.

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2.  Establishment of Escrow.

2.1.  Escrow Fund.  Upon the date of signing of the Term Sheet, but in any event, no later than June 30, 2014, the Company shall deposit all Cash Proceeds with the Escrow Agent, in accordance with the SPA the escrowed amounts in immediately available funds, which thereafter shall be referred to as the “Escrow Fund”.  The Escrow Agent shall act as escrow agent and hold, safeguard and disburse the Escrow Fund pursuant to the terms and conditions of this Agreement and the SPA.  The Escrow Fund will not be subject to any lien or attachment of any creditor of any Party to this Agreement and will be used solely for the purposes and subject to the conditions set forth in this Agreement and the SPA.  Notwithstanding the foregoing, Escrow Agent shall not be liable or responsible for any liens, charges, encumbrances, actions, claims, damages, or attachments made by any Party for or against all or any portion of the Escrow Amount.

2.2.  Investment of Escrow Fund.  The Escrow Agent shall place any funds or other property in the Escrow Fund into the Escrow Agent’s Attorney Escrow Accountwith Citibank, N.A., a FDIC insured national bank, which is an IOLTA interest paying account, with all interest being paid to the State Bar of Texas. Escrow Agent shall use a bank, trust company or other financial institution with combined capital and surplus of at least $50,000,000.00, unless otherwise agreed by the Parties.  The Parties hereby acknowledge that Citibank, N.A. is an acceptable financial institution for deposit of the Escrow Fund.  Provided that Escrow Agent complies with the requirements of this Section 2.2, Escrow Agent shall not be liable or responsible for any loss of all or any portion of the Escrow Fund by the depositary bank through fault of the depositary bank.

3.Distributions from the Escrow Fund.  The Escrow Agent shall make distributions from the Escrow Fund in satisfaction of the requirements of Paragraph 5.3 of the SPA.

3.1.  Escrow Agent shall verify the conformity of any disbursed funds being in accordance with Paragraph 5.3 of the SPA by receiving written invoices from the Company’s third-party providers and/or written voucher requests from the Company for its own internal overhead expenses, with approval to pay such invoices/vouchers being first obtained in writing (by e-mail or facsimile transmission) from Stanley T. Weiner.

3.2. Notwithstanding the provisions of Paragraph 5.3 of the SPA, if the Company or the Participants notifies Escrow Agent of any dispute between the Company and the Participants over the amount of the Escrow Fund to be paid to Participants, then the Escrow Agent shall hold such portion of the Escrow Fund (the “Disputed Amount”) and not disburse it until the earlier of receipt by the Escrow Agent of (i) Joint Instructions or (ii) a Final Award (as defined in Section 5 of this Agreement) specifying a release of monies to the Participants and/or the Company and the amounts of such monies to be released.  Upon the Escrow Agent’s receipt of the Joint Instructions or the Final Award (either of which shall be the “Termination Release Date”), the Escrow Agent shall disburse the Escrow Fund, or a portion thereof, in accordance with the terms of the Joint Instructions or Final Award.

3.3. The parties acknowledge that the Escrow Agent is identified as a potential recipient of some of the Cash Proceeds as “in-house legal.”  All distributions of any of the Cash Proceeds to Escrow Agent as “in-house legal” shall be reviewed, verified and approved by Stanley T. Weiner, and Escrow Agent shall provide SEC Counsel with notice of receiving such permission(s).

4.  Duties of Escrow Agent.

4.1.  Escrow Charges.  The Escrow Agent shall not charge for or be paid out of the Escrow Fund any fees solely for the establishment and maintenance of the escrow, except for any banking charges directly related to the handling of the Escrow Fund, such as wiring fees and postage (the “Escrow Charges”), except as expressly approved by Stanley T. Weiner and reviewed, verified and approved by SEC Counsel (In any event not to exceed one half of one percent [0.005] of any Cash Proceeds [maximum of $2,500.00]). All Escrow Charges shall be paid by the Company.

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4.2.  Additional Responsibilities.  The Escrow Agent’s acceptance of its duties pursuant to this Agreement is subject to the following terms and conditions:

(a)The Company and the Participants jointly and severally agree to indemnify and hold harmless the Escrow Agent (and any successor escrow agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys’ fees and disbursements (“Losses”), arising out of and in connection with this Agreement, other than Losses attributable to the Escrow Agent’s willful misconduct, fraud or gross negligence.  Without limiting the foregoing, the Escrow Agent shall under no circumstance or event have any liability in connection with its investment or reinvestment of the Escrow Fund, in accordance with the terms of this Agreement, including, without limitation, any liability for any delays (not resulting from its willful misconduct, fraud or gross negligence) in the investment or reinvestment of the Escrow Fund, or any loss of interest incident to any such delays.  This indemnification will survive the release, discharge, termination and/or satisfaction of this Agreement.  Moreover, the Participants knowingly waives any conflict of interest of the Escrow Agent in its capacity as counsel for the Company with regard to the Powerhouse One Agreement.

(b)The Escrow Agent will incur no liability with respect to any action taken or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other document believed by it to be genuine and duly authorized, nor for any other action or inaction, except its own willful misconduct, fraud or gross negligence.  The Escrow Agent will have no duty to inquire into or investigate the validity, accuracy or content of any document delivered to it.  The Escrow Agent will not be responsible for the validity or sufficiency of this Agreement.  In all questions arising under this Agreement, the Escrow Agent may rely on the advice or opinion of Escrow Agent’s counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice, the Escrow Agent will not be liable to anyone.  The Escrow Agent will not be required to take any action hereunder involving any expense unless the payment of such expense is made or provided for in a manner satisfactory to it.  The Escrow Agent will have no duties or responsibilities other than those expressly set forth in this Agreement and the implied duty of good faith and fair dealing.  The Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that the person executing any document in connection with this Agreement has been duly authorized to do so.

(c)The Company and the Participants shall provide the Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax identification number certification.

(d)If at any time the Escrow Agent doubts what action it should take pursuant to this Agreement, the Escrow Agent may retain the Escrow Fund, or the portion thereof at issue, until the earlier of the Escrow Agent’s receipt of (i) a Final Award or (ii) a written notice executed by both the Company and the Participants directing delivery of the Escrow Fund, or the portion thereof at issue, in which event the Escrow Agent shall disburse the Escrow Fund in accordance with such order or notice.

5.Notices.  All notices and other communications delivered or made pursuant to this Agreement must be in writing and will be deemed given if delivered personally, faxed, sent by nationally recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the address set forth under such recipient’s signature on the signature pages hereto (or at such other address for a party as such party specifies by like notice).  All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a facsimile, when the fax machine sending such fax acknowledges transmission, (c) in the case of delivery by nationally recognized overnight courier, on the day delivered to the recipient and (d) in the case of mailing, on the fifth business day following such mailing.

6.  Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute a single agreement.

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7.  Waiver and Amendment.  This Agreement may be amended, supplemented, modified and/or rescinded only through an express written instrument signed by all parties or their respective heirs, successors and permitted assigns.  Any Party may specifically and expressly waive in writing any portion of this Agreement or any breach hereof, but only to the extent such provision is for the benefit of the waiving party, and no such waiver shall constitute a further or continuing waiver of any preceding or succeeding breach of the same or any other provision.  The consent by one party to any act for which such consent was required shall not be deemed to imply consent or waiver of the necessity of obtaining such consent for the same or similar acts in the future, and no forbearance by a Party to seek a remedy for noncompliance or breach by another Party shall be construed as a waiver of any right or remedy with respect to such noncompliance or breach.

8.  Entire Agreement.  This Agreement and the Term Sheet set forth the entire agreement among the Parties with regard to the subject matter of this Agreement.  All agreements, covenants, representations and warranties, express or implied, oral and written, of the parties with regard to the subject matter of this Agreement are contained in this Agreement and the Term Sheet referring to or implementing the provisions of this Agreement.  This is an integrated agreement.

9.  Severability.  Each provision of this Agreement is intended to be severable.  Should any provision of this Agreement or the application thereof be judicially declared to be or become illegal, invalid, unenforceable or void, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties.

10.  Assignment.  Except as specifically provided otherwise in this Agreement, neither this Agreement nor any interest herein shall be assignable (voluntarily, involuntarily, by judicial process, operation of law, or otherwise), in whole or in part, by any party without the prior written consent of all other Parties.

11.  Heirs, Successors and Assigns; No Third Party Beneficiary.  Each of the terms, provisions, and obligations of this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by the parties and their respective legal representatives, heirs, successors and permitted assigns.  Nothing in this Agreement will be construed as giving any person, firm, corporation or other entity, other than the parties to this Agreement and their heirs, successors and permitted assigns, any right, remedy or claim under or in respect of this Agreement or any provision hereof.

12.  Governing Law.  The validity, construction and performance of this Agreement, and any action arising out of or relating to this Agreement shall be governed by the laws of the State of Texas, without regard to the laws of the State of Texas as to choice or conflict of laws.

13.  Defined Terms.  Capitalized terms used in this Agreement without definition have the respective meanings given to them in the Powerhouse One Agreement and related Term Sheet.

-4-

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

COMPANY	PARTICIPANTS
STW Resources Holding Corp., a Nevada corporation _______________________________ By:  Stanley T. Weiner, its CEO	Signatures to the Subscription Agreements constitute agreement, ESCROW AGENT Seabolt Law Group and D. Grant Seabolt, Jr., Esq. ____________________________________ By:  D. Grant Seabolt, Jr., its Principal Address: 5307 E. Mockingbird Lane, 5th FL Dallas, TX 75206 Texas Bar No. 17942500 Alabama Bar No. ASB-8352-E61D

EX-21.1

Exhibit 21.1

List of Subsidiaries

1.   STW Energy Services, LLC

2.   STW Oilfield Construction, LLC

3.   STW Pipeline Maintenance & Construction, LLC

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stanley Weiner, certify that:

(1)           I have reviewed this annual report on Form 10-K of STW Resources Holding Corp., (Registrant).

(2)           Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)           Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 (a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 (b)  evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)           The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrants auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 (a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

 (b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: June 19, 2014

By:	/s/ Stanley Weiner
	Stanley Weiner
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Miranda, certify that:

(1)           I have reviewed this annual report on Form 10-K of STW Resources Holding Corp., (Registrant).

(2)           Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)           Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 (a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 (b)  evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)           The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrants auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 (a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

 (b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: June 19, 2014

By:	/s/ Robert J. Miranda
	Robert J. Miranda
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18U.S.C.,SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, Stanley Weiner, the undersigned President and Chief Executive Officer of STW Resources Holding Corp., (the “Company”), herby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2013 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.  A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

Date: June 19, 2014
	By:  /s/ Stanley Weiner
	Stanley Weiner
	President and CEO

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18U.S.C.,SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, Robert J. Miranda, the undersigned Chief Financial Officer of STW Resources Holding Corp., (the “Company”), herby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2013 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.  A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

Date: June 19, 2014
	By:  /s/ Robert J. Miranda
	Robert J. Miranda
	CFO

XML

Related Party Transactions (Details Narrative) (USD $)	12 Months Ended									3 Months Ended		3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Weiner [Member]	Dec. 31, 2012 Weiner [Member]	Dec. 31, 2013 Maddox [Member]	Dec. 31, 2012 Maddox [Member]	Dec. 31, 2013 Seabolt [Member]	Dec. 31, 2012 Seabolt [Member]	Dec. 31, 2013 Brooks [Member]	Dec. 31, 2013 Board of Directors [Member]	Dec. 31, 2012 Board of Directors [Member]	Dec. 31, 2013 Other Related Party [Member]	Dec. 31, 2013 Other Related Party [Member]	Dec. 31, 2013 Dufrane [Member]
Consulting fees incurred			$ 150,000	$ 102,000	$ 150,000	$ 130,000	$ 90,000	$ 60,000	$ 30,000			$ 73,500
Accrued commissions payable	976,613	772,835		24,500								202,728
Salary and consulting fees payable			263,083	155,583	170,500	59,500	121,083	108,866	30,000	491,724	235,000
Initial grant										200,000		469,000	469,000
Initial cash fee compensation										1,000
Annual compensation										75,000
Professional fees										43,500
Accrued professional fees										602,849		63,199	63,199
Due to related parties												139,763	139,763	132,490
Related party payable, cash advance												276,804	276,804
Related party payable, common stock										5,043,750		137,041	137,041
Related party sales	347,550											48,328	48,328
Due from related party												$ 10,752	$ 10,752

XML

Commitments and Contingencies (Details 1) (Brooks [Member], USD $)	Dec. 31, 2013
Brooks [Member]
Amount of Personal Guaranty	$ 45,800	[1]
Guaranty Shares	382,000
No. of Shares owned following receipt of guaranty shares	382,000

[1] Pursuant to the service agreement with Mr. Brooks, any amounts due on a related defaulted lease in excess of 20% of the amount of the personal guaranty, shall be the Company's obligation. If Brooks' employment with the Company is terminated, the Company shall use its best commercial efforts to have it or a third party assume Brooks' guarantee obligations.

