10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

OR

[  ] TRANSITION REPORT PURSUANT TO PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____ to _____

STW RESOURCES HOLDING CORP

(Exact Name of Registrant as Specified in Charter)

Nevada	000-52654	26-1945743
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)
3424 South County Road 1192 Midland, Texas 79706		(432) 686-7777
(Address of Principal Executive Offices)		(Registrant’s Telephone Number)

(Former name and address, if changed since last report)

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 [  ]   No [X]

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

As of October 21, 2014, there were 167,368,821 shares of the issuer’s common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS
		Page
PART I	FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013	1
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six month periods ended June 30, 2014 and 2013	2
	Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited) for the period from January 1, 2014 through June 30, 2014	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six month period ended June 30, 2014 and 2013	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4	Controls and Procedures	36
PART II	OTHER INFORMATION
Item 1	Legal proceedings	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3	Defaults upon Senior Securities	39
Item 5	Other information	40

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STW Resources Holding Corp.

PART I

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets

		June 30, 2014			December 31, 2013
ASSETS		(Unaudited)
Current Assets
Cash		$	758,240		$	17,301
Accounts receivable, trade, net			1,510,654			532,910
Accounts receivable from related parties			935,373			--
Prepaid expenses and other current assets			627,172			33,370
	Total Current Assets		3,831,439			583,581
Long Term Assets
Property and equipment, net			1,065,167			746,638
Other assets
Deferred loan costs, net of $146,589 and $102,435 accumulated  amortization, respectively			141,274			185,428
TOTAL ASSETS		$	5,037,880		$	1,515,647
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank overdraft		$	--		$	30,468
Accounts Payable			3,258,667			1,256,043
Payable to related parties:
Black Pearl Energy, LLC			1,233,060			139,763
Dufrane Nuclear, Inc.			193,553			132,490
Accrued consulting fees – related parties			727,166			584,666
Current portion of notes payable, net of discounts, $958,689 and $854,928 payable to related parties, respectively			3,668,471			4,668,492
Sales and payroll taxes payable			2,336,107			350,074
Insurance premium finance contract payable			526,462			--
Accrued expenses and interest			1,408,454			1,839,439
Accrued compensation			779,939			285,190
Accrued board compensation			271,067			491,724
Fees payable in common stock			718,687			231,897
Stock subscriptions payable			700,000			310,000
Derivative liability			1,128,152			1,630,985
	Total Current Liabilities		16,949,785			11,951,231
Notes payable, net of discount and current portion			3,118,574			2,623,009
Total Liabilities			20,068,359			14,574,240
Commitments and contingencies (Note 8)
Stockholders' Deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
Common stock; $0.001 par value; 250,000,000 shares authorized, 150,618,931 and 111,255,849 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively			150,620			111,256
Additional paid in capital			15,718,689			11,231,418
Accumulated deficit			(30,822,936	)		(24,355,343	)
Total Stockholders' Deficit of STW Resources Holding Corp.			(14,953,627	)		(13,012,669	)
Non-controlling interest in subsidiary			(76,852	)		(45,924	)
Total Stockholders’ Deficit			(15,030,479	)		(13,058,593	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	5,037,880		$	1,515,647

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

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STW Resources Holding Corp

Condensed Consolidated Statements of Operations

For the three and six month periods ended June 30, 2014 and 2013 (Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues:
Water treatment services	$	10,051		$	--		$	10,051		$	541,000
Energy and construction services		5,565,911			--			9,126,698			--
Related parties services revenue		37,386			--			77,378			--
Net revenues		5,613,348			--			9,214,127			541,000
Cost of revenues		5,276,057			--			8,457,299			459,634
Gross Profit		337,291			--			756,828			81,366
Operating expenses
Research and development		56,465			9,118			151,955			9,118
Sales and marketing		266,681						439,189			--
General and administrative		3,029,495			443,168			5,158,764			1,049,932
Depreciation and amortization		63,716			--			116,400			--
Total operating expenses		3,416,357			452,286			5,866,308			1,059,050
Loss from operations		(3,079,066	)		(452,286	)		(5,109,480	)		(977,684	)
Interest expense		(507,903	)		(212,685	)		(945,505	)		(560,562	)
Change in derivative liability		(456,809	)		438,185			(443,536	)		(1,736,369	)
Net Loss	$	(4,043,778	)	$	(226,786	)	$	(6,498,521	)	$	(3,274,615	)
Less: Share of net income (loss) of subsidiary attributable to non-controlling interest		10,641			(771	)		(30,928	)		(771	)
Net Loss of STW Resources Holding Corp.	$	(4,054,419	)	$	(226,015	)	$	(6,467,593	)	$	(3,273,844	)
Loss per common share – basic and diluted	$	(0.03	)	$	(0.00	)	$	(0.05	)	$	(0.03	)
Weighted average shares outstanding - basic and diluted		141,671,620			96,606,172			132,569,539			96,456,559

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

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STW Resources Holding Corp

Condensed Consolidated Statement of Stockholders’ Deficit (Unaudited)

For the six months ended June 30, 2014

	Common Stock $0.001 Par
	Number		Amount		Additional Paid In Capital		Accumulated Deficit			Non-Controlling Interest			Stockholders’ Deficit
Balance, December 31, 2013		111,255,849	$	111,256	$	11,231,418	$	(24,355,343	)	$	(45,924	)	$	(13,058,593	)
Shares issued upon conversion of notes payable and accrued interest		16,594,510		16,595		1,571,479								1,588,074
Shares issued upon extension of maturity dates on notes payable		733,137		733		66,621								67,354
Shares issued upon conversion of PIK accrued interest		5,559,617		5,560		505,209								510,769
Shares issued for consulting fees		3,471,750		3,472		348,703								352,175
Shares issued as board of director fees		5,581,568		5,582		552,575								558,157
Shares issued to employees as compensation		3,016,250		3,016		298,609								301,625
Shares issued as a charitable contribution		1,000,000		1,000		109,000								110,000
Proceeds from sale of  common stock		1,531,250		1,531		120,969								122,500
Shares issued for common stock payable		1,875,000		1,875		148,125								150,000
Value of derivative associated with converted notes payable						715,981								715,981
Value of conversion feature of JMJ convertible note						50,000								50,000
Net loss for the period								(6,467,593	)		(30,928	)		(6,498,521	)
Balance, June 30, 2014		150,618,931	$	150,620	$	15,718,689	$	(30,822,936	)	$	(76,852	)	$	(15,030,479	)

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

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STW Resources Holding Corp

Condensed Consoidated Statements of Cash Flows (Unaudited)

For the six month periods ended June 30, 2014 and 2013

		Six Month Periods Ended June 30:
		2014			2013
Cash flows from operating activities
Net loss		$	(6,467,593	)	$	(3,273,844	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation			116,487			--
Share of net loss of subsidiary attributable to non-controlling interest			(30,928	)		(771	)
Change in derivative liability			443,536			1,736,369
Value of common shares issued upon conversion of notes payable in excess of carrying value			(272,980	)		--
Financing cost of JMJ note payable			42,592			--
Amortization of discount and debt issuance costs			90,833			56,872
Value of Share based compensation			1,655,444			210,000
Changes in working capital:
(Increase) Decrease in accounts receivable			(1,913,117	)		13,669
(Increase) Decrease in prepaid expenses and other current assets			(593,807	)		--
Increase (Decrease) in accounts payable			2,002,624			89,924
Increase (Decrease) in insurance premium finance contract payable			526,462
Increase (Decrease) in sales and payroll taxes payable			1,986,034			--
Increase (Decrease) in accrued expenses and interest			854,637			602,081
Increase (Decrease) in accrued compensation			494,749			108,046
Increase (Decrease) in accrued board compensation			--			288,324
Increase (Decrease) in deferred revenue			--			(97,346	)
	Net cash used in operating activities		(1,065,027	)		(266,676	)
Cash flows from investing activities
Purchase of equipment, net of equipment loans			(107,431	)		--
	Net cash used in investing activities		(107,431	)		--
Cash flows from financing activities
Bank overdraft			(30,468	)		--
Proceeds from stock subscriptions, net			540,000			-
Accounts payable – related parties			1,296,861			(18,829	)
Principal payments of notes payable			(95,496	)		(41,000	)
Proceeds from  notes payable			80,000			337,525
Debt issuance costs			--			(35,025	)
Proceeds from issuance of common stock			122,500			--
	Net cash provided by financing activities		1,913,397			242,671
Net increase (decrease) in cash			740,939			(24,005	)
Cash at beginning of period			17,301			59,870
Cash at end of period		$	758,240		$	35,865