XML

Income Taxes (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Taxes Details Narrative
Net Loss	$ (7,032,955)	$ (3,598,684)
Deferred noncurrent tax asset, gross	9,181,627	1,113,500
Increase in valuation allowance	1,477,280	221,000
Annual limitation NOL	$120,000
Federal income tax net operating loss	$ (18,400,000)

XML

Notes Payable (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Total Debt	$ 7,291,501	$ 5,844,875
Unamortized debt discount	(107,221)	(80,735)
Less: Current Portion	(4,668,492)	(5,331,734)
Total Long Term Debt	2,623,009	513,141
CNotes 14% [Member]
Total Debt	2,904,736	2,882,235
CNotes 12% [Member]
Total Debt	375,000	415,000
Other Debt [Member]
Total Debt	43,280	84,280
GE Ionics [Member]
Total Debt	2,100,000	2,100,000
Deferrable Compensation [Member]
Total Debt	279,095	279,095
Rev Part Notes [Member]
Total Debt	852,702	165,000
Crown Financial Notes
Total Debt	683,036
Equipment contract [Member]
Total Debt	137,573
Capital Lease Obligations [Member]
Total Debt	$ 23,300

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes Tables

Provision for income taxes

	December 31, 2013		December 31, 2012
Current taxes	$	—	$	—
Deferred taxes		—		—
Total	$	—	$	—

Reconciliation of tax on the Company's loss

	Year Ended December 31,
	2013			2012
Income tax benefit at the U.S. statutory income tax	$	(2,391,205	)	$	(1,223,553	)
Change in fair value of derivative liability		871,052			336,855
Other differences		42,873			653
Changes in Valuation allowance		1,477,280			886,045
Total	$	—		$	—

Net deferred tax assets recognized

	December 31, 2013			December 31, 2012
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,380,000		$	1,037,000
Accrued expenses		210,780			76,500
Valuation allowance		(2,590,780	)		(1,113,500	)
Total	$	—		$	—

XML

Segment Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Segment Operations
Revenues	$ 1,945,631
Cost of revenues	1,675,314
Operating expenses	3,469,483	1,935,027
Segment loss	(7,081,379)	(3,598,684)
Segment Assets
Current Assets	583,581	153,847
Segment Assets	1,515,647	201,014
Water Reclamation [Member]
Segment Operations
Revenues	536,735
Cost of revenues	472,978
Operating expenses	102,210	1,935,027
Segment loss	(38,453)	(1,935,027)
Segment Assets
Current Assets
Fixed assets
Segment Assets
Oil & Gas Services [Member]
Segment Operations
Revenues	1,408,996
Cost of revenues	1,202,336
Operating expenses	763,900
Non-allocable corporate overhead	(3,160,713)
Segment loss	2,603,374
Segment Assets
Current Assets	579,541
Fixed assets	694,219
Segment Assets	$ 1,273,760

XML

Stockholders' Equity (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Number of Shares Under Warrants
Warrants outstanding at beginning of period	32,407,434	29,803,434
Warrants Issued	9,316,838	4,034,000
Warrants Exercised
Warrants Forfeited
Warrants Cancelled
Warrants Expired	(23,383,546)	(1,430,000)
Warrants outstanding at end of period	18,340,726	32,407,434
Warrants exercisable at end of period	18,340,726	32,407,434
Weighted Average Exercise Price
Warrants outstanding at beginning of period	$ 0.86	$ 0.94
Warrants Issued	$ 0.21	$ 0.20
Warrants Exercised
Warrants Forfeited
Warrants Cancelled
Warrants Expired	$ 0.32	$ 0.50
Warrants outstanding at end of period	$ 1.21	$ 0.86
Warrants exercisable at end of period	$ 0.21	$ 0.86
Remaining Contractual Life (Years)
Warrants outstanding at beginning of period	1 year 22 days
Warrants Issued	2 years
Warrants outstanding at end of period	1 year 24 days	1 year 22 days
Warrants exercisable at end of period	1 year 24 days	1 year 22 days
Aggregate Intrinsic Value
Warrants outstanding at beginning of period	$ 32,830
Warrants outstanding at end of period	131,320	32,830
Warrants exercisable at end of period	$ 131,320	$ 32,830

XML

Derivative Liability (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Derivative Liabilities Details 1
Beginning Balance	$ 1,046,439	$ 1,491
Issuance of warrants and embedded conversion features		54,197
Reclassification of derivative liability due to increased share authorization	(1,977,372)
Change in fair value	(2,561,918)	(990,751)
Ending Balance	$ 1,630,985	$ 1,046,439

XML

Commitments and Contingencies (Details) (USD $)	Dec. 31, 2013
Future minimum lease payments
Future minimum lease payments, 2014	$ 124,116
Future minimum lease payments, 2015	124,116
Future minimum lease payments, 2016	124,116
Future minimum lease payments, 2017	122,930
Future minimum lease payments, Thereafter	321,750
Total future minimum lease payments, Capital Lease	817,028
Capital lease obligation	23,300
Capital Lease Obligations [Member]
Future minimum lease payments
Future minimum lease payments, 2014	7,116
Future minimum lease payments, 2015	7,116
Future minimum lease payments, 2016	7,116
Future minimum lease payments, 2017	5,930
Future minimum lease payments, Thereafter
Total future minimum lease payments, Capital Lease	27,278
Less interest	(3,978)
Capital lease obligation	23,300
Less current portion	(5,012)
Long-term capital lease obligation	18,288
Operating Lease Expense [Member]
Future minimum lease payments
Future minimum lease payments, 2014	117,000
Future minimum lease payments, 2015	117,000
Future minimum lease payments, 2016	117,000
Future minimum lease payments, 2017	117,000
Future minimum lease payments, Thereafter	321,750
Total future minimum lease payments, Capital Lease	$ 789,750

XML

Investment in Black Wolf, LLC

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Investment in Black Wolf, LLC

On January 8, 2013, the Company and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt, entered into an equity exchange agreement (the “Exchange Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock (the "Pearl Shares").  The Pearl Shares, although supposed to be issued after we amended our articles of incorporation to increase our authorized share capital, were never issued.  Other than the Pearl Shares, the Exchange Agreement did not obligate STW to provide any other assets or commitments in consideration of the transaction contemplated thereby.  The transaction contemplated by the Agreement - the transfer of ownership in Black Wolf - closed on January 28, 2013.  At the time of the Exchange Agreement, Black Wolf commercialized the expertise and services of Lone Wolf Resources, LLC, an environmental and civil construction company operating in the oil and gas industry (“Lone Wolf”). Lone Wolf has worked with the Department of Transportation and the Texas Commission on environmental quality to shape the standards for processing hydrocarbon-impacted soils to a reusable road base. Lone Wolf has completed projects internationally and throughout the United States, including the world's largest in-situ thermal remediation project. BPE is an oilfield service company that has developed an evaporation cover that is conservation friendly, economical and can be floated on to existing ponds or installed during construction for the elimination of evaporation on frac ponds used throughout the oilfield. BPE also provides high quality liners with fusion-welded seams, quality control testing including air tests of seams and destruction testing in West Texas and Eastern New Mexico, and intends to expand into South Texas during the first quarter of next year. Black Wolf combines Lone Wolf’s and BPE’s services and constructs drill sites, reserve pits, frac ponds, roads, pit closings, liners, leak detection systems, evaporation covers, and provides associated maintenance. Black Wolf also offers turnkey services for H-11 permitted ponds, including surveys, engineering and design, and permitting for storage of produced and brine waters as well as utilizes proprietary technologies employed by Lone Wolf in the reclamation of hydrocarbon-impacted soils. Black Wolf is currently negotiating on a number of multi-well packages with many of the largest oil and gas producers in West Texas.  After 4 months of operations, Lone Wolf initiated their termination clause with Black Pearl and Black Wolf.   As a result, Black Wolf was dissolved and we sought to terminate the Exchange Agreement since our investment would no longer be of any value.  On October 14, 2013, we entered into a Rescission Agreement with BPE, pursuant to which BPE has agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we are not required to issue the Pearl Shares and BPE agreed to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

XML

Stockholders' Equity (Details Narrative) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Stockholders Equity Details Narrative
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized shares	10,000,000	10,000,000
Common stock, par value	$ 0.0001	$ 0.001
Common stock, authorized shares	250,000,000	100,000,000

XML

Nature of Business and Significant Accounting Policies (Details 1)	12 Months Ended
	Dec. 31, 2013
Computer Equipment [Member]
Useful lives of Property, Plant and Equipment	3 years
Furniture [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Minimum [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Useful lives of Property, Plant and Equipment	5 years

XML

Nature of Business and Significant Accounting Policies (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Fair Value of Derivative Liability	$ 1,630,985	$ 1,046,439
Level 1 [Member]
Fair Value of Derivative Liability
Level 2 [Member]
Fair Value of Derivative Liability
Level 3 [Member]
Fair Value of Derivative Liability	$ 1,630,985	$ 1,046,439

XML

Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Taxes Details
Income taxes benefit at US statutory rate	(239120500.00%)	(122355300.00%)
Change in fair value of derivative liability	$ 871,052	$ 336,855
Other differences	42,873	653
Valuation allowance	1,477,280	886,045
Total

XML

Nature of Business and Significant Accounting Policies (Details Narrative) (USD $)	6 Months Ended	12 Months Ended		71 Months Ended	12 Months Ended				12 Months Ended						12 Months Ended
	Jun. 13, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2013 Consulting [Member]	Dec. 31, 2013 STW Energy [Member]	Dec. 31, 2013 Oilfield [Member]	Dec. 31, 2013 Pipeline [Member]	Dec. 31, 2013 Water Reclamation [Member]	Dec. 31, 2012 Water Reclamation [Member]	Dec. 31, 2013 Oil & Gas Services [Member]	Dec. 31, 2012 Oil & Gas Services [Member]	Dec. 31, 2013 Three Vendors [Member]	Dec. 31, 2012 Three Vendors [Member]	Dec. 31, 2013 Two Vendors [Member]	Dec. 31, 2013 Customer One [Member]	Dec. 31, 2013 Customer Two [Member]	Dec. 31, 2013 Customer Three [Member]	Dec. 31, 2012 One Customer [Member]	Feb. 19, 2010 LenderMember	Feb. 19, 2010 ConvertibleNoteHoldersMember	Feb. 19, 2010 UnsecuredClaimsMember	Feb. 10, 2010 MergerShareholdersMember	Feb. 10, 2010 ExercisePriceMinimumMember	Feb. 10, 2010 ExercisePriceMaximumMember
Company ownership interest						75.00%	100.00%	100.00%
Noncontrolling member interest						25.00%
Common stock issued		111,255,849	96,308,599	111,255,849																400,000	1,760,000	100,000	31,780,004
Preferred stock issued																				2,140,000
Options and warrants issued																							12,613,002
Convertible debentures																							$ 1,467,903
Convertible debentures conversion price																							$ 0.25
Exercise price																								$ 3.00	$ 8.00
Par value																								$ 0.00001	$ 0.001
Net loss attributable to non-controlling interest		48,424
Accumulated Deficit		24,355,343		24,355,343
Accrued sales and payroll taxes		350,074		350,074
Notes payable in default		3,695,346		3,695,346
Raised net equity and debt financing				12,000,000
Cash on hand		17,301	59,870	17,301
Debt	617,000
Equity	2,000,000
Deferred revenue			97,346
Deferred costs related to contract			436,654
Total revenues including service contracts		1,945,631							536,735		1,408,996
Revenue from related parties		347,550
Common Stock equivalents outstanding		102,350,791	101,270,609	102,350,791
Percent of accounts payable													64.00%	78.00%
Concentration risk															28.00%
Percent of accounts receivable																42.00%	17.00%	17.00%	100.00%
Percent of revenues																27.00%	22.00%	17.00%
Proceeds from stock subscriptions and unit offering		310,000		310,000
Stock subscription and unit offering, shares		3,875,000		3,875,000
Shares issued for consulting fees, commitment					12,449,673
Shares issued for consulting fees, value, commitment					826,897
Shares issued for consulting fees					8,800,000
Shares issued for consulting fees, value		$ 434,000	$ 786,375		$ 595,000
Shares issuable under commitment					3,649,673

XML

Property and Equipment (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property And Equipment Details
Office furniture and equipment	$ 16,838	$ 10,396
Tools and yard equipment	2,302
Vehicles and construction equipment	798,273
Total, cost	817,413	10,396
Accumulated Depreciation and Amortization	(70,775)	(10,396)
Total Property and Equipment	$ 746,638

XML

Property and Equipment

12 Months Ended

Dec. 31, 2013

Deferred Revenue Disclosure [Abstract]

Property and Equipment

Property, plant and equipment consisted of the following at December 31, 2013 and December 31, 2012:

	December 31, 2013			December 31, 2012
Office furniture and equipment	$	16,838		$	10,396
Tools and yard equipment		2,302			--
Vehicles and construction equipment		798,273			--
Total, cost		817,413			10,396
Accumulated Depreciation and Amortization		(70,775	)		(10,396	)
Total Property and Equipment	$	746,638		$	-

Depreciation expense for the year ended December 31, 2013 and 2012 was $60,380 and zero, respectively.

XML

Propertyt and Equipment (Details Narrative) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Depreciation Expense		$ 60,380

XML

Stockholders' Equity (Details)	12 Months Ended
	Dec. 31, 2013
Office & Director Issuance 1 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 2 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 3 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 4 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 5 [Member]
Shares	356,250
Triggering Event	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Office & Director Issuance 6 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 7 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 8 [Member]
Shares	625,000
Triggering Event	2012 Director Compensation
Office & Director Issuance 9 [Member]
Shares	156,250
Triggering Event	2012 Advisory Board Compensation
Office & Director Issuance 10 [Member]
Shares	156,250
Triggering Event	2012 Advisory Board Compensation

XML

Condensed Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$ 17,301	$ 59,870
Accounts receivable	532,910	5,040
Prepaid expenses and other current assets	33,370	88,937
Total current assets	583,581	153,847
Property and equipment, net	746,638
Other Assets
Deferred loan costs, net of $102,435 and $45,675 accumulated amortization, respectively	185,428	47,167
Total Assets	1,515,647	201,014
Current liabilities
Bank overdraft	30,468
Accounts payable	1,256,043	794,191
Payable to related parties:
Black Pearl Energy, LLC	139,763
Dufrane Nuclear, Inc.	132,490
Accrued consulting fees - officers	584,666	287,934
Current portion of notes payable, net of discounts, $854,928	4,668,492	5,331,734
Sales and payroll taxes payable	350,074
Accrued expenses and interest	1,839,439	899,728
Accrued compensation	285,190	127,665
Accrued board compensation	491,724	235,000
Deferred Revenue, net of deferred costs of $436,654		97,346
Fees payable in common stock	231,897
Stock subscriptions payable	310,000
Derivative liability	1,630,985	1,046,439
Total current liabilities	11,951,231	8,820,037
Notes payable, net of discount and current portion	2,623,009	513,141
Accrued interest on notes payable, net of current portion		26,307
Total liabilities	14,574,240	9,359,485
Stockholders' deficit
Preferred stock, par value $.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2013 and December 31, 2012
Common stock, par value $.001 per share, 250,000,000 and 100,000,000 shares authorized, 111,255,849 and 96,308,599 shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively	111,256	96,309
Additional paid-in capital	11,231,418	8,067,608
Accumulated deficit	(24,355,343)	(17,322,388)
Total Stockholders' Deficit of STW Resources	(13,012,669)	(9,158,471)
Non-controlling interest in subsidiary	(45,924)
Total Stockholders' Deficit	(13,058,893)	(9,158,471)
Total Liabilities and Stockholders' Deficit	$ 1,515,647	$ 201,014

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Income Taxes (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Income Taxes Details 1
Net operating loss carry-forward	$ 2,380,000	$ 1,037,000
Accrued expenses	210,780	76,500
Deferred noncurrent tax asset, gross	9,181,627	1,113,500
Valuation allowance	(9,181,627)	(1,113,500)
Deferred noncurrent tax asset, Total