(Continued)

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STW Resources Holding Corp

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six month periods ended June 30, 2014 and 2013

Supplemental cash flow information:
Cash paid for interest	$	12,679	$	3,115
Cash paid for income taxes	$	--	$	--
Non-cash investing and financing activities:
Related party note payable for Black Wolf investment	$	--	$	420,000
Shares issued from common stock payable	$	150,000	$	-
Value of shares issued to consultants	$	352,175	$	210,000
Value of shares issued to employees as compensation	$	301,625	$	--
Value of shares issued as board fees	$	558,157	$	--
Value of shares issued as charitable contributions	$	110,000	$	--
Value of shares issued in connection with extension of notes payable	$	67,354	$	--
Value of shares issued in payment of accrued PIK interest	$	510,769	$	--
Value of shares issued upon conversion of notes payable    and accrued interest	$	1,588,074	$	66,209
Value of warrants issued as debt issuance costs	$	--	$	159,996
Value of warrants issued with revenue participation notes	$	--	$	33,398
Value of conversion feature of JMJ convertible note payable	$	50,000	$	--
Value of derivative associated with convertible note payable	$	715,981	$	--

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

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STW Resources Holding Corp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six Month Periods Ended June 30, 2014 and 2013

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission.  Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any other interim period.  These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2013, which are included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014. The December 31, 2013 condensed consolidated balance sheet was derived from the audited condensed consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014.

History of the Company

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.

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. 

Consolidation policy

The condensed consolidated financial statements for the six months ended June 30, 2014, include the accounts of the Company and its wholly owned subsidiaries: STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and its 75% owned subsidiary STW Energy, LLC. The condensed consolidated financial statements as of June 30, 2013, include STW Resources Holding Corp and STW Energy, LLC as the other subsidiaries noted above were not established until the quarterly period ended September 30, 2013. 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 at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

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

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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 $45,924 for the year ended December 31, 2013. During the six month period ended June 30, 2014, a net loss attributable to the non-controlling interest of $30,928 was incurred. During the six months ended June 30. 2013, a net loss attributable to the non-controlling interest of $771 was incurred. As of June 30, 2014, the net deficit interest in the subsidiary held by the non-controlling interest is $76,852.

Going Concern

The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as 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 $30,822,936 as of June 30, 2014, and as of that date was delinquent in payment of $2,336,107 of sales, payroll taxes, and penalties. As of June 30, 2014, $2,807,127 of notes payable is in default. Since its inception in January 2008 management has raised equity and debt financing of approximately $15,000,000 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.  

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 June 30, 2014, the Company had $758,240 of cash on hand; however, the Company raised $559,000 from the issuance of 5,590,000 shares of its common shares during the period July 1, 2014 through October 21, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations through December 31, 2014. Management is currently seeking 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, 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.

The accompanying condensed 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.

Use of Estimates

Condensed 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 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.

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Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations.  As of June 30, 2014 and December 31, 2013, respectively, the Company has determined that an allowance for doubtful accounts is required, but has determined it to be immaterial.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

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 per institution. At June 30, 2014, there were no account balance per institution that would have exceeded the $250,000 insurance limit.

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 June 30, 2014, three vendors accounted for 11%, 10% and 7% of total accounts payable.  During the six months ended June 30, 2014, three vendors accounted for 83% of total purchases. During the three months ending June 30, 2014 three vendors totaled 85% of purchases. During the three and six months ended June 30, 2013, one vendor, a subcontractor, accounted for 100% of total purchases.

As of June 30, 2014, three customers accounted for 34%, 7% and 6% of accounts receivable. During the six months ended June 30, 2014, three customers accounted for 27%, 22% and 9% of net revenues. As of June 30, 2013, 100% of accounts receivable were from one customer. During the three and six months ended June 30, 2013, one customer accounted for 100% of revenues.

Fair Value of Financial Instruments

 “Fair value” is defined 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, 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 5).

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 use of assumptions to external and internal information. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy:

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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.

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and derivatives due to insufficient authorized shares to settle outstanding contracts which are carried at fair value, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

Management has used the simplified Black Scholes 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 on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2014 and December 31, 2013.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2014	$	--	$	--	$	1,128,152		$	1,128,152
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the statement of operations as 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 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 common stock 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, 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.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 5).

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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

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 during the three and six months ending June 30, 2014 or for the year ending December 31, 2013.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. 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 recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the six months ended June 30, 2014, the Company recognized $9,126,698 of revenues from these services contracts, and $77,378 revenues from related parties. During the three months ending June 30, 2014 the Company realized revenue of $5,565,911 from services contracts and $37,386 of the service revenue was from related parties.

Business Segments

The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note10.

Income Taxes

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 basis.  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.   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. 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 reduction in the valuation allowance will be included in income in the year of the change in estimate.

-10-

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 June 30, 2014 and December 31, 2013, 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 recognize 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 option pricing model to calculate the fair value of any equity instruments on the grant date.

At June 30, 2014 and December 31, 2013, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net 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 net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2014 and December 31, 2013, the Company had 78,617,973 and 102,350,791 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

The initial balance of stock subscriptions payable as of December 31, 2013, was $310,000 representing 2,000,000 shares to be issued. During the six months ended June 30, 2014, the Company received stock subscriptions and $662,500 of proceeds from a unit offering of its common stock in consideration of 8,281,250 shares of its common stock. During the six months ended June 30, 2014, $272,500 of these stock subscriptions payable were issued representing 3,406,250 shares of common stock, including $150,000, or 1,875,000 shares, of the December 31, 2013 subscription payable. The remaining balance of stock subscriptions payable as of June 30, 2014, is $700,000 representing 6,875,000 shares to be issued.

Fees Payable in Common Stock

During the six months period ending June 30, 2014, the Company agreed to issue an aggregate of 12,136,571 shares and cancelled 166,700 of its common stock in payment of performance bonuses, employment signing bonuses, consulting fees, a loan guaranty, and a partial payment of a technology licensing agreement. During the three months period ending June 30, 2014, the Company agreed to issue an aggregate of 7,852,917 shares of its common stock in payment performance bonuses, employment signing bonuses, consulting fees, a loan guaranty, and a partial payment of a technology licensing agreement and cancelled 166,700 shares. During the six months ended June 30, 2013, the Company agreed to pay 2,100,000 shares for services valued at $210,000. During the three months ended June 30, 2013 there were no additional commitments for the fees payable in common stock. As of December 31, 2013, the Company had outstanding commitments to issue an aggregate of 3,649,673 shares of its common stock valued at $231,897. During the six months ended June 30, 2013, the Company agreed to pay 11,969,871 shares for services valued at $1,317,944. During the six month period ending June 30, 2014, the Company cancelled 166,700 valued at $11,669 and issued 8,221,137 shares valued at $831,154 in payment of these fees which left a remaining of fees payable in common stock of $718,687, or 8,398,407 shares.

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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.

NOTE 2 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
Office furniture and equipment	$	27,014		$	16,838
Tools and yard equipment		149,535			2,302
Facilities and leasehold improvements		34,389			--
Vehicles and construction equipment		1,041,490			798,273
Total, cost		1,252,428			817,413
Accumulated Depreciation and Amortization		(187,261	)		(70,775	)
Property and equipment, net	$	1,065,167		$	746,638

Depreciation expense for the three and six month periods ended June 30, 2014 is $63,716 and $116,487, respectively. Depreciation expense for both the three and six month periods ended June 30, 2013 is zero.

NOTE 3 – RECEIVABLE FROM FACTOR, NET OF UNAPPLIED CUSTOMER CREDITS

Accounts Purchase Agreement – Crown Financial, LLC

On June 21 2013, STW Energy Services, LLC (“STW Energy”) entered into an accounts purchase facility with Crown Financial, LLC, 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. As of June 30, 2014 and December 31, 2013, respectively, there were no accounts receivables subject to recourse due to nonpayment of the purchased accounts.

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.