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net Loss	$ (7,032,955)	$ (3,598,684)
Adjustments to reconcile net loss of STW Resources to net cash used in operations operating activities:
Depreciation	60,380
Net loss of subsidiary attributable to non-controlling interest	(48,424)
Change in fair value of derivative liability	2,561,918	990,751
Amortization of discount and debt issuance costs	164,549	44,675
Share-based compensation	826,897	1,004,875
Change in fair value of common shares issued in connection with the debt settlement agreement		19,587
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable	(527,870)
(Increase) Decrease in prepaid expense	55,567	1,343
Increase (Decrease) in accounts payable	459,649	(17,295)
Increase (Decrease) in sales and payroll taxes payable	350,074
Increase (Decrease) in accrued compensation	157,525
Increase (Decrease) in accrued expenses and interest	976,613	772,835
Increase (Decrease) in accrued board compensation	559,349	232,750
Increase (Decrease) in deferred revenue	(97,346)	97,346
Net cash used in operating activities	(1,534,074)	(451,817)
Cash flows used in investing activities
Purchases of vehicles and equipment, net of equipment loans	(608,372)
Net cash used in investing activities	(608,372)
Cash flows provided from financing activities
Bank overdraft	30,468
Stock subscriptions payable	310,000
Related party payables	568,985
Proceeds from notes payable	1,320,611	165,000
Principal payments on notes payable	(97,662)	(50,000)
Non-controlling interest contributions	2,500
Issuance of convertible notes payable		401,000
Proceeds from equity issuances, net		45,000
Debt issuance costs	(35,025)	(56,500)
Net cash from financing activities	2,099,877	504,500
Net increase in cash	(42,569)	52,683
Cash at beginning of period	59,870	7,187
Cash at end of period	17,301	59,870
Supplemental cash flow information:
Cash paid for interest	10,413	9,647
Non-cash investing and financing activities:
Value of common shares issued in connection with debt settlement agreement		30,000
Fair value of shares sold by note holder to reduce the note payable principal balance in connection with the debt settlement		30,413
Value of warrants issued with revenue participation notes payable	65,555
Value of common shares issued to board and advisory board for fees	302,625	1,173,900
Value of common shares issued to consultants	434,000	90,000
Value of common shares issued to employees as signing bonuses	161,000
Value of property, plant & equipment acquired with long term debt	247,004
Estimated fair value of warrants issued in connection with the 14% convertible notes payable		54,197
Reclassification of derivative liability due to increased share authorization	1,977,372
Notes and interest settled in stock	$ 66,209

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Notes Payable (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Warrants issued	18,340,726	32,407,434	29,803,434
Annual dividend yield	0.00%	0.00%
Expected volatility	623.00%	100.00%
Common stock, authorized shares	250,000,000	100,000,000
Total Debt	$ 7,291,501	$ 5,844,875
note payable to an accredited investor, amount	97,662	50,000
Revenue Participation Notes balance	852,702
Interest expense, notes payable	1,205,338	655,371
Amortization of debt discount and debt issuance costs	164,549	44,675
Net deferred loan costs	(185,428)	(47,167)
Unamortized debt discount	107,221	80,735
Monthly lease payment	593
Capital lease obligation	23,300
Lease interest rate	10.00%
Brooks [Member]
Factoring agreement loan	225,000
Precent of accounts receivable	80.00%
Factoring fee	1.50%
Minimum [Member]
Expected life (years)	5 months 14 days	3 years 4 months 24 days
Risk-free interest rate	0.11%	0.51%
Minimum [Member] | Machinery and Equipment [Member]
interest rate of debt	4.70%
Maximum [Member]
Expected life (years)	7 months 6 days	6 months
Risk-free interest rate	0.25%	0.15%
Maximum [Member] | Machinery and Equipment [Member]
interest rate of debt	8.00%
CNotes 14% [Member]
Warrants issued	20,167,871
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.17%
Expected volatility	100.00%
Estimated fair value of warrants	81,656
Embedded conversion feature at issuance	35,546
notes convertible into common stock share amount	46,746,898
Aggregate principal balance of notes	2,904,736
Aggregate principal amount due to mature current period	2,504,736
Remaining balance to mature future periods	400,000
aggregate principal of notes with negotiated extensions	1,606,765
shares issued in consideration	800,973
shares issued in consideration, value amount	64,078
Total Debt	2,904,736	2,882,235
Total debt matured and in default	897,971
Notes payable to related parties	171,892
CNotes 12% [Member]
Warrants issued	1,641,496
warrants exercise price	$ 0.02
notes convertible into common stock share amount	28,282,534
Total Debt	375,000	415,000
Other Debt [Member]
Warrants issued	200,000
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	12,000
Total Debt	43,280	84,280
note payable to an accredited investor, amount	43,280
unsecured loan agreement, amount	20,000
interest rate of debt	20.00%
principal payment on unsecured loan	20,000
unpaid principal balance of unsecured loan	0
GE Ionics [Member]
Total Debt	2,100,000	2,100,000
Default note rate	10.00%
STW original debt with GE, amount	11,239,437
Deferrable Compensation [Member]
Total Debt	279,095	279,095
ParticipationNote 1 [Member]
Warrants issued	165,000
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.33%
Expected volatility	100.00%
interest rate of debt	12.00%
Revenue Participation Notes balance	165,000
Revenue receivable initial rate	50.00%
Revenue receivable subsequent rate	10.00%
Revenue payable maximum amount	295,000
Cash fees related to issuance of notes	16,500
Warrants issued related to cash fees due for issuance of notes	16,500
ParticipationNote 2 [Member]
Warrants issued	182,000
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	33,398
interest rate of debt	12.00%
Revenue Participation Notes balance	302,500
Warrants issued related to cash fees due for issuance of notes	91,000
note discount	42,000
ParticipationNote 3 [Member]
Warrants issued	32,500
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	1,624
interest rate of debt	6.00%
Revenue Participation Notes balance	182,000
note discount	15,000
proceeds to company	50,000
maximum offering size	325,000
ParticipationNote 4 [Member]
Warrants issued	414,230
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	27,153
notes convertible into common stock share amount	1,752,958
Total Debt	207,115
Revenue Participation Notes balance	203,202
Revenue receivable initial rate	50.00%
note discount	27,015
proceeds to company	180,100
Crown [Member]
Warrants issued	4,000,000
warrants exercise price	$ 0.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	159,996
Total Debt	1,000,000
Loan facility amount outstanding	683,036
interest rate of debt	15.00%
Equipment contract [Member]
Total Debt	$ 137,573

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2013

Notes Payable Tables

Notes Payable

	December 31,			December 31,
Name	2013			2012
14% Convertible Notes	$	2,904,736		$	2,882,235
12% Convertible Notes		375,000			415,000
Other Short-term Debt		43,280			84,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		852,702			165,000
Crown Financial note		683,036			--
Equipment finance contracts		137,573			--
Capital lease obligation		23,300			--
Unamortized debt discount		(107,221)			(80,735)
Total Debt		7,291,501			5,844,875
Less: Current Portion		(4,668,492	)		(5,331,734	)
Total Long Term Debt	$	2,623,009		$	513,141

Revenue Participation Notes

2012 Revenue Participation Notes	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500
2013 Revenue Participation Notes - STW Energy		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		203,202
Total revenue participation notes	$	852,702

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Derivative Liability (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Annual dividend yield	0.00%	0.00%
Expected volatility	623.00%	100.00%
FairValueInputsLevel3Member
Embedded conversion Options	$ 1,467,579	$ 962,815
Warrants	163,406	83,624
Increase (Decrease) in fair value	$ 1,630,985	$ 1,046,439
Minimum [Member]
Expected life (years)	5 months 14 days	3 years 4 months 24 days
Risk-free interest rate	0.11%	0.51%
Maximum [Member]
Expected life (years)	7 months 6 days	6 months
Risk-free interest rate	0.25%	0.15%

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Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Amendment shares issued

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		625,000	2012 Director Compensation
Manfred E. Birnbaum		625,000	2012 Director Compensation
D. Grant Seabolt, Jr.		625,000	2012 Director Compensation
Joseph I. O'Neill III		625,000	2012 Director Compensation
Audry Lee Maddox		356,250	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		625,000	2012 Director Compensation
Paul DiFrancesco		625,000	2012 Director Compensation
Bill G. Carter		625,000	2012 Director Compensation
Steven Schachman		156,250	2012 Advisory Board Compensation
Hunter Hill		156,250	2012 Advisory Board Compensation

Securities to acquire common stock outstanding

Security	Number of Underlying Common Shares		Exercise Price	Expire
Warrants issued for Professional Services		1,500,000	4.00		2014
Warrants associated with the January 14, 2009 Bridge Note		480,000	3.00		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		1,500,000	8.00		2014
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with 2012 Revenue Participation Notes		181,500	0.20		2014
Warrants associated with May 2012 Subscription Agreement		525,000	0.20		2014
Warrants associated with June-September 14% Convertible Notes		550,000	0.20		2014
Warrants associated with November 14% Convertible notes		2,777,500	0.20		2014
Warrants associated with 2013 Revenue Participation Notes		1,110,230	0.20 – 0.30		2015
Warrants issued to Crown Financial, LLC		4,000,000	0.20		2016
Warrants issued on $20,000 short term loan		200,000	0.20		2015
Warrants issued with November 2013 Unit Share Offering		3,875,000	0.20		2015
Sub-total of Warrants outstanding		18,340,726
Common stock associated with the 12% Convertible Notes plus accrued interest		27,765,417	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
12/31/2013 Accrued Default interest		517,118	0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		46,114,632	0.08		2015
12/31/2013 Accrued Default interest		198,299	0.08		2014
12/31/2013 Calibre Note interest		163,968	0.08		2014
Common stock associated with November 2013 Unit Share Offering		3,875,000	0.08		2015
Common stock payable as fees		3,649,673	various		2014
Total securities		102,350,791

Warrant activity

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		29,803,434	$	0.94
Issued		4,034,000		0.20
Exercised		-
Forfeited		-
Cancelled		-
Expired		(1,430,000)		0.50
Outstanding at December 31, 2012		32,407,434	$	0.86	1.06	$	32,830
Exercisable		32,407,434	$	0.86	1.06	$	32,8300
Outstanding at January 1, 2013		32,407,434	$	0.86	1.06
Issued		9,316,838		0.21	2.0
Exercised		-
Forfeited		-
Cancelled		-
Expired		(23,383,546)		0.32
Outstanding at December 31, 2013		18,340,726	$	1.21	1.07	$	131,320
Exercisable		18,340,726	$	0.21	1.07	$	131,320

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Nature of the Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of the Business and Significant Accounting Policies

History of the Company

STW Resources Holding Corp. (“STW” or the “Company”, is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas.  STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia.  STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem.  The Company is also evaluating the deployment of similar technology in the municipal wastewater industry.

The Company’s operations are located in the United States of America and the principal executive offices are located at 3424 South County Road 1192, Midland, Texas 79706. 

On January 17, 2010, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned subsidiary of STW Resources, Inc. (“STW Sub”) and certain shareholders of STW controlling a majority of the issued and outstanding shares of STW.  Pursuant to the Merger Agreement, STW merged into the Acquisition Sub resulting in an exchange of all of the issued and outstanding shares of STW for shares of the Company on a one for one basis. At such time, STW became a wholly owned subsidiary of the Company.  

On February 9, 2010, the Federal Bankruptcy Court handling a bankruptcy proceeding for our predecessor at the time entered an order confirming the Second Amended Plan of Reorganization (the “Plan”) pursuant to which the Merger Agreement was approved.  The Plan was effective February 19, 2010 (the “Effective Date”). The principal provisions of the Plan were as follows:

● MKM, the DIP lender, received 400,000 shares of common stock and 2,140,000 shares of preferred stock,

● The holders of the Convertible Notes received 1,760,000 shares of common stock,

● General unsecured claims received 100,000 shares of common stock, and

● The Company’s equity interest was extinguished and cancelled.

On February 12, 2010, pursuant to the terms of the Merger Agreement, STW Sub merged with Acquisition Sub, which became a wholly-owned subsidiary of the Company (the “Merger”).  In consideration for the Merger and STW Sub becoming a wholly-owned subsidiary of the Company, the Company issued an aggregate of 31,780,004 ("the STW Acquisition Shares") shares of common stock to the shareholders of STW at the closing of the Merger and all derivative securities of STW Sub as of the Merger became derivative securities of the Company including options and warrants to acquire 12,613,002 shares of common stock at an exercise price ranging from $3.00 to $8.00 with an exercise period ranging from July 31, 2011 through November 12, 2014 and convertible debentures in the principal amount of $1,467,903 with a conversion price of $0.25 and maturity dates ranging from April 24, 2010 through November 12, 2010.

Formation of New Subsidiaries

On June 25, 2013, the Company formed a new subsidiary, a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The remaining 25% non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”).

Effective June 30, 2013, STW Resources Holding Corp. (the “Company”) formed a new subsidiary, STW Oilfield Construction, LLC (“Oilfield Construction”), a Texas limited liability company. The Company is the sole member of Oilfield Construction, owning 100% of the membership interest in such entity, which is managed by the Company's CEO and COO, as well as one of the Company's directors and an employee of the Company.

Effective September 20, 2013, the Company formed another new subsidiary, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), a Texas limited liability company. The Company is the sole member of Pipeline Maintenance, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation policy

The consolidated financial statements for the year ended December 31, 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and 75% owned subsidiary of STW Energy Services, LLC. The consolidated financial statements for the year ended December 31, 2012, include the accounts of the Company and its wholly owned subsidiary, STW Resources, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated as of December 31, 2013.

Reclassifications

Certain reclassifications were made to the prior year consolidated financial statements to conform to the current year presentation. There was no change to reported net loss.

Non-Controlling interest

On June 25, 2013, the Company invested in a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2013, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a net loss attributable to non-controlling interests of $48,424 for the year ended December 31, 2013.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $24,355,343 as of December 31, 2013, and as of that date was delinquent in payment of $350,074 of sales and payroll taxes. As of December 31, 2013, $3,695,346 of notes payable are in default. Since its inception in January 2008 through December 31, 2013, management has raised equity and debt financing of approximately $12,000,000 to fund operations and provide working capital.  The cash resources of the Company are insufficient to meet its planned business objectives without additional financing.  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond.  These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.  There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing.  There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At December 31, 2013, the Company had $17,301 of cash on hand; the Company raised $617,500 of equity financing and secured a $2.0 million credit line from Black Pearl Energy, LLC, a related party, on March 13, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations for the next three months. Management is currently seeking additional funds, primarily through the issuance of debt or equity securities for cash to be used in operations. No assurance can be given that any future financing will be available or, if available, and that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

Development Stage Enterprise

During the year ended December 31, 2012, the Company was a development stage company as defined by the Financial Accounting Standards Board (the “FASB”). During the year ended December 31, 2013, the Company realized $1,945,631, including $536,735 of revenues from its water treatment business and $1,408,996 from its oil services business. Revenues commenced January 1, 2013, accordingly, as of January 1, 2013, the Company is no longer a development stage company.

Use of Estimates

Consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Among other things, management has estimated the collectability of its accounts receivable, the valuation of long lived assets, the assumptions used to calculate its derivative liabilities, and equity instruments issued for financing and compensation. Actual results could differ from those estimates.

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2013, there were no uninsured deposits.

The Company anticipates entering into long-term, fixed-price contracts for its services with select oil and gas producers and municipal utilities.  The Company will control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures.

As of December 31, 2013, three vendors accounted for 64% of total accounts payable.  During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.  As of December 31, 2012, three vendors accounted for 78% of total accounts payable.

As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.  As of December 31, 2012, one customer accounted for 100% of accounts receivable. During the year ended December 31, 2012, the Company had no revenues as it was a development stage enterprise.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, convertible notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments.  Our derivative liabilities are recorded at fair value (see Note 6).