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NOTE 4 – NOTES PAYABLE

The Company’s notes payable at June 30, 2014 and December 31, 2013, consisted of the following:

	June 30,			December 31,
Name	2014			2013
14% Convertible Notes	$	2,326,517		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		33,280			43,280
Short term note - MKM		30,000			--
Convertible note – JMJ Financial		55,556			--
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue participation notes		852,702			852,702
Crown Financial note		986,310			683,036
Equipment finance contracts		119,670			137,573
Capital lease obligation		20,015			23,300
Unamortized debt discount		(116,100)			(107,221)
Total debt		6,787,045			7,291,501
Less: Current Portion		(3,668,471	)		(4,668,492	)
Total long term debt	$	3,118,574		$	2,623,009

14% Convertible Notes

Between November 2011 and September 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 41,734,038 shares of the Company’s common stock.

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 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 are included in the derivative liabilities account each reporting period as the Company has insufficient authorized shares to settle outstanding contracts (see Note 5). On July 12, 2013, the Company increased its share authorization to 250,000,000 shares, adjusted the gain or loss on the change in fair value through the statement of operations and then reclassified this derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

As of June 30, 2014 and December 31, 2013, the aggregate principal balances of these notes are $2,326,517 and $2,904,736, respectively. During the six month period ended June 30, 2014, the Company converted principal and accrued interest of $973,869 in exchange for 9,770,008 shares of the Company’s common stock. The value of the stock issued was $781,337 resulting in additional interest expense of $192,532 upon the conversion of convertible debt. During the three month period ended June 30, 2014, the Company converted principal and accrued interest of $741,912 in exchange for 9,273,900 shares of the Company’s common stock. The value of the stock issued was $927,390 resulting in additional interest expense of $185,478 upon the conversion of convertible debt. As June 30, 2014, the total of outstanding 14% convertible notes is $2,326,517 of which $294,752 matured on November 30, 2013 and is in default, however, as of October 21, 2014, none of the note holders have declared the notes in default. During the six month period ended June 30, 2013, the Company converted principal of $25,000. There was no additional activity in the three months ending June 30, 2013 in this area.

As of June 30, 2014 and December 31, 2013, $171,892 of the 14% convertible notes is payable to related parties.

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12% Convertible Notes

Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that matured on November 30, 2011 and are currently in default.  At June 30, 2014, the remaining balance is $100,000. 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.

During the six months ended June 30, 2014, the Company issued 6,824,500 shares of its common stock valued at $614,205 in payment of $225,000 of principal and $116,225 accrued interest (total of $341,225). The conversion of these notes payable and accrued interest for common stock resulted in a non-cash charge of $272,980 to the derivative liability upon the conversion of convertible debt. During the six months ended June 30, 2013, the Company issued 7,928,000 shares of its common stock in payment of $240,000 of principal and $123,191 accrued interest (total of $363,191). During the three months ended June 30, 2013, the Company issued 1,103,500 shares of its common stock valued at $66,209 at the date of issuance, resulting in an expense of $44,243, in payment of $15,000 of principal and $6,966 accrued interest. Additionally, the Company paid $50,000 of principal and $5,532 in accrued interest on two notes.

Other Short-Term Debt

Other short term debt is comprised of a note payable to an accredited investor in the amount of $33,280. The Company did not make its required payments during 2013 or 2014 and the balance is in default.

On January 1, 2014, the Company issued a $30,000 short term note from an investor, MKM Capital. The note bears interest at 8% and matures on January 1, 2015.  The balance of the note payable as of June 30, 2014, is $30,000.

Convertible note payable with original issue discount

On March 19, 2014, the Company issued a $500,000 convertible note to JMJ Financial, an accredited private investor.  The note bears interest at 6% and matures on March 19, 2016. The note is convertible under a variable conversion price formula that is based on the lesser of $0.11 per share of 60% of the lowest trade price in the 25 trading days previous to the conversion date. The note bears a $50,000 original issue discount which would yield $450,000 of net cash proceeds to the Company.  As of June 30, 2014, the Company has drawn $50,000 cash proceeds from this note. The $50,000 cash draw plus the applicable pro-rata original issue discount results in a gross note payable balance of $55,556. The value of the conversion feature of this note, accounted for as a liability, was determined under the Black-Scholes pricing model to be $92,592 as of the date of issuance, of which $42,592 was recorded as a financing cost in the condensed consolidated statement of operations and $50,000 was recorded as a loan discount.  The conversion feature and the original issue discount have been recorded as a loan discount of $55,556 that will be amortized as interest expense over the term of the note under the effective interest method. The effective interest rate of this note was determined to be 25.7%.

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.

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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 June 30, 2014 and 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.  (See Note 9)

Deferred Compensation Notes

As of June 30, 2014, and 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 June 30, 2014 and 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 more fully described in the notes to the consolidated financial statements for the year ended December 31, 2013 which was included in the Company’s Form 10-K as filed with the SEC on June 20, 2014.

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 our subsidiary: 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 June 30, 2014 and December 31, 2013, the Company had drawn down $986,310 and $683,036, respectively, of this loan facility.

In lieu of a cash loan fee, the Company issued 4,000,000 warrants in connection with this loan agreement. These warrants have an exercise price of $0.20, are immediately exercisable and have 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 as a deferred loan cost to be amortized to interest expense over the term of the loan.  Related party interest expense for this loan was $47,040 and $83,746 for the three and six months ended June 30, 2014, respectively. There was no such expense for the three and six months ended June 30, 2013.

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Equipment Finance Contracts

During 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 at rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of June 30, 2014 and December 31, 2013, respectively, the Company has an aggregate balance of $119,670 and $137,573 payable on these equipment finance contracts.

Capital lease obligation

During 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%. As of June 30, 2014 and December 31, 2013, the principal balance on this capital lease is $20,015 and $23,300, respectively.

For the six month periods ended June 30, 2014 and 2013, interest expense on all notes payable described above was $945,505 and $560,562, respectively, which included $90,833 and $56,872, respectively, of amortization of debt discount and debt issuance costs. For the three months ended June 30, 2014 and 2013, interest expense on all notes payable described above was $507,903 and $212,685, respectively. This included $47,032 and $28,084, respectively, of amortization of debt discount and debt issuance. There was no interest capitalized in 2014 or 2013.

NOTE 5 - 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 derivative liability associated with the 14% convertible notes due to the availability of sufficient authorized shares to settle these outstanding contracts.

Management has used the simplified Black Scholes 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 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.

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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 June 30, 2014 and December 31, 2013:

	For the six months ended June 30, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.00– 0.50			0.00 – 0.60
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		623	%		623	%

	June 30, 2014		December 31, 2013
Embedded Conversion features	$	897,522	$	1,467,579
Warrants		230,630		163,406
	$	1,128,152	$	1,630,985

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 six months ended June 30, 2014		For the year ended December 31, 2013
Balance beginning	$	1,630,985	$	1,046,439
Change in derivative liability due to increased share authorization		--		(1,977,372)
Value of derivative liability associated with JMJ note payable		42,592
Value of derivative liability attributable to conversion of notes payable and accrued interest		(715,981)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980)
Change in fair  value		443,536		2,561,918
Balance ending	$	1,128,152	$	1,630,985

The reduction in fair value of the derivative liability is largely attributable to the effect on the derivative liability from the payment of $50,000 of notes and the conversion of $225,000 of notes, and related accrued interest.

NOTE 6 – RELATED PARTY TRANSACTIONS

Officers’ Compensation

During six month periods ended June 30, 2014 and 2013, we incurred $75,000 and $75,000, respectively, in officers’ compensation due our Director, Chairman and CEO, Mr. Stanley Weiner. During three month periods ended June 30, 2014 and 2013, we incurred $37,500 and $37,500, respectively. As of June 30, 2014 and December 31, 2013, the balances of $338,083 and $263,083, respectively, were payable to Mr. Weiner for his officers’ salary.

During six month periods ended June 30, 2014 and 2013, we incurred $75,000 and $75,000, respectively, in officers’ compensation due our Director and Chief Operating Officer, Mr. Lee Maddox. During three month periods ended June 30, 2014 and 2013, we incurred $37,500 and $37,500, respectively.  As of June 30, 2014 and December 31, 2013, the balances of $245,500 and $170,500, respectively, were payable to Mr. Maddox for his officers’ salary.

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During six month periods ended June 30, 2014 and 2013, we incurred $45,000 and $45,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. During three month periods ended June 30, 2014 and 2013, we incurred $22,500 and $22,500, respectively.  As of June 30, 2014 and December 31, 2013, the balances of $143,583 and $121,083, respectively, were payable to Seabolt Law Group for these services.