We determine the fair value of our financial instruments based on a three-level hierarchy for fair value measurements under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy:

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently, we do not have any items classified as Level 1.

Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, we do not have any items classified as Level 2.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment. We use the Black-Scholes-Merton option pricing model (“Black-Scholes”) to determine the fair value of the financial instruments.

If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s finance department is responsible for performing the valuation of financial instruments, including Level 3 fair values.  The valuation processes and results are reviewed and approved by the CFO at least once every quarter, in line with the Company’s quarterly and annual reporting dates. Valuation results are discussed with the Audit Committee as part of its quarterly review and annual audit of the Company’s financial statements.

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. For example, if the volatility factor was reduced from 623% to 500%, the derivative liability would be reduced from $1,630,985 to $1,585,686.

Our derivative liabilities consist of embedded conversion features on debt and price protection features on warrants, which are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 6).

Management has used the simplified Black Scholes Merton model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation.

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2013 and 2012.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985
December 31, 2012	$	--	$	--	$	1,046,439		$	1,046,439

Accounting for Derivative Liabilities

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC  Topic 815-40, “Derivative Instruments and Hedging: Contracts in Entity’s Own Equity ” (“ASC Topic 815-40”). The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. The change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, price protection features on outstanding warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, the changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expired or waived. These common stock purchase warrants do not trade in an active securities market.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 6).

Equity Instruments Issued to Non-Employees for Acquiring Goods or Services

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

Long-lived Assets and Intangible Assets

In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

The Company had no such asset impairments at December 31, 2013 or 2012.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. As of December 31, 2012, the Company reported deferred revenue of $97,346, which is net of deferred costs of $436,654 related to this contract. These revenues and costs were recognized during the year ended December 31, 2013 upon completion of the contract and acceptance of the desalinization facility.

The Company recognizes revenue on a contract once the service or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonably assured and amounts are fixed and determinable.

Services Revenues from Master Services Agreements

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies including Anadarko Petroleum Company, Apache Corporation, Diamondback E&P, Pioneer Natural Resources USA, Reliance Energy, Atlas Pipeline Holdings, and Targa Resources LLC. These MSAs contract the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services.  The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company realizes revenues from these contracts as the services are performed under the customer purchase orders. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

The Company recognizes revenue in the service area based on the MSA agreements. As services are performed and signed off by the customer the Company generates an invoice and recognizes the revenue from its ongoing customers. Revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

Business Segments

The Company has two reportable segments, (1) water reclamation services, and (2) oil & gas services. Segment information is reported in Note 11.

Income Taxes

In accordance with ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company maintains a valuation allowance with respect to deferred tax assets.  The Company established a valuation allowance based upon the potential likelihood of realizing the deferred tax asset in the future tax consequences. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits.  The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2013 and 2012.  The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2013 and December 31, 2012, respectively.

Common Stock and Common Stock Warrants Issued to Employees

The Company uses the fair value recognition provision of ASC 718, “Stock Compensation,” which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes-Merton option pricing model to calculate the fair value of any equity instruments on the grant date.

At December 31, 2013 and 2012, the Company had no grants of employee common stock options or warrants outstanding.

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the lack of dilutive items. As of December 31, 2013 and 2012, the Company had 102,350,791 and 101,270,609 dilutive shares outstanding, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Furniture	3 years
Machinery	3-5 years

Stock Subscriptions Payable

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from a unit offering of its common stock in consideration of 3,875,000 shares of its common stock. The stock was not issued as of December 31, 2013 and was reported as Stock Subscriptions Payable.

Fees Payable in Common Stock

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 12,449,673 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 8,800,000 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 3,649,673 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.  The Company does not have any components of other comprehensive income (loss) as defined by ASC 220, “Reporting Comprehensive Income.”  For the years ended December 31, 2013 and 2012, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Other Assets
Accumulated amortization	$ 102,435	$ 45,675
Current liabilities
Notes payable to related parties	854,928	854,928
Deferred costs	$ 436,544	$ 436,544
Shareholders' equity (deficit)
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized shares	10,000,000	10,000,000
Preferred stock, issued shares
Preferred stock, outstanding shares
Common stock, par value	$ 0.0001	$ 0.001
Common stock, authorized shares	250,000,000	100,000,000
Common stock, issued shares	111,255,849	96,308,599
Common stock, outstanding shares	111,255,849	96,308,599

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Segment Information

12 Months Ended

Dec. 31, 2013

Segment Information

Note 11. Segment Information

We have two reportable segments, (1) water reclamation services, and (2) oil & gas services, as described herein.

Water reclamation services

The Company provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations.

Oil and Gas Services

Our subsidiaries, STW Energy, STW Pipeline Maintenance & Construction, and STW Oilfield Construction Services offer a wide range of oilfield and pipeline construction, and support services. We employ qualified laborers with years of experience in the oil patch and Supervisor/Sales people with particular oil patch knowledge in the Permian and Delaware Basins of West Texas, Eastern New Mexico, and in the Eagle Ford of South Texas.

The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). The following is a list of methodologies that we use for segment reporting that differ from our external reporting:

· Corporate overhead is allocated among the segments based on the ratio of segment revenues to total revenues.

· Liabilities including accounts payable, notes payable, and other liabilities are managed at the corporate level and not included in segment operations.

· Interest expense and change in derivative liabilities are managed at the corporate level and not included in segment operations.

Segment Operations

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Water Reclamation			Oil & Gas Services			Water Reclamation			Oil & Gas Services
Revenues	$	536,735		$	1,408,896		$	--		$	--
Costs of revenues		472,978			1,202,336			--			--
Operating expenses		102,210			763,900			1,935,027			--
Non-allocable corporate overhead					(3,160,713	)
Segment loss	$	(38,453	)	$	2,603,374		$	(1,935,027	)	$	--

Segment Assets

	December 31, 2013				December 31, 2012
	Water Reclamation		Oil & Gas Services		Water Reclamation		Oil & Gas Services
Current Assets	$	--	$	579,541	$	--	$	--
Fixed assets				694,219		--		--
Segment Assets	$	--	$	1,273,760			$	--

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jun. 19, 2014	Jun. 30, 2013
Document And Entity Information
Entity Registrant Name	STW RESOURCES HOLDING CORP.
Entity Central Index Key	0001357838
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 1,723,579
Entity Common Stock, Shares Outstanding		151,118,930
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2013

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Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Note 12. Subsequent Events

Management evaluated all activity of the Company through June 19, 2014, the date the consolidated financial statements were available to be issued and has concluded that no material subsequent events have occurred that would require recognition in the financial statements of disclosures in the notes to the financial statements, except as discussed below.

Line of Credit

On March 19, 2014, we entered into a Line of Credit Agreement (the "Credit Agreement") with Black Pearl Energy, LLC ("Black Pearl"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt.  Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, approximately $1,010,000 has been advanced subsequent to December 31, 2013; the credit was issued in the form of a promissory note (the "Note").  We must pay back all advanced funds on or before August 1, 2014, although such date will be extended to September 30, 2014 if we do not receive gross proceeds of no less than $6,000,000 resulting from either or both of: (a) the consummation of one or more private placements of debt or equity securities, not including the funds received pursuant to the Credit Agreement; or (b) the filing of a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) for an initial public offering of our securities.  Interest accrues at 11% per annum.  To further induce Black Pearl to issue us the line of credit, we agreed to issue them 1,000,000 restricted shares of our common stock (after which, Black Pearl will own 1,500,000 (1%) of our common stock) and a $25,000 transaction fee to be paid on the final closing date of the credit line.

Upon an event of default, which includes nonpayment of any funds owed or bankruptcy, Black Pearl may cease making further advances to us until such default is cured; if the default is not cured, all of Black Pearl's obligations under the Agreement and the Note shall cease and terminate, and Black Pearl may: (i) declare the outstanding principal evidenced by the Note immediately due and payable; (ii) exercise any remedy provided for in the Credit Agreement; or (iii) (iv) exercise any other right or remedy available to it pursuant to the Credit Agreement or Note, or as provided at law or in equity.  Interest on the advanced funds shall increase to 18% until the default is cured.

Factoring Agreement

On January 13, 2014, we entered into an accounts receivable factoring facility (the “Factoring Facility”) with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement (the “Factoring Agreement”).  The Factoring Agreement is secured through a Security Agreement between the Company, two of our subsidiaries: STW Pipeline Maintenance & Construction, LLC and STW Oilfield Construction, LLC (collectively, the "Subsidiaries") and Crown,  by all of the instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment of the Company and the Subsidiaries.  The Factoring Facility includes a loan in the amount of $4,000,000.  Our Chief Operating Officer, Lee Maddox also personally guaranteed our full and prompt performance of all of our obligations, representations, warranties and covenants under the Factoring Agreement, pursuant to a Guaranty Agreement for and in consideration of Crown issuing us the Factoring Facility.

The Factoring Facility shall continue until terminated by either party upon 30 days written notice.  Under the terms of the Factoring Agreement, Crown may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to the Company up to 80% of the face amount of the account receivable (the "Purchase Price"); although Crown maintains the right to propose a change in that rate, which we can accept in writing, orally or by accepting funding based on such changed rate.  Additionally, based upon when each invoice gets paid, Crown shall pay us a rebate percentage of between 0-18% of the related invoice.  Crown will generally have full recourse against us in the event of nonpayment of any such purchased account.  Crown has the discretion to also accept a substitute invoice from us for uncollected invoices; if such substitute invoice is not accepted, we will be obligated to pay Crown the Purchase Price of such uncollected invoice plus interest at the maximum lawful interest rate per annum, minus any payments made on the invoice.

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening our mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of our repayment obligations or Crown enforcing its rights under the Security Agreement and taking possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

Debt Extension

During 2012, the Company issued to certain accredited investors, new 14% Convertible Notes with an aggregate principal amount of $2,380,975.  The Company also issued 566,667 warrants to the placement agent under the same terms.  These notes were due on November 30, 2013 and otherwise have the same terms as the 14% Notes the Company issued in 2011.  In light of the Company's current cash position, we recently received consent to extend the maturity date of such notes (the "Extension") from the holders of approximately 56% of the outstanding principal amount of such notes. Pursuant to the Extension, the maturity date shall be extended to June 1, 2015.  In consideration for their consent to the Extension, the Company agreed to issue each of the consenting note holders additional shares of the Company's common stock in an amount equal to one half of the original principal amount of such holder's note. The Company negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, during January 2014, the Company issued an aggregate of 733,137 shares of its common stock valued at $67,354 and is obligated to issue an additional 67,836 shares of its common stock, for a total of 800,973 shares.

14% convertible notes Paid In Kind “PIK” interest offering

As part of our effort to free up critical capital necessary to carry out our business plans and increase shareholder value, the Company has recently received consent from certain of its outstanding note holders to receive accrued interest in shares of our common stock (the "PIK Shares"), rather than in cash as required by the related note agreement.  Upon consent, the PIK Shares are being issued at the rate of $0.08 per share.  As of June 19, 2014, we have agreed to issue a total of 6,004,619 PIK Shares to those note holders who have consented to receiving same.  As of the date of this Report, we have outstanding accrued interest in the amount of $751,428 for which we are seeking consent to pay in PIK Shares, to which if we receive consent, would require us to issue an additional 3,388,229 PIK Shares. As of the end of January 2014 we had issued 5,559,617 shares of common stock to satisfy the outstanding balance of $444,769 in interest.

Unit offering of Common Shares

Between January 1, and February 10, 2014, we sold an aggregate of 1,656,250 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to ten (10) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $132,500 in gross funding in the transaction (the "Offering"). 

On May 28, 2014, we sold an aggregate of 2,312,500 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to four (4) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one, 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $0.20 per share, subject to adjustment (the "Warrants," collectively with the shares of common stock, the "Units").  Each Unit had a purchase price of $0.08, and the Company received an aggregate of $185,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants. Warrants in total came to 2,412,500.

The Purchase Agreements contain representations and warranties by the Company and the investors which are customary for transactions of this type such as, with respect to the Company: organization, good standing and qualification to do business; capitalization; subsidiaries, authorization and enforceability of the transaction and transaction documents; valid issuance of stock, consents being obtained or not required to consummate the transaction; litigation; compliance with securities laws; and no brokers used, and with respect to the investors: authorization, accredited investor status and investment intent.

Issuance of Common Shares to Consultants and Employees

On February 26, 2014, we issued 500,000 common shares valued at $55,000 to an investor relations consultant for services.

Conversion of 12% convertible notes payable

During January, 2014, we issued 6,824,500 shares of our common stock to two (2) accredited investors upon their conversion of $225,000 of principal and $116,225 accrued interest of the investors’ 12% convertible notes.

Conversion of 14% convertible notes payable

During January 2014 and March, 2014, a holder of $25,000 of our 14% convertible notes payable converted the note and related accrued interest into 498,106 shares of the Company’s common stock.

On May 22, 2014 the current holder of a  14% convertible note that was in default in the amount of $544,426 of principal and $197,486 of accrued interest converted into 9,273,902 shares of the Company’s common stock.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Revenues
Contract and service revenues	$ 1,598,081
Service revenues from related party	347,550
Total revenues	1,945,631
Costs of Revenues	1,675,314
Gross Profit	270,317
Operating Expenses
Research and Development	80,556
Sales and marketing	37,066
General and administrative	3,291,481	1,935,027
Depreciation	60,380
Total operating expenses	3,469,483	1,935,027
Loss from operations	(3,199,166)	(1,935,027)
Other Income (Expense)
Interest expense	(1,205,338)	(655,371)
Change in fair value of shares issued to note holder		(19,587)
Other income		2,052
Penalties	(114,957)
Change in fair value of derivative liability	(2,561,918)	(990,751)
Net Loss	(7,032,955)	(3,598,684)
Less: Share of net loss of subsidiary attributable to non-controlling interest	(48,424)
Net Loss of STW Resources	$ (7,081,379)	$ (3,598,684)
Loss per common share - basic and diluted	$ (0.07)	$ (0.05)
Weighted average shares outstanding - basic and diluted	99,992,398	76,376,677

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Derivative Liability

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Derivative Liability

We apply the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments. On July 12, 2013, the Company increased its share authorization to 250,000,000 shares and removed this $1,977,372 derivative liability due to the availability of sufficient authorized shares to settle these outstanding contracts.

Management has used the simplified Black Scholes Merton model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation.

During the year ended December 31, 2012, the Company used a volatility rate of 100% to value its derivative instruments. This 100% volatility rate was based on management’s estimate of volatility due to the limited trading history of the Company and the fact that it was a development stage company. During the year ended December 31, 2013, the Company computed a historical volatility of 623% using daily pricing observations for recent periods. We applied a historical volatility rate during the year ended December 31, 2013, and future periods, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and embedded conversion features.