During six month periods ended June 30, 2014 and 2013, we incurred $317,118 and none, respectively, in CFO, audit preparation, tax, and SEC compliance services expense with Miranda & Associates, a Professional Accountancy Corporation, and Miranda CFO Services, Inc., firms owned by our Chief Financial Officer, Mr. Robert J. Miranda. During three month periods ended June 30, 2014 and 2013, we incurred $168,520 and none, respectively.  As of June 30, 2014 and December 31, 2013, the balance of $172,956 and $24,060, respectively, were payable to these firms for these services. During the three and six months ended June 30, 2014, we paid Miranda & Associates in the form of common stock 751,750 shares of common stock valued at $72,175 toward these fees. As of June 30, 2014, we have agreed to pay 1.0 million in share of common stock valued at $100,000 toward these obligations, leaving a cash payable balance due of $72,756 as of June 30, 2014.

During six month periods ended June 30, 2014 and 2013, we incurred $60,000 and none, respectively, in officers’ consulting fees due to our Chief Operating Officer, Mr. Joshua Brooks. During three month periods ended June 30, 2014 and 2013, we incurred $30,000 and none, respectively. During the six month period ended June 30, 2014, we also incurred with Mr. Joshua Brooks a performance bonus comprised of 2.0 million shares of the Company’s common stock valued at $120,000. As of June 30, 2014 and December 31, 2013, the balance of $60,000 and $30,000, was payable to Mr. Brooks for his officers’ salary. Under the terms of his employment agreement, Mr. Brooks is paid in common stock in lieu of cash compensation. These stock awards are accrued as fees payable in common stock the awards are vested.

During six month periods ended June 30, 2014 and 2013, we incurred $100,000 and none, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC. Mr. Adam Jennings. During three month periods ended June 30, 2014 and 2013, we incurred $50,000 and none, respectively. During the six month period ended June 30, 2014, we incurred with Mr. Adam Jennings a signing bonus comprised of 1,600,000 shares of the Company’s common stock valued at $148,000. During the three month period ended June 30, 2014, we incurred with Mr. Adam Jennings a signing bonus comprised of 1,300,000 shares of the Company’s common stock valued at $127,000. As of June 30, 2014 and December 31, 2013, the balance of $100,000 and $21,000, was payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards are accrued as fees payable in common stock as the awards are vested.

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. For the six months ended June 30, 2014 and 2013, the Company incurred board of director fees of $337,500 and $304,824, respectively. For the three months ended June 30, 2014 and 2013, the Company incurred board of director fees of $168,750 and $163,012, respectively.  During the three and six months ended June 30, 2014, the Company issued zero and 5,581,568 shares of its common stock in payment of these fees, valued at zero and $558,167, respectively. As of June 30, 2014 and December 31, 2013, the Company has accrued compensation due to its directors (both current and former) of $271,067 and $491,724, respectively.

As of June 30, 2014 and December 31, 2013, the Company has $1,233,060 and $139,763, respectively, of related party payables to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel. During six months ended June 30, 2014 and 2013, the Company, had sales of $77,378 and none, respectively, to Black Pearl Energy, LLC, a related party. During three months ended June 30, 2014 and 2013, the Company, had sales of $37,386 and none, respectively.

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As of June 30, 2014 and December 31, 2013, the Company has a related party payable of $193,553 and $132,490, respectively, to Dufrane Nuclear, Inc. a company controlled by Mr. Joshua Brooks, the Company’s Chief Operating Officer.

Line of credit with Black Pearl Energy, LLC

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, of which $749,334 has been advanced as of June 30, 2014. 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 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 with Crown Financial, LLC

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.  Although our former Chief Operating Officer, Lee Maddox, 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, such guaranty was terminated when Mr. Maddox resigned as our COO in July 2014, pursuant to the terms of the related Termination Agreement.

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 our 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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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.

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares
Joshua Brooks, Chief Operating Officer	September 24, 2013	$	45,800	(1)		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.

NOTE 7 – STOCKHOLDERS’ DEFICIT

Preferred Stock

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

Common Stock

The Company has authorized 250,000,000 shares of common stock with a par value of $0.001.  During the six months ended June 30, 2014 and 2013, the Company issued common shares as follows:

During January 2014, the Company issued an aggregate of 5,559,617 shares of its common stock valued at $510,769 in payment of accrued paid-in-kind (“PIK”) interest to twelve (12) investors.

During January, 2014, the Company issued an aggregate of 733,137 shares of its common stock to twelve (12) investors valued at $67,354 as consideration for the extension of the maturity date to June 1, 2015, on the 14% convertible notes that matured on November 30, 2013 and in default.

During January, 2014, the Company issued an aggregate of 7,320,608 shares of its common stock valued at $660,684 upon the conversion of a 14% convertible note and two 12% convertible notes (see Note 5).

During January and February, 2014, the Company issued 1,500,000 shares of its common stock valued at $145,000 to consultants for services rendered.

During March 2014, the Company issued 1,875,000 shares of its common stock to an investor that had subscribed and paid $150,000 for the shares on November 15, 2013. This subscription of shares was previously reported as Stock Subscriptions Payable as of December 31, 2013.

During March 2014, the Company issued 781,250 shares of its common stock in consideration of $62,500 cash proceeds realized from the sale of stock to accredited investors at $0.08 per share.

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During the period April 1, 2014 through September 17, 2014, we sold an aggregate of 11,465,000 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to fifty (50) 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 $1,029,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants so total warrants were 11,565,000.

In April 2014 the Company issued 875,000 shares of common stock on a unit share offering at $0.08 for proceeds of $70,000. The Company issued 5,581,568 shares of common stock to the Board of Directors for services rendered; this was valued at $558,157. Additional shares of 600,000 were issued to an employee as a signing bonus valued at $60,000. Officer’s compensation was paid by issuing 2,416,250 shares of common stock in lieu of paying $241,625. Consultants were issued 1,121,750 shares of common stock in lieu of paying $112,175 in accrued fees.

On May 22, 2014, the Company converted a 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.

In May 2014 a consultant was issued 500,000 shares of common stock in lieu of fees of $60,000.

In June 2014 the Company issued 375,000 shares of common stock on a unit share offering at $0.08 for proceeds of $30,000. A charitable contribution was made of 1,000,000 shares of common stock valued at $110,000.

In July 2014 the Company issued 6,625,000 shares of common stock on a unit share offering at $0.08 for proceeds of $530,000. The Company also issued 250,000 shares for 50,000 warrants at $.020 for $50,000, 135,366 shares in payment of PIK interest for $10,829, and 500,000 shares for a loan, valued at $40,000. Two employees received 1,700,000 shares of stock for signing bonus and services to the company. These shares were valued at $136,000.

On August 11, 2014, the Company entered into an agreement with MKM Opportunity Master Fund to extend the maturity date of two of its 14% convertible notes payable that have an aggregate balance of $1,091,590.  The notes mature on June 1, 2015, however, in consideration of an extension of the maturity date to December 31, 2015, the Company agreed to issue 333,334 shares of its common stock.   The Company also agreed to issue 150,000 shares of its common stock to MKM Opportunity Master Fund due to the delay in issuing MKM its initial $30,000 note.

In August 2014 the Company issued 4,375,000 shares of common stock on a unit share offering at $0.10 for proceeds of $437,500. The Company also issued 650,000 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 60,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800, and issued an additional 575,000 shares to employees as signing bonuses.

On September 23, 2014, 600,000 shares of common stock were issued to three employees at $0.22 per share as part of their employment/signing bonuses.

On October 15, 2014, the Company issued 779,525 shares of common stock to an investor at a unit value of $0.12 per share.

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As of June 30, 2014, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with June-September 14% Convertible Notes		425,000	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 2013 and 2014 Unit Share Offerings		10,281,250	0.20		2015
Sub-total of Warrants outstanding		20,435,476
Common stock associated with the 12% Convertible Notes plus accrued interest		8,049,315	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
Common stock associated with 14% convertible notes plus accrued interest		33,504,187	0.08		2015
Common stock associated with 2013 and  2014 Unit Share Offerings		6,875,000	0.08		2015
Common stock associated with the JMJ notes		629,630	various
Common stock payable as fees		7,398,407	various
Total		78,617,973

Warrants

A summary of the Company’s warrant activity and related information during the six months ended June 30, 2014 follows:

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		18,340,726	$	1.21	1.07	$	131,320
Issued		8,281,250		0.19	2.0
Exercised		-
Forfeited		-
Cancelled		(1,875,000)		0.20
Expired		(4,311,500)		5.32
Outstanding at June 30, 2014		20,435,476	$	0.19	1.41	$	131,320
Exercisable		20,435,476	$	0.19	1.41	$	131,320

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NOTE 8 – 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 of a mobile trailer office unit that commenced on October16, 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 June 30, 2014, are as follows:

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	3,558		$	58,500	$	62,058
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		23,720			731,250		754,970
Less interest		(3,705	)
Capital lease obligation		20,015
Less current portion		(5,012	)
Long-term capital lease obligation	$	15,003

Rental expense for all property and equipment operating leases during the six month periods ended June 30, 2014 and 2013, respectively, was $1,952,136 and $7,044. Rental expense for all property and equipment operating leases during the three month periods ended June 30, 2014 and 2013 were $1,431,940 and $3,524, respectively. Related party rental expense during the six months ended June 30, 2014 and 2013, was $327,134 and none, respectively. Related party rental expense during the three months ended June 30, 2014 and 2013, was $268,436 and none, respectively.

Product Purchase and Manufacturing license agreement

On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Salttech B.V, (“Salttech”) a company based in the Netherlands. The agreement provides exclusive rights to purchase Salttech’s DyVaR devices which are used to remove salinity from brackish/brine water streams. The agreement grant’s to the Company exclusive United States rights to purchase these products for use in the municipal and oil & gas industries.  The agreement also grants to the Company the right of first refusal for this technology in North America.

The initial term of the agreement is for five years and is renewable automatically for five years and every five year period unless terminated by written notice of the parties at least three months before the termination date.

The initial royalty for the first year of the agreement is for $324,000, payable quarterly beginning with the calendar quarter starting July 1, 2014 as follows: Q3 2014 $60,000, Q4 2014 $60,000, Q1 2015 $100,000 and Q2 2015 $104,000.  The Company also agreed to pay a continuing royalty of $240,000 per year for years 2-5, plus 3% of the invoice price of any products sold by the Company under the agreement.  The Company also agreed to issue 400,000 shares of its common stock in consideration of this agreement.

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As of June 30, 2014, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2014	$	160,000
2015		324,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments		1,324,000

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

The Company has an employment agreement with Joshua Brooks that expired on September 19, 2014, but is renewable by mutual consent of the Company and Mr. Brooks. The agreement entitles Mr. Brooks to an annual salary of $120,000.  The Company’s subsidiary, STW Pipeline Maintenance & Construction, LLC, has an employment agreement with Adam Jennings that expired on September 22, 2014, but is renewable by mutual consent of the Company and Mr. Jennings. The employment agreement for Mr. Jennings has been renewed and we are currently in negotiations with Mr. Brooks.

On March 13, 2014, the board of directors approved a motion to enter into an employment contract with Herb Roberts to be the assistant to the Chief Operating Officer and Chief Financial Officer, at an annual salary of $180,000, plus a grant of 500,000 shares of the company’s common stock, ESOP participation, and $10,000 of moving expenses.  Mr. Roberts was terminated during June 2014 and the stock award was rescinded.

Contingencies

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, GE Ionics Settlement Agreement), 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.  The lawsuit is in the discovery phase of litigation.

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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 uncontested claim.  Since that date, the Company has made all agreed upon payments of debt, interest and attorney fees to Muller and Beach and the related matter has been resolved.

TCA Global Credit Master Fund, LP Lawsuit.  On April 04, 2014, TCA Global Credit Master Fund, LP filed a lawsuit against the Company in the Circuit Court of the 11th Judicial District of Miami-Dade County, Florida y, Florida, cause No. 2014-8956-CA-06, alleging the Company’s breach of an October 16, 2012 debt settlement agreement (the “TCA Lawsuit”). The Company did not have to file an answer, as it and TCA agreed to a First Addendum to the October 16, 2012 settlement agreement, wherein STW agreed to pay TCA Global the sum of $77,068 in unpaid principal, accrued interest and attorneys’ fees, and TCA Global agreed to conditionally dismiss the TCA Lawsuit.  Should there be a default in the Company’s payments under the First Addendum, the Company agreed to the entry of a Final Consent Judgment for the $77,068, less amounts paid prior to filing of the Consent Judgment.  The Company is currently in default under the Settlement Addendum, and still owes TCA Global $37,068 to discharge the obligation in full.  At this time, TCA Global has accepted partial payments and has yet to file the Consent Judgment.  The Company is confident it will pay the remaining balance in a short period of time.

Sichenzia and Ross Lawsuit.  On June 13, 2014, Sichenzia Ross Friedman Ference LLP filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $180,036 in legal fees and expenses from the Company.  The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters.  The parties filed a stipulation with the Court on August 25, 2014, which extended the Company’s date to file an Answer to the lawsuit to September 22, 2014.  The Company is currently scheduling negotiations with Sichenzia Ross to agree upon an amount owed and a mechanism for payment.

Arbitration Judgment

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 $196,727 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 commending 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.  The Award is final and Viewpoint has expressed an intention of attempting to enforce the Award through judicial means. The full amount of this award has been accrued for in Accounts Payable.

NOTE 9 – SEGMENT INFORMATION

We have three reportable segments, (1) water reclamation services, (2) oil & gas services, and (3) corporate overhead, as described herein.

Water reclamation services

The Company plans to provide 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 a range of oilfield and pipeline construction, maintenance 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.

Corporate Operations

Corporate operations include senior management salaries and benefits, accounting and finance, legal, business development, and other general corporate operating expenses.

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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:

· 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

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	9,204,076		$	--		$	9,214,127
Costs of revenues		--			8,457,299			--			8,457,299
Operating expenses		219,585			1,948,574			3,698,149			5,866,308
Other income (expense)		--			--			(1,389,041	)		(1,389,041	)
Segment income (loss)	$	(209,534	)	$	(1,201,797	)	$	(5,087,190	)	$	(6,498,521	)

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,603,297		$	--		$	5,613,348
Costs of revenues		--			5,276,057			--			5,276,057
Operating expenses		88,037			1,212,795			2,115,525			3,416,357
Other income (expense)		--			--			(964,712	)		(964,712	)
Segment income (loss)	$	(77,986	)	$	(885,555	)	$	(3,080,237	)	$	(4,043,778	)

	Six months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	541,000	$	--	$	--		$	541,000
Costs of revenues		459,634		--		--			459,634
Operating expenses		--		--		1,059,050			1,059,050
Other income (expense)		--		--		(2,296,931	)		(2,296,931	)
Segment income (loss)	$	81,366	$	--	$	(3,355,981	)	$	(3,274,615	)

	Three months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	--	$	--	$	--		$	--
Costs of revenues		--		--		--			--
Operating expenses		--		--		452,286			452,286
Other income (expense)		--		--		225,500			225,500
Segment income (loss)	$	--	$	--	$	(226,786	)	$	(226,786	)

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Segment Assets

	June 30, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	40,000	$	3,236,267	$	555,172	$	3,831,439
Fixed assets		--		975,387		89,780		1,065,167
Other assets		-		--		141,274		141,274
Segment Assets	$	40,000	$	4,211,654	$	786,226	$	5,037,880

	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	--	$	583,581	$	583,581
Fixed assets				--		746,638		746,638
Other assets						--		--
Segment Assets	$	--	$	--	$	1,515,647	$	1,515,647

NOTE 10 – SUBSEQUENT EVENTS

Litigation

Bob J. Johnson & Associates Lawsuit.  On July 14, 2014 against the Company’s subsidiary, STW Water Process & Technologies, LLC (“STW Water”), Bob J. Johnson & Associates, Inc. (BJJA) v. Alan Murphy and STW Water & Process Technologies, LLC, Case No. CV50473 in the 238th District Court of Midland County, Texas (the “BJJA Lawsuit”). BJJA sought to enforce an allegedly enforceable covenant not to compete and a confidentiality agreement signed by Alan Murphy, STW Water’s recently hired President, who was a former vice president and employee of BJJA.  On July 14, 2014, BJJA obtained a TRO against Alan Murphy, STW Water and those associated with the Defendants, which, by the Company’s ownership of STW Water, included the Company.  The TRO temporarily prohibited the Company, STW Water and Alan Murphy from contacting two key customers of STW and STW Water, Pioneer Energy Resources and the City of Ft. Stockton, Texas.  On July 28, 2014, the Court held a temporary injunction hearing, which resulted in the TRO being dissolved and the Court refusing to further enjoin STW, STW Water or Alan Murphy from competing with BJJA.  The case is still on the docket; however, the Company is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction.