We currently have no reason to believe that future volatility over the expected remaining life of these warrants and embedded conversion features is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and embedded conversion features. The risk-free interest rate is based on one-year to five-year U.S. Treasury securities consistent with the remaining term of the warrants and embedded conversion features.

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of December 31, 2013 and December 31, 2012:

	For the year ended December 31, 2013			For the year ended December 31, 2012
Annual dividend yield		0	%		0	%
Expected life (years)		0.60– 0.47			0.50 – 3.40
Risk-free interest rate		0.11% - 0.25	%		0.15% - 0.51	%
Expected volatility		623	%		100	%

	December 31, 2013		December 31, 2012
Embedded Conversion features	$	1,467,579	$	962,815
Warrants		163,406		83,624
	$	1,630,985	$	1,046,439

The following table presents the changes in fair value of our warrants and embedded conversion features measured at fair value on a recurring basis for each reporting period-end.

	For the year ended December 31, 2013			For the year ended December 31, 2012
Balance beginning	$	1,046,439		$	1,491
Issuance of warrants and embedded conversion features					54,197
Reclassification of derivative liability due to increased share authorization		(1,977,372	)		--
Change in fair  value		2,561,918			990,751
Balance ending	$	1,630,985		$	1,046,439

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Notes Payable

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Notes Payable

The Company’s notes payable at December 31, 2013 and December 31, 2012, consisted of the following:

	December 31,			December 31,
Name	2013			2012
14% Convertible Notes	$	2,904,736		$	2,882,235
12% Convertible Notes		375,000			415,000
Other Short-term Debt		43,280			84,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		852,702			165,000
Crown Financial note		683,036			--
Equipment finance contracts		137,573			--
Capital lease obligation		23,300			--
Unamortized debt discount		(107,221)			(80,735)
Total Debt		7,291,501			5,844,875
Less: Current Portion		(4,668,492	)		(5,331,734	)
Total Long Term Debt	$	2,623,009		$	513,141

14% Convertible Notes

Between November 2011 and December 2012, the Company issued a series of 14% convertible notes payable to accredited investors.  The Company also issued 20,167,871 two year warrants to purchase common stock at an exercise price of $0.20 per share.  These notes are convertible into 46,746,898 shares of the Company’s common stock as of December 31, 2013.

The Company valued the warrants and the embedded conversion feature at inception using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.17% - 0.33%; expected volatility of 100%. The estimated fair value of the warrants issued between November 2011 and December 2012 was $81,656 and the embedded conversion feature was $35,546 at issuance and was recorded as a derivative liability at such time in the accompanying consolidated balance sheets. The warrants and embedded conversion feature were included in the derivative liabilities account each reporting period as the Company had insufficient authorized shares to settle outstanding contracts (see Note 6). On July 12, 2013, the Company increased its share authorization to 250,000,000 shares and reclassified the $1,977,372 derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

As of December 31, 2013, the aggregate principal balance of these notes is $2,904,736. An aggregate principal amount of $2,504,736 of these notes matured on November 30, 2013, with the remaining $400,000 balance maturing at various dates through November 2014. On September 22, 2013, the Company negotiated extensions of the maturity dates until June 1, 2015, with fourteen (14) of the note holders that hold an aggregate principal of $1,606,765 of these notes. In consideration of the extension agreements, the Company agreed to issue an aggregate 800,973 shares of its common stock with an accrued value of $64,078. As December 31, 2013, the total of outstanding 14% convertible notes is $2,904,736 of which $897,971 matured on November 30, 2013 and is in default.

As of December 31, 2013, $171,892 of the 14% convertible notes is payable to related parties.

12% Convertible Notes

Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that were scheduled to mature on November 30, 2011 and are currently in default.  The Company also issued 1,641,496 warrants to purchase common stock at an exercise price of $0.02 per share that expire at various dates through 2015. The notes are convertible into 28,282,534 shares of the Company’s common stock as of December 31, 2013.

On June 6, 2013, the Company issued 353,120 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible notes payable and 750,380 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 12% convertible note payable.  The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

Other Short-Term Debt

Other short term debt is comprised of a settlement of a note payable to an accredited investor in the amount of $43,280. The Company did not make its required payments during 2013 and the balance is in default.

On August 1, 2013, the Company entered in to an unsecured loan agreement in the amount of $20,000 with a private investor. The loan matures on February 1, 2014 and bears interest at an effective rate of 20%.   The Company made a $20,000 principal payment on this note bringing the unpaid principal balance as of December 31, 2013 to zero.

The Company also issued 200,000 warrants that bear an exercise price of $0.20 and expire on August 1, 2015.The Company valued the warrants at $12,000 using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The value of the warrants was recorded as a loan fee that was expensed during the year ended December 31, 2013.

GE Ionics

On August 31, 2010, the Company entered into a Settlement Agreement relating to a $2,100,000 note payable that was amended on October 30, 2011. On May 7, 2012, GE informed the Company that it had failed to make any required installment payment that was due and payable under the GE Note and that the Company’s failure to make any such installment payment(s) constituted an Event of Default under the GE Note.   Pursuant to the terms of the GE Note, upon the occurrence of an Event of Default for any reason whatsoever, GE shall, among other things, have the right to (a) cure such defaults, with the result that all costs and expenses incurred or paid by GE in effecting such cure shall bear interest at the highest rate permitted by law, and shall be payable upon demand; and (b) accelerate the maturity of the GE Note and demand the immediate payment thereof, without presentment, demand, protest or other notice of any kind.    Upon an event of default under the GE Note, GE shall be entitled to, among other things (i) the principal amount of the GE Note along with any interest accrued but unpaid thereon and (ii) any and all expenses (including attorney’s fees and expenses) incurred in connection with the collection and enforcement of any rights under the GE Note.  

Under the terms of the August 31, 2010 note, interest at the rate of WSJ prime plus 2% is due on the note, upon default, interest is due at the maximum legal rate which is 10% in the state of Texas. The note matured on September 1, 2013, and is in default. Interest on the note through December 31, 2013, has been accrued pursuant to the terms of the note through May 6, 2012, interest upon default on May 7, 2012, has been accrued at the maximum default rate in the state of Texas which is 10%.

As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the GE Note.  

On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”).  Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE, upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”).  As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote.

Deferred Compensation Notes

As of December 31, 2013, the Company has a balance of $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in-house counsel. The notes matured December 31, 2012, and the notes are in default.

Revenue Participation Notes

As of December 31, 2013, the Company has an outstanding balance of $852,702 of Revenue Participation Notes comprised as follows:

2012 Revenue Participation Notes	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500
2013 Revenue Participation Notes - STW Energy		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		203,202
Total revenue participation notes	$	852,702

These notes are described as follows:

2012 Revenue Participation Notes

During February 2012, the Company issued to certain accredited investors (the “Investors”) revenue participation interest notes with a principal amount of $165,000 (the “March 2012 Notes”). These March 2012 Notes mature on January 31, 2017 and carry an interest rate of 12%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received two times their investment amount and 10% of the net revenues thereafter until such time as they have received an additional $295,000 at which time the March 2012 Notes are retired in full. The Investors received warrants to purchase 165,000 shares of the Company’s common stock. These warrants have an exercise price of $0.20, are immediately exercisable and a two year maturity. The Company incurred cash fees of $16,500 which is recorded as a loan origination fee and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet and is being amortized to interest expense, and issued 16,500 warrants under the same terms as those received by the Investors. As of December 31, 2013, the Company has not generated revenue related to these revenue participating notes.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.33%; expected volatility of 100%. As the value of the warrants was not significant, the Company did not allocate any portion of the debt proceeds to the warrants and the value of the warrants were derivatives as of December 31, 2012.

2013 Revenue Participation Notes – STW Resources Salt Water Remediation Technology

During the nine month period ended September 30, 2013, the Company issued to ten (10) accredited investors revenue participation notes with an aggregate principal amount of $302,500. These notes mature five years from the date of issuance, and carry an interest rate of 12% and an effective interest rate of 13.5%.  Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water.  The Company will pay one-half (50%) of the Net Operating Revenues, after deducting project operational and equipment lease expenses, from the Water Processing Master Services Agreements (“MSA’s”) to all Participants generally (with each Participant’s percentage of the $302,500 investment being paid on a pro-rata basis) until such time as each Participant’s share of the $302,500 Note has been paid in full, and until such further time as an additional $302,500 has been paid to the Participants in relation to each Participant’s share of the $302,500  investment.  Thereafter, all further Revenue Fees shall cease and this Agreement shall be terminated in all respects.

The Company also issued 605,000 warrants in connection with this investment. These warrants have an exercise price of $0.20, are immediately exercisable and expire on various dates through June 30, 2015.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $33,398 and recorded this loan discount to be amortized to interest expense over the term of the loan.

2013 Original Issue Discount Notes with Revenue Participation Interest – STW Energy Services, LLC

During the year ended December 31, 2013, the Company issued to four (4) accredited investors revenue participation note with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These notes mature eighteen (18) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 9.4%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Energy services contracts. The Investor shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 91,000 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on various dates through June 30, 2015.

The 6% original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $325,000.  The Notes maintain an original issue discount of $75,000 and are due on or before March 26, 2015; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained.  The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Energy Services, LLC ("Energy Services") subsidiary, until each Note has been paid in full.   All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes.  If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full.   In consideration for the Note, the Company shall issue 2 year warrants to purchase one share of common stock for each two dollars of such holder's investment, at an exercise price of $0.30 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 162,500 shares.  The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.  

The Company valued the 91,000 warrants associated with the $182,000 notes using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $5,004 and recorded this loan discount to be amortized to interest expense over the term of the loan.

2013 Convertible Original Issue Discount Notes with Revenue Participation Interest – STW Oilfield Construction, LLC

On September 27, 2013, the Company issued to a related party accredited investor, Mr. Joshua Brooks, a convertible revenue participation notes with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries a stated interest rate of 6% and an effective interest rate of 14%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 131,608 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on September 27, 2015.  The notes are convertible into 548,367 shares of the Company’s common stock. On December 6, 2013, the Company and Mr. Brooks agreed to a mutual rescission of this note and related warrants agreement. The net proceeds of $50,618 from this note were recorded as Related Party Payable – Dufrane Nuclear, a Company controlled by Mr. Joshua Brooks.

2013 Convertible Original Issue Discount Notes with Revenue Participation Interest – STW Pipeline Maintenance and Construction, LLC

During the year ended December 31, 2013, the Company issued to two (2) accredited investors convertible revenue participation notes with an aggregate principal amount of $207,115 and an original issue discount of $27,015, yielding net cash proceeds of $180,100 to the Company. These notes mature seven (7) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 8.1%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Pipeline Maintenance &Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 414,230 warrants in connection with this investment. These two year warrants bear an exercise price of $0.30 per share.  The notes are convertible into 1,725,958 shares of the Company’s common stock.

The 6% convertible original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $207,000.  The Notes maintain an original issue discount of $27,000 and are due on or before May 18, 2014; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained.  The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Pipeline Maintenance & Construction, LLC ("Pipeline") subsidiary, until each Note has been paid in full.  All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes.  If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full.  The Notes are convertible into shares of the Company's common stock at $0.12 per share, subject to adjustment for standard anti-dilution features.  In consideration for the Notes, the Company issued 2-year warrants to purchase two shares of common stock for each one dollar of such holder's investment, at an exercise price of $0.20 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 414,000 shares.  The Company is required to reserve a sufficient number of shares to be able to issue all of the shares underlying the Notes if same are fully converted.  The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.  

The Company valued the 414,230 warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $27,153 and recorded this debt discount to be amortized to interest expense over the term of the loan agreement.

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of December 31, 2013, the Company had drawn down $683,036 of this loan facility.

The Company issued 4,000,000 warrants in connection with this loan agreement, in lieu of a cash loan fee. These warrants have an exercise price of $0.20, are immediately exercisable and a two year maturity.  The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $159,996 and recorded this loan fee a prepaid loan fee to be amortized to interest expense over the term of the loan.

Equipment Finance Contracts

During the year ended December 31, 2013, the Company financed the purchase of vehicles and other equipment with equipment finance contracts from various banks and finance institutions.  The contracts mature in three to five years and bear interest rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of December 31, 2013, the Company has an aggregate balance of $137,573 payable on these equipment finance contracts.

Capital lease obligation

During the year ended December 31, 2013, the Company entered into a capital lease of a modular office trailer. The lease contract calls for forty eight (48) monthly payments of $593 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $23,300 with an implicit interest rate in the lease of 10%.

For the years ended December 31, 2013 and 2012, interest expense on all notes payable described above was $1,205,338 and $655,371, respectively, which included $164,549 and $44,675, respectively, of amortization of debt discount and debt issuance costs.  There was no interest capitalized in 2013 and 2012. As of December 31, 2013 and 2012, net deferred loan costs were $185,428 and $45,667, respectively. The balance of unamortized discount at December 31, 2013 and 2012, respectively, were $107,221 and $80,735.

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Derivative Liability (Tables)

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Warrants and embedded conversion options which have no observable market data

	For the year ended December 31, 2013			For the year ended December 31, 2012
Annual dividend yield		0	%		0	%
Expected life (years)		0.60– 0.47			0.50 – 3.40
Risk-free interest rate		0.11% - 0.25	%		0.15% - 0.51	%
Expected volatility		623	%		100	%

	December 31, 2013		December 31, 2012
Embedded Conversion features	$	1,467,579	$	962,815
Warrants		163,406		83,624
	$	1,630,985	$	1,046,439

Warrants and embedded conversion options measured at fair value on a recurring basis

	For the year ended December 31, 2013			For the year ended December 31, 2012
Balance beginning	$	1,046,439		$	1,491
Issuance of warrants and embedded conversion features					54,197
Reclassification of derivative liability due to increased share authorization		(1,977,372	)		--
Change in fair  value		2,561,918			990,751
Balance ending	$	1,630,985		$	1,046,439

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Nature of the Business and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

History of the Company

STW Resources Holding Corp. (“STW” or the “Company”, is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas.  STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia.  STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem.  The Company is also evaluating the deployment of similar technology in the municipal wastewater industry.

The Company’s operations are located in the United States of America and the principal executive offices are located at 3424 South County Road 1192, Midland, Texas 79706. 

On January 17, 2010, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned subsidiary of STW Resources, Inc. (“STW Sub”) and certain shareholders of STW controlling a majority of the issued and outstanding shares of STW.  Pursuant to the Merger Agreement, STW merged into the Acquisition Sub resulting in an exchange of all of the issued and outstanding shares of STW for shares of the Company on a one for one basis. At such time, STW became a wholly owned subsidiary of the Company.  

On February 9, 2010, the Federal Bankruptcy Court handling a bankruptcy proceeding for our predecessor at the time entered an order confirming the Second Amended Plan of Reorganization (the “Plan”) pursuant to which the Merger Agreement was approved.  The Plan was effective February 19, 2010 (the “Effective Date”). The principal provisions of the Plan were as follows:

● MKM, the DIP lender, received 400,000 shares of common stock and 2,140,000 shares of preferred stock,

● The holders of the Convertible Notes received 1,760,000 shares of common stock,

● General unsecured claims received 100,000 shares of common stock, and

● The Company’s equity interest was extinguished and cancelled.