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Unit offering of Common Shares

During the period July 1, 2014 through October 21, 2014, we sold an aggregate of 5,590,000 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to thirty six (37) 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 $0.10, and the Company received an aggregate of $559,000 in gross funding in the transaction (the "Offering"). 

On August 11, 2014, the Company entered into an agreement with MKM Opportunity Master Fund to extend the maturity date of two of its 14% convertible notes payable that have an aggregate balance of $1,091,590. The notes mature on June 1, 2015, however, in consideration of an extension of the maturity date to December 31, 2015, the Company agreed to issue 333,334 shares of its common stock. The Company also agreed to issue 150,000 shares of its common stock to MKM Opportunity Master Fund due to the delay in issuing MKM its initial $30,000 note.

Shares Issued

In July 2014 the Company issued 6,625,000 shares of common stock on a unit share offering at $0.08 for proceeds of $530,000. The Company also issued 250,000 shares for 50,000 warrants at $.020 for $50,000, 135,366 shares in payment of PIK interest for $10,829, and 500,000 shares for a loan, valued at $40,000. Two employees received 1,700,000 shares of stock for signing bonus and services to the company. These shares were valued at $136,000.

Extension of 14% convertible notes payable and Shares Issued in Connection with Note Payable

In August 2014 the Company issued 4,375,000 shares of common stock on a unit share offering at $0.10 for proceeds of $437,500. The Company also issued 650,000 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 60,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800, and issued an additional 575,000 shares to employees as signing bonuses.

On September 23, 2014, 600,000 shares of common stock were issued to three employees at $0.22 per share as part of their employment/signing bonuses.

On October 15, 2014, the Company issued 779,525 shares of common stock to an investor at a unit value of $0.12 per share.

In fiscal 2013, the Board received written consent from a majority of its shareholders authorizing management to effect up to a 10-to-1 reverse split of all authorized and outstanding shares of the Company's common stock for up to twelve months (the "Authorization"), which expires in November 2014.  Management has now determined to effect a 1 for 6 reverse stock split on November 7, 2014 (the "Reverse Split").  For more information about the authority granted, please see the Information Statement on Schedule 14C that the Company filed with the SEC on October 21, 2013.  Following the Reverse Split, every six shares will be combined and converted into 1 share of the Company's Common Stock (with any fraction shares being rounded up to the nearest whole number).  Shareholders will not need to return their stock certificates; the Certificates shall be payable upon surrender; the transfer agent will electronically update all stock certificates then outstanding to reflect the reverse split.Although these actions did not occur during the period covered by this Report, now that they have decided to effect the Reverse Split, management believes it was important to disclose same in its next filing, which is this Report.  We are currently working to supply FINRA with all of the materials it requires to approve the Reverse Split, without which, we cannot effect the Reverse Split.

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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

The following information should be read in conjunction with STW Resources Holding Corp. and its subsidiaries ("we", "us", "our", or the “Company”) condensed consolidated unaudited financial statements and the notes thereto contained elsewhere in this report. Information in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-Q that does not consist of historical facts, are "forward-looking statements."  Statements accompanied or qualified by, or containing words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements, and as such, are not a guarantee of future performance. 

Forward-looking statements are subject to risks and uncertainties, certain of which are beyond our control.  Actual results could differ materially from those anticipated as a result of the factors described in the “Risk Factors” and detailed in our other Securities and Exchange Commission filings.  Risks and uncertainties can include, among others, fluctuations in general business cycles and changing economic conditions; changing product demand and industry capacity; increased competition and pricing pressures; and advances in technology that can reduce the demand for the Company's products.  Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. 

Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report or incorporated by reference might not transpire.  Factors that cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described elsewhere in this report and in the “Risk Factors” section of our annual report on Form 10-K.

The Company disclaims any obligation to update the forward-looking statements in this report.

Overview

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.  The Company 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.  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, Midland, Texas 79706.

The Report of Independent Registered Public Accounting Firm related to our December 31, 2013 consolidated financial statements includes an explanatory paragraph stating that the recurring losses and negative cash flows from operations since inception 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.

Results of Operations

For the next twelve months, our current operating plan is focused on providing water reclamation services to oil & 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.

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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 quarter ended June 30, 2014 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. Based on our current business plan, we currently estimate we will need up to an additional $5 million of new capital to execute our business plan over the next six months.  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.

Three months ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Our revenue, operating expenses, and net loss from operations for the three month period ended June 30, 2014 as compared to the three month period ended June 30, 2013, were as follows – some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:

	Three Months Ended June 30:
	2014			2013			Change			% Change Increase (Decrease)
NET REVENUES	$	5,613,348		$	--		$	5,613,348			100.0	%
COSTS OF REVENUES		5,276,057			--			5,276,057			100.0	%
Gross Profit		337,291			--			337,291			100.0	%
OPERATING EXPENSES:
Research & development		56,465			9,118			47,347			519.3	%
Sales and marketing		266,681			--			266,681			100.0	%
General and administrative		3,029,495			443,168			2,586,327			583.6	%
Depreciation		63,716			--			63,716			100.0	%
Total operating expenses		3,416,357			452,286			2,964,071			655.4	%
Loss from operations		(3,079,066	)		(452,286	)		(2,626,780	)		580.8	%
Interest expense		(507,903	)		(212,685	)		(295,218	)		138,8	%
Change in derivative liability		(456,809	)		438,185			(894,994	)		204.3	%
Share of net loss of subsidiary attributable to non-controlling interest		10,641			(771	)		11,412			1480.2	%
Net Loss	$	(4,054,419	)	$	(226,015	)	$	(3,828,404	)		1693.9	%

Net Revenues:  During the three months ended June 30, 2014, we realized $10,051 from our water reclamation business segment and $5,603,297 of revenues from our oil & gas services business segment, including $37,386 from a related party. During the three months ended June 30, 2013, we realized no revenues from any of our business segments. The increase in revenues between the quarter ended June 30, 2014 and 2013 is $5,613,348 or 100.0% due largely to the increase in oil & gas services, which had not commenced activities at June 30, 2013.

Cost of Revenues:  Total costs of revenues for the three months ended June 30, 2014 were $5,276,057 as compared to none for the three months ended June 30, 2013, an increase of $5,276,057 or 100.0%. The increase in costs of revenue is attributable to the increased revenues from our oil & gas services business segment. Costs of revenues during the three months ended June 30, 2014, are comprised of labor, fringe benefits, equipment rental, and other costs of providing oil & gas services.

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Gross Profit:  During the three and six months ended June 30, 2014, we realized a gross profit of $327,240 and $656,777, respectively from our oil & gas services business segment compared to none during the three and six months ended June 30, 2013 as our oil & gas services business had not yet commenced. During the three and six months ended June 30, 2013, we realized a gross profit of zero and $81,366, respectively from the contract to design, build and deliver a proprietary water desalinization facility compared to $10,051 during the three and six months ended June 30, 2014 as our water desalinization business has a longer sale cycle.

Research and development expenses:  Research and development expenses increased by $47,347 or 519.3% to $56,465 for the three months ended June 30, 2014 from $9,118 for the three months ended June 30, 2013.  The increase in research and development expenses are attributable to our water reclamation business segment.

Sales and marketing expenses:  Sales and marketing expenses increased by $266,681 or 100.0% to $266,681 for the three months ended June 30, 2014 from none for the three months ended June 30, 2013.  The increase in sales and marketing expenses are attributable to increased expenses of our oil & gas services business segment.

General and Administrative Expense: General and administrative expenses increased $2,586,327 or 583.6% to $3,029,495 for the three months ended June 30, 2014 from $443,168 for the three months ended June 30, 2013.  Our general and administrative expenses for the three months ended June 30, 2014 consisted of payroll and related taxes of $821,578, professional fees of $175,259, consulting fees of $3,472, insurance of $50,443, management fees of $644,253, salaries and wages of $687,538, penalties of $478,202, and board of director fees of $168,750, for a total of $3,029,495. Our general and administrative expenses for the three months ended June 30, 2013  consisted of payroll and related taxes of $57,066, professional fees of $136,868, consulting fees of $75,129, insurance of $11,093, and board of director fees of $163,012, for a total of $443,168.

The primary reasons for the increase in comparing the three months ended June 30, 2014 to the corresponding period for 2013 was mainly due to the rapid ramp-up of the business since the prior year which caused an increase in business development expenses, increase in salaries and benefits for employees, increase in professional services and consulting fees, increase in management fees, increased penalties related to payroll taxes, and the increase in the board of director fees.  During the three month periods ended June 30, 2014 and 2013, non-cash stock based compensation expenses relating to consulting and other fees included in general and administrative expenses were $1,331,761 and none, respectively.

Interest Expense:  Interest expense increased by $295,218 to $507,903 for the three month period ended June 30, 2014 from $212,685 for the three month period ended June 30, 2013.  The increase is due to additional interest expenses incurred on additional debt financing incurred by us since June 30, 2013, including $185,478 of additional interest expense attributable to the conversion of a note payable and accrued interest for common shares having a value greater than the carrying value of the note and accrued interest.

Change in derivative liability: During the three month period ended June 30, 2014, we recorded a $456,809 increase in the fair value of the derivative liability from March 31, 2014.  During the three month period ended June 30, 2013, we recorded a $438,185 decrease in the derivative liability from March 31, 2013, a net difference of $894,994 between the three months ended June 30, 2014 and 2013. The increase in the derivative liability during the three months ended June 30, 2014 is attributable to the reduction of the remaining term of outstanding warrants, offset by the effect of increased share values as of June 30, 2014. The reason for the increase in the derivative liability for the three months ended June 30, 2013 was mainly due to the change in the fair value of derivatives attributable to the increase in volatility rate from 100% for 2012 to a historical rate of 623% for 2013.

Non-controlling interest in Net Loss:  During the three months ended June 30, 2014 and 2013, we reported $10,641and $771, respectively, 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.

 Net Loss:  Net loss increased by $3,828,404, or 1693.9%, to a net loss of $4,054,419 for the three month period ended June 30, 2014 from a net loss of $226,015 for the three month period ended June 30, 2013.  This net loss reflects the increased revenues with improved gross margin, less increased operating expenses and change in derivative liability discussed above.

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Six months ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Our revenue, operating expenses, and net loss from operations for the six month period ended June 30, 2014 as compared to the six month period ended June 30, 2013, were as follows – some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:

	Six Months Ended June 30:
	2014			2013			Change			% Change Increase (Decrease)
NET REVENUES	$	9,214,127		$	541,000		$	8,673,127			1,603.2	%
COSTS OF REVENUES		8,457,299			459,634			7,997,665			1,740.0	%
Gross Profit		756,828			81,366			675,462			830.2	%
OPERATING EXPENSES:
Research & development		151,955			9,118			142,837			1,566.5	%
Sales and marketing		439,189			--			439,189			100.0	%
General and administrative		5,158,764			1,049,932			4,108,832			391.3%	%
Depreciation		116,400			--			116,400			100.0	%
Total operating expenses		5,866,308			1,059,050			4,807,258			453.9	%
Loss from operations		(5,109,480	)		(977,684	)		(4,131,796	)		422.6	%
Interest expense		(945,505	)		(560,562	)		(384,943	)		68.7	%
Change in derivative liability		(443,536	)		(1,736,369	)		1,292,833			74.5	%
Share of net loss of subsidiary attributable to non-controlling interest		(30,928	)		(771	)		30,157			3911.4	%
Net Loss	$	(6,467,593	)	$	(3,273,844	)	$	(3,193,749	)		97.6	%

Net Revenues:  During the six months ended June 30, 2014, we realized $10,051 from our water reclamation business segment, $9,126,698 of revenues from our oil & gas services business segment, and $77,378 from a related party. During the six months ended June 30, 2013, we realized $541,000 of revenues from our water reclamation services business segment from the design, build and delivery of a proprietary water desalinization facility and none from our oil & gas services business segment. The increase in revenues between the six months ended June 30, 2014 and 2013 is $8,673,127, or 1,603.2%, is attributable to the increase in oil & gas services segment business, which had not commenced operations at June 30, 2013.

Cost of Revenues:  Total costs of revenues for the six months ended June 30, 2014 were $8,457,299 as compared to $459,634 for the six months ended June 30, 2013, an increase of $7,997,665 or 1,740.0%. The increase in costs of revenue is attributable to the increased revenues from our oil & gas services business segment. Costs of revenues during the three months ended June 30, 2014, are comprised of labor, fringe benefits, equipment rental, and other costs of providing oil & gas services.  Costs of revenues for the six months ended June 30, 2013 are attributable to contract costs to design, build and deliver a proprietary water desalinization facility.

Gross Profit:  During the six months ended June 30, 2014, we realized a gross profit of $756,828 from our oil & gas services business segment compared to $81,366 of gross profit realized during the six months ended June 30, 2013. During the six months ended June 30, 2013, we realized a gross profit from the contract to design, build and deliver a proprietary water desalinization facility of $81,366 compared to none during the six months ended June 30, 2014 as this contract was completed in June 2013.

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Research and development expenses:  Research and development expenses increased by $142,837 or 1,566.5% to $151,955 for the six months ended June 30, 2014 from $9,118 for the six months ended June 30, 2013.  The increase in research and development expenses is attributable to our water reclamation business segment.

Sales and marketing expenses:  Sales and marketing expenses increased by $439,189 or 100.0% to $439,189 for the six months ended June 30, 2014 from none for the six months ended June 30, 2013.  The increase in sales and marketing expenses are attributable to increased expenses of our oil & gas services business segment.

General and Administrative Expense: General and administrative expenses increased $4,108,832 or 391.3% to $5,158,764 for the six months ended June 30, 2014 from $1,049,932 for the six months ended June 30, 2013.  Our general and administrative expenses for the six months ended June 30, 2014 consisted of payroll and related taxes of $1,482,584, professional fees of $313,834, consulting fees of $179,154, insurance of $96,385, management fees of $992,103, salaries and wages of $950,205, penalties of $806,999, and board of director fees of $337,500, for a total of $5,158,764. Our general and administrative expenses for the six months ended June 30, 2013 consisted of payroll and related taxes of $64,303, professional fees of $276,532, consulting fees of $389,343, insurance of $13,929, and board of director fees of $305,825, for a total of $1,049,932.

The primary reasons for the increase in comparing the six months ended June 30, 2014 to the corresponding period for 2013 was mainly due to the rapid ramp-up of the business since the prior year which caused an increase in business development expenses, increase in salaries and benefits for employees, increase in professional services and consulting fees, increase in management fees, increased penalties related to payroll taxes, and the increase in the board of director fees.  During the six month periods ended June 30, 2014 and 2013, non-cash stock based compensation expenses relating to consulting and other fees included in general and administrative expenses were $1,755,444 and 210,000, respectively.

Interest Expense:  Interest expense increased by $384,943 to $945,505 for the six month period ended June 30, 2014 from $560,562 for the six month period ended June 30, 2013.  The increase is due to additional interest expenses incurred on additional debt financing incurred by us since June 30, 2013, including $185,478 of additional interest expense attributable to the conversion of a note payable and accrued interest for common shares having a value greater than the carrying value of the note and accrued interest.

Change in derivative liability: During the six month period ended June 30, 2014, we recorded a $443,536 increase in the fair value of the derivative liability from December 31, 2013.  During the six month period ended June 30, 2013, we recorded a $1,736,369 increase in the derivative liability from December 31, 2012.  There is a net difference of $2,179,905 between the six months ended June 30, 2014 and 2013. The increase in the derivative liability during the six months ended June 30, 2014 is attributable to the reduction of the remaining term of outstanding warrants offset by the effect of an increase in the value of shares as of June 30, 2014. The reason for the increase in the derivative liability for the six months ended June 30, 2013 was mainly due to the change in the fair value of derivatives attributable to the increase in volatility rate from 100% for 2012 to a historical rate of 623% for 2013.

Non-controlling interest in Net Loss:  During the six months ended June 30, 2014 and 2013, we reported $30,928 and $771, respectively, 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.

 Net Loss:  Net loss increased by $3,193,749, or 97.6%, to a net loss of $6,467,593 for the six month period ended June 30, 2014 from a net loss of $3,273,844 for the six month period ended June 30, 2013.  This net loss reflects the increased revenues with improved gross margin, less increased operating expenses and change in derivative liability discussed above.