On February 12, 2010, pursuant to the terms of the Merger Agreement, STW Sub merged with Acquisition Sub, which became a wholly-owned subsidiary of the Company (the “Merger”).  In consideration for the Merger and STW Sub becoming a wholly-owned subsidiary of the Company, the Company issued an aggregate of 31,780,004 ("the STW Acquisition Shares") shares of common stock to the shareholders of STW at the closing of the Merger and all derivative securities of STW Sub as of the Merger became derivative securities of the Company including options and warrants to acquire 12,613,002 shares of common stock at an exercise price ranging from $3.00 to $8.00 with an exercise period ranging from July 31, 2011 through November 12, 2014 and convertible debentures in the principal amount of $1,467,903 with a conversion price of $0.25 and maturity dates ranging from April 24, 2010 through November 12, 2010.

Formation of New Subsidiaries

On June 25, 2013, the Company formed a new subsidiary, a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The remaining 25% non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”).

Effective June 30, 2013, STW Resources Holding Corp. (the “Company”) formed a new subsidiary, STW Oilfield Construction, LLC (“Oilfield Construction”), a Texas limited liability company. The Company is the sole member of Oilfield Construction, owning 100% of the membership interest in such entity, which is managed by the Company's CEO and COO, as well as one of the Company's directors and an employee of the Company.

Effective September 20, 2013, the Company formed another new subsidiary, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), a Texas limited liability company. The Company is the sole member of Pipeline Maintenance, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation Policy

The consolidated financial statements for the year ended December 31, 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and 75% owned subsidiary of STW Energy Services, LLC. The consolidated financial statements for the year ended December 31, 2012, include the accounts of the Company and its wholly owned subsidiary, STW Resources, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated as of December 31, 2013.

Reclassifications

Certain reclassifications were made to the prior year consolidated financial statements to conform to the current year presentation. There was no change to reported net loss.

Non-Controlling Interest

On June 25, 2013, the Company invested in a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2013, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a net loss attributable to non-controlling interests of $48,424 for the year ended December 31, 2013.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $24,355,343 as of December 31, 2013, and as of that date was delinquent in payment of $350,074 of sales and payroll taxes. As of December 31, 2013, $3,695,346 of notes payable are in default. Since its inception in January 2008 through December 31, 2013, management has raised equity and debt financing of approximately $12,000,000 to fund operations and provide working capital.  The cash resources of the Company are insufficient to meet its planned business objectives without additional financing.  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond.  These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.  There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing.  There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At December 31, 2013, the Company had $17,301 of cash on hand; the Company raised $617,500 of equity financing and secured a $2.0 million credit line from Black Pearl Energy, LLC, a related party, on March 13, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations for the next three months. Management is currently seeking additional funds, primarily through the issuance of debt or equity securities for cash to be used in operations. No assurance can be given that any future financing will be available or, if available, and that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

Development Stage Enterprise

During the year ended December 31, 2012, the Company was a development stage company as defined by the Financial Accounting Standards Board (the “FASB”). During the year ended December 31, 2013, the Company realized $1,945,631, including $536,735 of revenues from its water treatment business and $1,408,996 from its oil services business. Revenues commenced January 1, 2013, accordingly, as of January 1, 2013, the Company is no longer a development stage company.

Use of Estimates

Consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Among other things, management has estimated the collectability of its accounts receivable, the valuation of long lived assets, the assumptions used to calculate its derivative liabilities, and equity instruments issued for financing and compensation. Actual results could differ from those estimates.

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2013, there were no uninsured deposits.

The Company anticipates entering into long-term, fixed-price contracts for its services with select oil and gas producers and municipal utilities.  The Company will control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures.

As of December 31, 2013, three vendors accounted for 64% of total accounts payable.  During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.  As of December 31, 2012, three vendors accounted for 78% of total accounts payable.

As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.  As of December 31, 2012, one customer accounted for 100% of accounts receivable. During the year ended December 31, 2012, the Company had no revenues as it was a development stage enterprise.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, convertible notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments.  Our derivative liabilities are recorded at fair value (see Note 6).

We determine the fair value of our financial instruments based on a three-level hierarchy for fair value measurements under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy:

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently, we do not have any items classified as Level 1.

Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, we do not have any items classified as Level 2.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment. We use the Black-Scholes-Merton option pricing model (“Black-Scholes”) to determine the fair value of the financial instruments.

If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s finance department is responsible for performing the valuation of financial instruments, including Level 3 fair values.  The valuation processes and results are reviewed and approved by the CFO at least once every quarter, in line with the Company’s quarterly and annual reporting dates. Valuation results are discussed with the Audit Committee as part of its quarterly review and annual audit of the Company’s financial statements.

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. For example, if the volatility factor was reduced from 623% to 500%, the derivative liability would be reduced from $1,630,985 to $1,585,686.

Our derivative liabilities consist of embedded conversion features on debt and price protection features on warrants, which are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 6).

Management has used the simplified Black Scholes Merton model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation.

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2013 and 2012.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985
December 31, 2012	$	--	$	--	$	1,046,439		$	1,046,439

Accounting for Derivative Liabilities

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC  Topic 815-40, “Derivative Instruments and Hedging: Contracts in Entity’s Own Equity ” (“ASC Topic 815-40”). The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. The change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, price protection features on outstanding warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, the changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expired or waived. These common stock purchase warrants do not trade in an active securities market.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 6).

Equity Instruments Issued to Non-Employees for Acquiring Goods or Services

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

Long-lived Assets and Intangible Assets

In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

The Company had no such asset impairments at December 31, 2013 or 2012.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. As of December 31, 2012, the Company reported deferred revenue of $97,346, which is net of deferred costs of $436,654 related to this contract. These revenues and costs were recognized during the year ended December 31, 2013 upon completion of the contract and acceptance of the desalinization facility.

The Company recognizes revenue on a contract once the service or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonably assured and amounts are fixed and determinable.

Services Revenues from Master Services Agreements

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies including Anadarko Petroleum Company, Apache Corporation, Diamondback E&P, Pioneer Natural Resources USA, Reliance Energy, Atlas Pipeline Holdings, and Targa Resources LLC. These MSAs contract the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services.  The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company realizes revenues from these contracts as the services are performed under the customer purchase orders. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

The Company recognizes revenue in the service area based on the MSA agreements. As services are performed and signed off by the customer the Company generates an invoice and recognizes the revenue from its ongoing customers. Revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

Business Segments

The Company has two reportable segments, (1) water reclamation services, and (2) oil & gas services. Segment information is reported in Note 11.

Income Taxes

In accordance with ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company maintains a valuation allowance with respect to deferred tax assets.  The Company established a valuation allowance based upon the potential likelihood of realizing the deferred tax asset in the future tax consequences. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits.  The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2013 and 2012.  The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2013 and December 31, 2012, respectively.

Common Stock and Common Stock Warrants Issued to Employees

The Company uses the fair value recognition provision of ASC 718, “Stock Compensation,” which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes-Merton option pricing model to calculate the fair value of any equity instruments on the grant date.

At December 31, 2013 and 2012, the Company had no grants of employee common stock options or warrants outstanding.

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the lack of dilutive items. As of December 31, 2013 and 2012, the Company had 102,350,791 and 101,270,609 dilutive shares outstanding, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Furniture	3 years
Machinery	3-5 years

Stock Subscriptions Payable

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from a unit offering of its common stock in consideration of 3,875,000 shares of its common stock. The stock was not issued as of December 31, 2013 and was reported as Stock Subscriptions Payable.

Fees Payable in Common Stock

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 12,449,673 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 8,800,000 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 3,649,673 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.  The Company does not have any components of other comprehensive income (loss) as defined by ASC 220, “Reporting Comprehensive Income.”  For the years ended December 31, 2013 and 2012, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

Income Taxes

The Company's net loss before income taxes totaled $7,032,955 and $3,598,684 for the years ended December 31, 2013 and 2012, respectively.

The total provision for income taxes, which consists solely of U.S. federal taxes, consists of the following:

	December 31, 2013		December 31, 2012
Current taxes	$	—	$	—
Deferred taxes		—		—
Total	$	—	$	—

A reconciliation of the tax on the Company's loss for the year before income taxes and total tax expense are shown below:

	Year Ended December 31,
	2013			2012
Income tax benefit at the U.S. statutory income tax	$	(2,391,205	)	$	(1,223,553	)
Change in fair value of derivative liability		871,052			336,855
Other differences		42,873			653
Changes in Valuation allowance		1,477,280			886,045
Total	$	—		$	—

Based on the weight of available evidence, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not be realized.  Therefore, the company has recorded a full valuation allowance against the net deferred tax assets.

The components of net deferred tax assets recognized are as follows:

	December 31, 2013			December 31, 2012
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,380,000		$	1,037,000
Accrued expenses		210,780			76,500
Valuation allowance		(2,590,780	)		(1,113,500	)
Total	$	—		$	—

  Due to uncertainties surrounding the Company's ability to generate future U.S. taxable income to realize these assets, a full valuation allowance has been established to offset the net U.S. deferred tax asset.

The valuation allowance increased by $1,477,280 and $221,000 as of December 31, 2013 and 2012, respectively. The future utilization of the Company's federal net operating loss and tax credit carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future.  While the Company has not formally analyzed any NOLs to determine the maximum potential future tax benefit that might be available, the Company believes that the latest change date as defined under Section 382 occurred approximately in September 2012, and the annual limitation under Section 382 has been estimated to be approximately $120,000.The Company’s deferred tax assets have been adjusted to reflect the maximum benefit that might be available subject to this limitation.

At December 31, 2013, the Company had federal income tax net operating losses of approximately $18.4 million.  The federal net operating losses expire at various dates beginning in 2028.The Company files income tax returns in the U.S. federal jurisdiction and Texas.  Tax years 2008 forward remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. Tax years 2009 forward remain open to examination by the state taxing authority.

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Related Party Transactions

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Related Party Transactions

Officers’ Compensation

During years ended December 31, 2013 and 2012, we incurred $150,000 and $102,000, respectively, in officers’ consulting fees and $24,500 in commissions during the year ended December 31, 2012, due our Director, Chairman and CEO, Mr. Stanley Weiner.  As of December 31, 2013 and December 31, 2012, the balances of $263,083, and $155,583, respectively, were payable to Mr. Weiner for his officers’ salary.

During the years ended December 31, 2013 and 2012, we incurred $150,000 and $130,000, respectively, in officers’ consulting fees due our Director and Chief Operating Officer, Mr. Lee Maddox.  As of December 31, 2013 and December 31, 2012, the balances of $170,500, and $59,500, respectively, were payable to Mr. Maddox for his officers’ salary.

During the years ended December 31, 2013 and 2012, we incurred $90,000, and $60,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt.  As of December 31, 2013 and December 31, 2012, the balances of $121,083, and $108,866, respectively, were payable to Seabolt Law Group for these services.

During year ended December 31, 2013, we incurred $30,000 in officers’ consulting fees due our Vice President of Operations, Mr. Joshua Brooks.  As of December 31, 2013, the balance of $30,000, was payable to Mr. Brooks for his officers’ salary.

Board and Advisory Board Compensation

Directors are expected to timely and fully participate in all regular and special board meetings, and all meetings of committees that they serve on.  In December 2011, the Board voted to authorize the issuance of shares in lieu of cash compensation for past services.

Per the Director Agreements, the Company compensates each of the directors through the initial grant of 200,000 shares of common stock and the payment of a cash fee equal to $1,000 plus travel expenses for each board meeting attended, and $75,000 per year as compensation for serving on our board of directors. As of December 31, 2013, the Company recorded professional fees in the accompanying consolidated statement of operations of $602,849 and made payments of $43,500 in cash and issued 5,043,750 shares of its common stock having an accrued valued $302,625.  As of December 31, 2013, the Company has accrued compensation due to its directors (both current and former) of $491,724 and as of December 31, 2012 the Company had accrued $235,000, which is calculated based upon time of service and the number of Board meetings attended and is included in accrued compensation in the accompanying consolidated balance sheet.

The Company’s advisory board was comprised of three members. Each advisory board member was granted 56,250 shares upon joining the board and 75,000 shares annually thereafter.  The advisory board was dissolved on June 12, 2013.

Other related party transactions

During the year ended December 31, 2012, the Company incurred $73,500 in fees and expenses payable to Viewpoint, which was a related party based on one of their partners being a member of the Board of Directors, and granted a warrant to purchase 566,677 shares of the Company’s common stock with an exercise price of $0.20 per share for a period of two years from the date of issuance. At December 31, 2012, the Company had a balance due Viewpoint of $202,728 recorded in accounts payable.

During the year ended December 31, 2012, the Company incurred $63,199 in fees and expenses to Ascendiant Capital Markets, LLC, which was a related party based on one of their partners being a member of the Board of Directors, and granted a warrant to purchase 469,000 shares of the Company’s common stock with an exercise price of $0.20 per share for a period of two years from the date of issuance.

As of December 31, 2013, the Company has a $139,763 related party payable to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel.  This related party payable is comprised of cash advances of $276,804, net of $137,041 of accounts receivable.  During year ended December 31, 2013, the Company had sales of $347,550 to Black Pearl Energy, LLC, a related party.

As of December 31, 2013, the Company has a related party payable of $132,490 to Dufrane Nuclear, Inc. a company controlled by Mr. Josh Brooks, the Company’s vice president of operations.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Stockholders' Equity

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. No such shares are issued or outstanding and the Company does not currently have any plans to issue shares of such stock.

On March 7, 2013, the Company filed a certificate of designation to its articles of incorporation, as amended, with the Secretary of State of the State of Nevada whereby it designated 210,000 shares of preferred stock as series A-1 preferred stock (the “Series A-1 Preferred Stock”).  Except as otherwise expressly required by law, each holder of Series A-1 Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company and shall be entitled to one vote for each share of common stock deliverable upon conversion of the Series A-1 Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited.  Except as otherwise required by law, the holders of shares of Series A-1 Preferred Stock shall vote together with the holders of common stock on all matters and shall not vote as a separate class.

The Series A-1 Preferred Stock pays dividends of 16% per annum (10% cash and 6% paid-in-kind), payable quarterly in arrears.  Upon an Event of Default (as defined in the Certificate of Designation) the dividend rate shall increase to eighteen percent (18%) per annum, of which 12% is payable in cash and 6% paid-in-kind, until such time as the Event of Default is cured.  Each share of Series A-1 Preferred Stock has a stated value equal to $2.40 per share and is initially convertible at any time into shares of common stock at a conversion price equal to $0.12 per share, subject to adjustment under certain circumstances.   The conversion price of the Series A-1 Preferred Stock is subject to weighted average price adjustment for subsequent lower price issuances by the Company, subject to certain exceptions.   Notwithstanding the foregoing, a holder of Series A-1 Preferred Stock shall not have the right to convert any portion of the Series A-1 Preferred Stock, to the extent that, after giving effect to the conversion, such Holder would beneficially own in excess of 9.9% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of the common stock issuable upon conversion of Series A-1 Preferred Stock held by the applicable holder.  In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A-1 Preferred Stock will be entitled to receive an amount equal to two (2) times the original purchase price for the Series A-1 Preferred Stock, plus all declared and unpaid dividends.

Each share of Series A-1 Preferred Stock shall automatically convert into common stock, at the then applicable conversion price, upon the earlier to occur of (i) the closing share price of the Company’s common stock being at least $0.75 for 10 consecutive trading days, or (ii) the affirmative consent of the holders of at least a majority of the then outstanding shares of Series A-1 Preferred Stock.  The Company may, at any time, and upon providing a 30 days written notice, require the holders of Series A-1 Preferred Stock to sell all of their shares of Series A-1 Preferred Stock at a redemption price payable in cash equal to the sum of the outstanding principal and accrued but unpaid dividends, if any, multiplied by a factor such that each Holder receives an annualized return of 20%.  In addition, each holder of the Series A-1 Preferred Stock may, at their option upon certain events, require the Company to purchase all of the Series A-1 Preferred Stock held by such holder at a price payable in cash equal to the sum of the outstanding principal and accrued but unpaid dividends, if any, multiplied by a factor such that each holder receives an annualized return of 20%.

 Common Stock

The Company has authorized 250,000,000 shares of common stock with a par value of $0.001.  During the years ended December 31, 2013 and 2012, the Company issued common shares as follows:

Year ended December 31, 2012:

On March 20, 2012, pursuant to a debt settlement agreement, the Company issued 3,000,000 shares of its common stock to a note holder who sold these shares, and the net proceeds reduced the Company's liability to the note holder. The Company estimated the fair market value of the common stock to be $30,000 on the date of issuance (based on the closing share price on the issuance date) and recorded the amount in prepaid expenses and other current assets. The Company recorded the change in fair value of the shares still held by the note holder on each reporting date with the change in fair value being recorded as a change in fair value of shares issued to note holder within the consolidated statement of operations. The note holder sold all 3,000,000 shares for $18,626 which was used to reduce the amount of debt owed to the note holder. As of December 31, 2012, all shares held by the note holder were sold.

On March 23, 2012, the Board of Directors agreed to exchange their accrued and future compensation for fiscal 2012 for 29,478,000 shares of the Company’s common stock valued at $1,473,900. Total accrued compensation as of that date was $1,248,900, of which $1,173,900 was included in accrued compensation at December 31, 2011 and $300,000 of compensation expense being earned and recorded during the year ended December 31, 2012. The exchange price was agreed by both parties to be $0.05 per share.

On March 23, 2012, the Board of Directors authorized the Company to issue stock for consulting services to be performed on behalf of the Company. The Board authorized the issuance of 16,950,000 shares of common stock to various consultants, of which, 5,000,000 shares are to be  issued to Mr. Stan Weiner, the Company’s Chief Executive Officer, and 10,750,000 to be issued to the other various consultants. The Company cancelled 1,200,000 of the shares that were part of the original 16,950,000 shares to be issued for consulting services to be performed.  As of December 31, 2012, all shares related to these agreements have been issued related to the services to be performed pursuant to such consulting agreements. The Company estimated the fair value of the shares to be $786,000 based on the fair value of the share price on the commitment date. The Company will record the estimated fair value to expense for such services as they are performed ratably over the term of the consulting agreements. The consulting agreements mature on various dates through April 2013. During the year ended December 31, 2012, the Company expensed $696,000 in compensation for shares issued to consultants.

On March 23, 2012, the Board authorized the issuance of 425,000 shares of the Company’s common stock to its Advisory Board members. The Company estimated the fair market value to be $8,500 based on the closing share price on the date of issuance.

On March 23, 2012, the Company issued 18,750 shares to a consultant. The Company estimated the fair market value to be $375 based on the closing share price on the date of issuance.

In May 2012, the Company entered into a subscription agreement with accredited investors pursuant to which the Company sold 1,000,000 Units, each Unit consisting of one share of the Company’s common stock par value $0.001 and a warrant to purchase 0.375 shares of the Company’s common stock (the “Warrants”) for aggregate consideration of $50,000. The Warrants shall be exercisable for a period of two years from the date of issuance at an initial exercise price of $0.20. The Company incurred issuance costs of $5,000 and issued 150,000 warrants under the same terms.

The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.33%; expected volatility of 100%. As the value of the warrants is not significant, the Company did not allocate any portion of the proceeds to the warrants, however, the warrants were included in the derivative liability account at December 31, 2012 as the Company had insufficient authorized shares to settle the contract.

As of December 31, 2012, the Company has an aggregate of common stock issued and outstanding plus common stock equivalents which, if fully converted, would be in excess of the 100,000,000 authorized shares permitted by the articles of incorporation of the Company. Total common shares outstanding plus common stock equivalents (warrants and conversion features) totaled approximately 198,000,000 as of December 31, 2012. As a result, the Company has recorded substantially all common stock equivalents as a derivative liability in the accompanying consolidated balance sheet at December 31, 2012.

Year ended December 31, 2013:

On June 6, 2013, the Company issued 353,120 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible note payable and 750,380 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 14% convertible note payable.  The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

Prior to the July 12, 2013, amendment to our Articles of Incorporation to increase our authorized capital from 100,000,000 shares of common stock to 250,000,000 shares of common stock (the "Amendment"), we did not have sufficient shares of authorized capital to meet all of our outstanding security obligations.  Some of these obligations required us to issue shares of common stock to our officers and directors, pursuant to the agreements we maintain with them or board approved issuances to such persons; following the Amendment, on September 16, 2013 the company issued an aggregate of 5,043,750 shares of common stock, with a value of $297,581, as follows:

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		625,000	2012 Director Compensation
Manfred E. Birnbaum		625,000	2012 Director Compensation
D. Grant Seabolt, Jr.		625,000	2012 Director Compensation
Joseph I. O'Neill III		625,000	2012 Director Compensation
Audry Lee Maddox		356,250	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		625,000	2012 Director Compensation
Paul DiFrancesco		625,000	2012 Director Compensation
Bill G. Carter		625,000	2012 Director Compensation
Steven Schachman		156,250	2012 Advisory Board Compensation
Hunter Hill		156,250	2012 Advisory Board Compensation

On September 16, 2013, the Company issued 2,100,000 shares of its Common stock in payment of accrued consulting fees. These shares were authorized by the board of directors at a value of $0.10 per share based on the value on March 5, 2013, the date that the board of directors approved the payment in shares.  At the time of the March 5, 2013, board action to approve the payment of the accrued fees in stock, the Company did not have adequate shares authorized to settle the contracts so the issuance of shares was delayed until September 16, 2013.  These shares were issued on September 16, 2013, at a value at the time of issuance of $126,000, resulting in a reduction of accrued consulting fees expense of $84,000.

During August and October, 2013, the Company issued to four (4) accredited investors revenue participation notes with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These note mature eighteen (18) months from the date of issuance and carry stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Energy services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 91,000 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on various dates through June 30, 2015.

During September, 2013, the Company issued to a related party accredited investor convertible a revenue participation note with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 131,608 warrants in connection with this investment. The warrants bear an exercise price of $0.30 per share and expire on September 27, 2015.  The note is convertible into 548,347 shares of the Company’s common stock. On December 6, 2013, the Company and this investor agreed to a mutual rescission of this note and the related warrants.  The net cash proceeds of $50,418 are included in the total balance of $134,013 as Payable to Related Party, Dufrane Nuclear Shielding Inc., a company controlled by our Vice President of Operations, Mr. Joshua Brooks.

In the months of October and December 2013 seven (7) of the companies consultants were issued 6,500,000 shares in exchange for their invoice amounts due from the company.

On December 9, 2013, the Company issued 2,000,000 shares to an employee as a signing bonus under an employment contract.  The Company also issued 300,000 shares of its common stock to an employee of its subsidiary, STW Pipeline Maintenance & Construction, LLC, as an installment on a signing bonus under an employment contract with the subsidiary.

As of December 31, 2013, the Company had the following securities to acquire the Company’s common stock outstanding:

Security	Number of Underlying Common Shares		Exercise Price	Expire
Warrants issued for Professional Services		1,500,000	4.00		2014
Warrants associated with the January 14, 2009 Bridge Note		480,000	3.00		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		1,500,000	8.00		2014
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with 2012 Revenue Participation Notes		181,500	0.20		2014
Warrants associated with May 2012 Subscription Agreement		525,000	0.20		2014
Warrants associated with June-September 14% Convertible Notes		550,000	0.20		2014
Warrants associated with November 14% Convertible notes		2,777,500	0.20		2014
Warrants associated with 2013 Revenue Participation Notes		1,110,230	0.20 – 0.30		2015
Warrants issued to Crown Financial, LLC		4,000,000	0.20		2016
Warrants issued on $20,000 short term loan		200,000	0.20		2015
Warrants issued with November 2013 Unit Share Offering		3,875,000	0.20		2015
Sub-total of Warrants outstanding		18,340,726
Common stock associated with the 12% Convertible Notes plus accrued interest		27,765,417	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
12/31/2013 Accrued Default interest		517,118	0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		46,114,632	0.08		2015
12/31/2013 Accrued Default interest		198,299	0.08		2014
12/31/2013 Calibre Note interest		163,968	0.08		2014
Common stock associated with November 2013 Unit Share Offering		3,875,000	0.08		2015
Common stock payable as fees		3,649,673	various		2014
Total securities		102,350,791

Warrants

A summary of the Company’s warrant activity and related information during the years ended December 31, 2013 and 2012 follows:

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		29,803,434	$	0.94
Issued		4,034,000		0.20
Exercised		-
Forfeited		-
Cancelled		-
Expired		(1,430,000)		0.50
Outstanding at December 31, 2012		32,407,434	$	0.86	1.06	$	32,830
Exercisable		32,407,434	$	0.86	1.06	$	32,8300
Outstanding at January 1, 2013		32,407,434	$	0.86	1.06
Issued		9,316,838		0.21	2.0
Exercised		-
Forfeited		-
Cancelled		-
Expired		(23,383,546)		0.32
Outstanding at December 31, 2013		18,340,726	$	1.21	1.07	$	131,320
Exercisable		18,340,726	$	0.21	1.07	$	131,320

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Commitments and Contingencies

Lease Commitments

The Company leased its office facilities under an operating lease that commenced on October 1, 2013 and expires on September 30, 2020.  The lease calls for monthly payments of $9,750, plus payment by the Company of all operating expenses, insurance and taxes on the property.  The Company has an option until September 30, 2016, to purchase the land and building for $825,500

The Company entered into a capital lease for a mobile trailer office unit that commenced on October 16, 2013 and expires on September 16, 2017. The lease calls for forty-eight (48) monthly payments of $593, plus payment by the Company of all operating expenses, insurance and taxes on the property.  The Company has the option to purchase the property at the end of the term for zero.

Future minimum lease payments under the capital lease and operating lease as of December 31, 2013, are as follows:

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	7,116		$	117,000	$	124,116
2015		7,116			117,000		124,116
2016		7,116			117,000		124,116
2017		5,930			117,000		122,930
Thereafter		--			321,750		321,750
Total minimum lease payments		27,278			789,750		817,028
Less interest		(3,978	)
Capital lease obligation		23,300
Less current portion		(5,012	)
Long-term capital lease obligation	$	18,288

Rental expense for all property and equipment operating leases during the year ended December 31, 2013, was $78,558, including $49,308 of rental expense incurred with a related party.  Rental expense for all property and equipment operating leases during the year ended December 31, 2012, was $14,292.

Indemnities and Guarantees

In addition to the indemnification provisions contained in the Company’s charter documents, the Company will generally enter into separate indemnification agreements with the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.

Employment Agreements

On September 23, 2013, one of our wholly owned subsidiaries, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), entered into an Executive Employment Agreement with Adam Jennings to serve as Pipeline Maintenance's President (the "Jennings Agreement") for a term of one year, unless otherwise terminated or mutually extended.  The Company is a party to the Jennings Agreement only to the extent of the obligations it is required to perform under the Jennings Agreement.  Pursuant to the Jennings Agreement, Mr. Jennings may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent.  The Company also agreed to issue an aggregate of 1,200,000 shares of its common stock to Mr. Jennings as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following Mr. Jennings employment; provided however that the first installment shall be paid within 30 days of signing the agreement and if Mr. Jennings voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company.  The Company also has sole discretion to grant Mr. Jennings stock options in the Company.  Mr. Jennings is also entitled to receive 10% of Pipeline Maintenance's distributable limited liability company net profits during his employ.  The Company has sole rights to terminate Mr. Jennings' employment for cause.  The value of the first installment of the signing bonus of 300,000 shares of common stock was recorded on September 23, 2013 as fees payable in common stock.

On September 20, 2013, the Company entered into an Executive Employment Agreement with Joshua Brooks (the "Brooks Agreement"), to serve as the Company's Vice President of Operations, primarily focusing on the Company's oilfield construction, services and maintenance operations and to observe and learn the other activities that the Company is involved in including water processing.  The term of the Brooks Agreement is for a term of one year, unless otherwise terminated or mutually extended.  Pursuant to the Brooks Agreement, Mr. Brooks is entitled to an annual salary of $120,000, which shall be paid on a quarterly basis, in shares of the Company's common stock at a price per share equal to the weighted average trading value of such stock during the same quarter.   As incentive to help develop the operation and profitability of Pipeline Maintenance, Mr. Brooks is entitled to an aggregate of an additional 4,000,000 shares of the Company's common stock upon the occurrence of certain Company milestones in gross sales and/or profit.  As a signing bonus, the Company shall issue Mr. Brooks 2,000,000 shares of its common stock, which Mr. Brooks must return on a pro-rata basis, if he voluntarily resigns before March 20, 2014.  Mr. Brooks shall be entitled to bonuses and stock options, which the Company may award and grant in its sole discretion, and to the benefits offered to similarly situated executives.  The Company shall reimburse Mr. Brooks for reasonable business expenses he incurs while carrying out his duties under the Brooks Agreement, and they shall also reimburse him for use of his personal vehicle at standard mileage rates and provide him with a laptop computer and cellular phone, if needed to carry out such duties.  The Company shall indemnify Mr. Brooks to the fullest extent permitted under Nevada law.  Unless Mr. Brooks is terminated for cause by the Company, which they maintain the right to do, or as a result of disability, Mr. Brooks is entitled to certain severance as set forth in the Brooks Agreement.  Mr. Brooks maintains the right to terminate his employment at any time upon 30 days advance written notice and shall be entitled to all compensation payable up through such thirtieth day, after which all of the Company's obligations (other than indemnification and specific benefits) shall cease.  Pursuant to the Brooks Agreement, Mr. Brooks is under a 1 year non-compete/solicitation agreement.  The value of the signing bonus of $140,000 was recorded as fees payable in common stock on September 20, 2013.The Company has issued 2,000,000 shares of common stock to satisfy the obligation. As of December 31, 2013 there was no remaining obligation.

Service Agreement

On September 24, 2013, the Company entered into a service agreement with one of its executive officers pursuant to which the officer agreed to provide a personal guaranty to lenders and/or suppliers from which the Company's subsidiary, STW Oilfield Construction, LLC ("Oilfield Construction"), seeks to rent or purchase equipment, as specified in each agreement.  In consideration for the personal guaranty, the Company agreed to issue to the officer that number of shares of its common stock, valued at $0.12 per share, as is equal to the amount of the guaranty (the "Guaranty Shares").  The value of the 382,000 shares of common stock was recorded on September 24, 2013, as fees payable in common stock. The Company maintains the right to terminate these service agreements at any time with written notice.  The term of the agreement/guaranty is for 6 months.  The following table provides salient information about this service agreement, which is attached as an exhibit to this Report.

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, Vice President of Operations	September 24, 2013	$	45,800	(1)		382,000		382,000

(1) Pursuant to the service agreement with Mr. Brooks, any amounts due on a related defaulted lease in excess of 20% of the amount of the personal guaranty, shall be the Company's obligation.  If Brooks' employment with the Company is terminated, the Company shall use its best commercial efforts to have it or a third party assume Brooks' guarantee obligations. This obligation is still outstanding as of December 31, 2013.

Contingencies

Viewpoint Securities, LLC Arbitration.  On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP"), who entered into that certain engagement agreement, dated March 9, 2008, as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010, pursuant to which the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company.  The demand alleges breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement.  VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock.  The Company believes that it has valid defenses and intends to contest these claims vigorously.  On August 18, 2012, VP dismissed Stan Weiner from the claim with prejudice.  On February 5, 2013, the Company caused an answer to the complaint to be filed on behalf of the Company, denying the allegations and asserting, among other things, the course of business conduct, lack of FINRA status post termination and recognition of third party entitlement to amounts owed.  The arbitration has gone through the discovery phase and is set for a final hearing on February 3, 2014. A final arbitration hearing was held on February 3, 2014.   On April 1, 2014, the Arbitrator issued an Award in favor of Viewpoint for $196,727 on Viewpoint’s claim for $216,217 in fees and expenses, plus $5,541 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commencing April 1, 2014.

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”).   Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE (described more fully in Item 3 Legal Proceedings, GE Ionics Lawsuit, upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”).  As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote.

Marcus Muller and Roy Beach Promissory Notes.  On March 2, 2012, counsel for Marcus Muller and Roy Beach sent a demand letter to the Company demanding payment on two 12% Convertible Notes by the Company to Messrs. Muller and Beach.  The notes in an original principal amount of $25,000 each, were issued on August 13 and 18, 2010 and were in a default status.  Muller and Beach’s counsel threatened to initiate Chapter 7 Involuntary Bankruptcy proceedings against the Company, but did not disclose who the necessary third debtor was who had an alleged liquidated and uncontested claim.  Since that date, the Company has settled its obligation to Muller and Beach and the related matter has been resolved; however, an issue regarding attorneys’ fees in relation to this matter is now pending.  There has been no accrual for those fees.

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Notes Payable (Details 1) (USD $)	Dec. 31, 2013
Revenue Participation Notes balance	$ 852,702
ParticipationNote 1 [Member]
Revenue Participation Notes balance	165,000
ParticipationNote 2 [Member]
Revenue Participation Notes balance	302,500
ParticipationNote 3 [Member]
Revenue Participation Notes balance	182,000
ParticipationNote 4 [Member]
Revenue Participation Notes balance	$ 203,202

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property And Equipment Tables

Property, Plant and Equipment

	December 31, 2013			December 31, 2012
Office furniture and equipment	$	16,838		$	10,396
Tools and yard equipment		2,302			--
Vehicles and construction equipment		798,273			--
Total, cost		817,413			10,396
Accumulated Depreciation and Amortization		(70,775	)		(10,396	)
Total Property and Equipment	$	746,638		$	-

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Restatements Tables

Future minimum lease payments

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	7,116		$	117,000	$	124,116
2015		7,116			117,000		124,116
2016		7,116			117,000		124,116
2017		5,930			117,000		122,930
Thereafter		--			321,750		321,750
Total minimum lease payments		27,278			789,750		817,028
Less interest		(3,978	)
Capital lease obligation		23,300
Less current portion		(5,012	)
Long-term capital lease obligation	$	18,288

Service Agreement

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, Vice President of Operations	September 24, 2013	$	45,800	(1)		382,000		382,000

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Commitments and Contingencies (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Monthly rental expense	$ 9,750
Rental expense	78,558
Rental expense to related party	49,308
Operating lease rental expense	14,292
Option to purchase land and building	825,500
Original settlement agreement amount	1,977,372
Viewpoint [Member]
Loss contingency	216,217
Loss contingency, additional shares	566,667
Loss contingency reflected on financial statements	202,727
Muller and Beach [Member]
Loss contingency	25,000
Jennings [Member]
Shares issued as signing bonus	1,200,000
Fees payable in common stock	300,000
Brooks [Member]
Shares issued as signing bonus	2,000,000
Fees payable in common stock	140,000
Annual salary	120,000
Milestone shares	4,000,000
Guaranty shares, per share price	$ 0.12
Guaranty Shares	382,000
GE Ionics [Member]
Loss contingency	$ 11,239,437

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Stockholders' Equity (Details 1) (USD $)	Dec. 31, 2013
Securities to acquire common stock outstanding	102,350,791
Warrant 1 [Member]
Securities to acquire common stock outstanding	1,500,000
Exercise price	$ 4.00
Warrant 2 [Member]
Securities to acquire common stock outstanding	480,000
Exercise price	$ 3.00
Warrant 3 [Member]
Securities to acquire common stock outstanding	1,500,000
Exercise price	$ 8.00
Warrant 4 [Member]
Securities to acquire common stock outstanding	1,641,496
Exercise price	$ 0.02
Warrant 5 [Member]
Securities to acquire common stock outstanding	181,500
Exercise price	$ 0.20
Warrant 6 [Member]
Securities to acquire common stock outstanding	525,000
Exercise price	$ 0.20
Warrant 7 [Member]
Securities to acquire common stock outstanding	550,000
Exercise price	$ 0.20
Warrant 8 [Member]
Securities to acquire common stock outstanding	2,777,500
Exercise price	$ 0.20
Warrant 9 [Member]
Securities to acquire common stock outstanding	1,110,230
Exercise price	$ 0.20
Warrant 10 [Member]
Securities to acquire common stock outstanding	4,000,000
Exercise price	$ 0.20
Warrant 11 [Member]
Securities to acquire common stock outstanding	200,000
Exercise price	$ 0.20
Warrant 12 [Member]
Securities to acquire common stock outstanding	3,875,000
Exercise price	$ 0.20
Warrant Total [Member]
Securities to acquire common stock outstanding	18,340,726
Notes 1 [Member]
Securities to acquire common stock outstanding	27,765,417
Exercise price	$ 0.02
Notes 2 [Member]
Securities to acquire common stock outstanding	1,725,958
Exercise price	$ 0.12
Notes 3 [Member]
Securities to acquire common stock outstanding	517,118
Exercise price	$ 0.02
Notes 4 [Member]
Securities to acquire common stock outstanding	46,114,632
Exercise price	$ 0.08
Notes 5 [Member]
Securities to acquire common stock outstanding	198,299
Exercise price	$ 0.08
Notes 6 [Member]
Securities to acquire common stock outstanding	163,968
Exercise price	$ 0.08
Notes 7 [Member]
Securities to acquire common stock outstanding	3,875,000
Exercise price	$ 0.08
Stock Fees [Member]
Securities to acquire common stock outstanding	3,649,673

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Consolidated Statements of Stockholders’ Deficit (USD $)	Common Stock	Additional Paid In Capital	Accumulated Deficit	Non-Controlling Interest	Total
Beginning balance, Amount at Dec. 31, 2011	$ 46,637	$ 5,773,505	$ (13,723,704)		$ (7,903,562)
Beginning Balance, Shares at Dec. 31, 2011	46,636,849
Shares issued to board members as directors fees, Shares	29,903,000
Shares issued to board members as directors fees, Amount	29,903	1,452,497			1,482,400
Shares issued for consulting services, Shares	15,768,750
Shares issued for consulting services, Amount	15,769	770,606			786,375
Issuance of shares in connection with debt settlement agreement, shares	3,000,000
Issuance of shares in connection with debt settlement agreement, shares, amount	3,000	27,000			30,000
Subscription sale of shares, net of issuance cost, shares	1,000,000
Subscription sale of shares, net of issuance cost, amount	1,000	44,000			45,000
Reclassification of derivative liability due to increase share authorization
Net Loss for the period			(3,598,684)		(3,598,684)
Ending Balance, Amount at Dec. 31, 2012	96,309	8,067,608	(17,322,388)		(9,158,471)
Ending Balance, Shares at Dec. 31, 2012	96,308,599
Conversion of accrued interest on 12% convertible notes to common shares, Shares	353,120
Conversion of accrued interest on 12% convertible notes to common shares, Amount	353	20,834			21,187
Conversion of 12% convertible notes to common shares, Shares	750,380
Conversion of 12% convertible notes to common shares, Amount	750	44,272			45,022
Value of warrants issued for loan fee
Value of warrants issued with notes payable		171,996			171,996
Shares issued to board members as directors fees, Shares	4,575,000
Shares issued to board members as directors fees, Amount	4,575	269,925			274,500
Shares issued to advisory board members as fees, Shares	468,750
Shares issued to advisory board members as fees, Amount	469	27,656			28,125
Shares issued for consulting services, Shares	6,500,000
Shares issued for consulting services, Amount	6,500	247,500			434,000
Reclassification of derivative liability due to increase share authorization		1,977,372			1,977,372
Shares issued as employment signing bonuses, shares	2,300,000
Shares issued as employment signing bonus, amount	2,300	158,700			161,000
Non-controlling interest investment in subsidiary				2,500	2,500
Net Loss for the period			(7,032,955)	(484,424)	(7,081,379)
Ending Balance, Amount at Dec. 31, 2013	$ 111,256	$ 11,231,418	$ (24,355,343)	$ (45,924)	$ (13,058,893)
Ending Balance, Shares at Dec. 31, 2013	111,255,849

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Receivable from Factor, Net of Unapplied Customer Credits

12 Months Ended

Dec. 31, 2013

Receivable From Factor Net Of Unapplied Customer Credits

Receivable from Factor, Net of Unapplied Customer Credits

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an accounts purchase facility with Crown Financial pursuant to an Account Purchase Agreement (the “Accounts Purchase Agreement”), pursuant to the Texas Finance Code.

The Accounts Purchase Agreement shall continue until terminated by either party upon 30 days written notice.  The Accounts Purchase Agreement is secured by a security interest in substantially all of STW Energy’s assets pursuant to the terms of a Security Agreement. Under the terms of the Accounts Purchase Agreement, Crown Financial may, at its sole discretion, purchase certain of the STW Energy’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to STW Energy up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Crown shall pay STW Energy a rebate percentage of between 0-18.5% of the related invoice. Each account receivable purchased by Crown will be subject to a discount fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Crown will generally have full recourse against STW Energy in the event of nonpayment of any such purchased account.

The Accounts Purchase Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening STW Energy’s mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Accounts Purchase Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Crown enforcing its rights under the Security Agreement and take possession of the collateral. The Accounts Purchase Agreement contains provisions relating to events of default that are customary for agreements of this type.

Factoring Agreement with Joshua Brooks

On September 26, 2013, STW Oilfield Construction, LLC (Oilfield Construction) entered into an accounts receivable factoring facility (the “Factoring Facility”) with Mr. Joshua Brooks, the Company's Vice President of Operations, pursuant to a Loan Agreement (the “Factoring Agreement”), which shall not be deemed an account purchase agreement pursuant to the Texas Finance Code. The Factoring Facility includes a loan in the amount of $225,000, of which none is outstanding at December 31, 2013.

The Factoring Facility shall continue until terminated by either party upon 30 days written notice. The Factoring Facility is secured by a security interest in substantially all of Oilfield Construction's assets pursuant to the terms of a Security Agreement. Under the terms of the Factoring Agreement, Joshua Brooks may, at his sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Brooks will advance to the Company up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Mr.

Brooks shall pay Oilfield Construction a rebate percentage of between 0-18.5% of the related invoice. Each account receivable purchased by Mr. Brooks will be subject to a factoring fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Mr. Brooks will generally have full recourse against the Company in the event of nonpayment of any such purchased account.

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Joshua Brooks as attorney in fact for various activities associated with the purchased accounts receivable, including opening Oilfield Construction's mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Mr. Brooks enforcing its rights under the Security Agreement and take possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

The Company has guaranteed performance of certain of Oilfield Construction's obligations under the Factoring Agreement, pursuant to a Guaranty Agreement with Mr. Brooks, pursuant to which the Company shall guaranty payment of the loan and the related indebtedness thereon. Pursuant to the Guaranty Agreement, Mr. Brooks may take all reasonable steps to take and hold security for the payment of the obligations under the Guaranty Agreement and the Company granted Mr. Brooks a security interest in any claims the Company may have against Mr. Brooks or Energy Services, as well as the proceeds of any of the foregoing, any of which Mr. Brooks may retain without notice at any time until the guaranteed obligations are paid in full. Pursuant to the Guaranty Agreement, the Company may not, without Mr. Brooks' prior written consent, transfer or otherwise dispose of a material portion of the Company's assets or any interest thereon.

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Information Tables

Segment Operations and Assets

Segment Operations

	Year Ended December 31, 2013						Year Ended December 31, 2012
	Water Reclamation			Oil & Gas Services			Water Reclamation			Oil & Gas Services
Revenues	$	536,735		$	1,408,896		$	--		$	--
Costs of revenues		472,978			1,202,336			--			--
Operating expenses		102,210			763,900			1,935,027			--
Non-allocable corporate overhead					(3,160,713	)
Segment loss	$	(38,453	)	$	2,603,374		$	(1,935,027	)	$	--

Segment Assets

	December 31, 2013				December 31, 2012
	Water Reclamation		Oil & Gas Services		Water Reclamation		Oil & Gas Services
Current Assets	$	--	$	579,541	$	--	$	--
Fixed assets				694,219		--		--
Segment Assets	$	--	$	1,273,760			$	--

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Derivative Liability (Details Narrative)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Derivative Liability Details Narrative
Common stock, authorized shares	250,000,000	100,000,000
Volatility rate to value derivative instruments	623.00%	100.00%

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Nature of the Business and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fair Value of Derivative Liability

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985
December 31, 2012	$	--	$	--	$	1,046,439		$	1,046,439

Estimated useful life of property and equipment

Computer equipment and software	3 years
Furniture	3 years
Machinery	3-5 years