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Liquidity and Capital Resources

Our condensed consolidated financial statements have been presented 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.  As presented in the consolidated financial statements, we incurred a net loss of $6,467,593 during the six months ended June 30, 2014, and losses are expected to continue in the near term.  The accumulated deficit since inception is $30,822,936 at June 30, 2014.  Refer to Note 7 for our discussion of stockholder deficit.  We have been funding our operations through private loans and the sale of common stock in private placement transactions.  Refer to Note 4 and Note 10 for our discussion of notes payable and shares issued, respectively. 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.

Management anticipates that significant additional expenditures will be necessary to develop and expand our oil & gas services and water reclamation services business units before significant positive operating cash flows can be achieved.  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.  At June 30, 2014, we had $758,240 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.  As of the date of this Report, we have not entered into any formal agreements regarding the above.

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.

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Cash, total current assets, total assets, total current liabilities and total liabilities as of June 30, 2014 as compared to December 31, 2013, were as follows:

	June 30, 2014		December 31, 2013
Cash	$	758,240	$	17,301
Total current assets	$	3,831,439	$	583,581
Total assets	$	5,037,880	$	1,515,647
Total current liabilities	$	16,949,785	$	11,951,231
Total liabilities	$	20,068,359	$	14,574,240

At June 30, 2014, we had a working capital deficit of $13,118,346 compared to a working capital deficit of $11,367,650 at December 31, 2013.  Current liabilities increased to $16,949,785 at June 30, 2014 from $11,951,231 at December 31, 2013, primarily as a result of accrued penalties and interest, delinquent payroll taxes and board compensation.

Our operating activities used net cash of $1,065,027 for the six months ended June 30, 2014 compared to net cash used in operations of $266,676 for the six months ended June 30, 2013.   The net cash used in operations for the six months ended June 30, 2014, reflects a net loss of $6,467,593, decreased by $2,044,984 in non-cash charges and by $3,357,582 net increase in the working capital accounts.  The net cash used in operations for the six months ended June 30, 2013 reflects a net loss of $3,273,844, decreased by $2,002,470 in non-cash charges and by $1,004,698 net increase in the working capital accounts.

Our investing activities were $107,431 and none for the six months ended June 30, 2014 and June 30, 2013, respectively.  Our investing activities for the six months ended June 30, 2014, include $107,431 purchase of equipment, net of related equipment loans.

Our financing activities resulted in a cash inflow of $1,913,397 for the six months ended June 30, 2014, which represented $30,468 of bank overdraft, related party accounts payable of $1,296,861, the issuance of $272,500 in common stock, proceeds of $80,000 from notes payable, proceeds from stock subscriptions of $390,000, and the repayment of $95,496 of notes payable. Our financing activities resulted in cash inflow of $242,671 for the six months ended June 30, 2013, which is represented by the issuance of $337,525 in revenue participating notes, debt issuance costs of $35,025, reduction of related party accounts payable of $18,829, and the repayment of $41,000 of notes payable.

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, of which $1,233,060 has been advanced as of June 30, 2014. 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 has been 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 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.

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Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Estimates

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2013, for disclosures regarding the Company's critical accounting policies and estimates, as well as updates further disclosed in our interim financial statements as described in this Form 10-Q.

Item 4.   Controls and Procedures

The Company failed to timely file its annual report on Form 10-K for the year ended December 31, 2013 and its quarterly reports on Form 10Q for the first two quarters of its fiscal year ending December 31, 2013, and of its fiscal year ending December 31, 2014, which demonstrates that its Disclosure Controls and Procedures are inadequate.

Evaluation of Disclosure Controls and Procedures

As of the end of our last fiscal quarter ended June 30, 2014, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon those evaluations, management concluded that our disclosure controls and procedures were not effective as of June 30, 2014, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Going forward from this filing, the Company intends to work on re-establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

During the quarter covered by this Report, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

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Part II – Other Information

Item 1.  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 other material legal proceedings in the future.

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.

TCA Global Credit Master Fund, LP Lawsuit.  On April 04, 2014, TCA Global Credit Master Fund, LP filed a lawsuit against the Company in the Circuit Court of the 11th Judicial District of Miami-Dade County, Florida y, Florida, cause No. 2014-8956-CA-06, alleging the Company’s breach of an October 16, 2012 debt settlement agreement (the “TCA Lawsuit”). The Company did not have to file an answer, as it and TCA agreed to a First Addendum to the October 16, 2012 settlement agreement, wherein STW agreed to pay TCA Global the sum of $77,068 in unpaid principal, accrued interest and attorneys’ fees, and TCA Global agreed to conditionally dismiss the TCA Lawsuit.  Should there be a default in the Company’s payments under the First Addendum, the Company agreed to the entry of a Final Consent Judgment for the $77,068, less amounts paid prior to filing of the Consent Judgment.  The Company is currently in default under the Settlement Addendum, and still owes TCA Global $37,068 to discharge the obligation in full.  At this time, TCA Global has accepted partial payments and has yet to file the Consent Judgment.  The Company is confident it will pay the remaining balance in a short period of time.

Sichenzia and Ross Lawsuit.  On June 13, 2014, Sichenzia Ross Friedman Ference LLP filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $180,036 in legal fees and expenses from the Company.  The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters.  The parties filed a stipulation with the Court on August 25, 2014, which extended the Company’s date to file an Answer to the lawsuit to September 22, 2014.  The Company is currently scheduling negotiations with Sichenzia Ross to agree upon an amount owed and a mechanism for payment.

Bob J. Johnson & Associates Lawsuit.  On July 14, 2014 against the Company’s subsidiary, STW Water Process & Technologies, LLC (“STW Water”), Bob J. Johnson & Associates, Inc. (BJJA) v. Alan Murphy and STW Water & Process Technologies, LLC, Case No. CV50473 in the 238th District Court of Midland County, Texas (the “BJJA Lawsuit”). BJJA sought to enforce an allegedly enforceable covenant not to compete and a confidentiality agreement signed by Alan Murphy, STW Water’s recently hired President, who was a former vice president and employee of BJJA.  On July 14, 2014, BJJA obtained a TRO against Alan Murphy, STW Water and those associated with the Defendants, which, by the Company’s ownership of STW Water, included the Company.  The TRO temporarily prohibited the Company, STW Water and Alan Murphy from contacting two key customers of STW and STW Water, Pioneer Energy Resources and the City of Ft. Stockton, Texas.  On July 28, 2014, the Court held a temporary injunction hearing, which resulted in the TRO being dissolved and the Court refusing to further enjoin STW, STW Water or Alan Murphy from competing with BJJA.  The case is still on the docket; however, the Company is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction.

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Item 1A.  Risk Factors

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. Please refer to our Form 10-K filed with the SEC on June 20, 2014 under item 1.A Risk Factors.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Information on any and all equity securities we have sold during the period covered by this Report, and from such date through the date of this Report, that were not registered under the Securities Act of 1933, as amended and not included in a previously filed Current Report on Form 8-K is set forth below:  

During January 2014, the Company issued an aggregate of 5,559,617 shares of its common stock valued at $510,769 in payment of accrued paid-in-kind (“PIK”) interest to twelve (12) investors.

During January, 2014, the Company issued an aggregate of 733,137 shares of its common stock to twelve (12) investors valued at $67,354 as consideration for the extension of the maturity date to June 1, 2015, on the 14% convertible notes that matured on November 30, 2013 and in default.

During January, 2014, the Company issued an aggregate of 7,320,608 shares of its common stock valued at $660,684 upon the conversion of a 14% convertible note and two 12% convertible notes (see Note 5).

During January and February, 2014, the Company issued 1,500,000 shares of its common stock valued at $145,000 to consultants for services rendered.

During March 2014, the Company issued 1,875,000 shares of its common stock to an investor that had subscribed and paid $150,000 for the shares on November 15, 2013. This subscription of shares was previously reported as Stock Subscriptions Payable as of December 31, 2013.

During March 2014, the Company issued 781,250 shares of its common stock in consideration of $62,500 cash proceeds realized from the sale of stock to accredited investors at $0.08 per share.

During the period April 1, 2014 through September 17, 2014, we sold an aggregate of 11,465,000 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to fifty (50) 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 $1,029,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants so total warrants were 11,565,000.

In April 2014 the Company issued 875,000 shares of common stock on a unit share offering at $0.08 for proceeds of $70,000. The Company issued 5,581,568 shares of common stock to the Board of Directors for services rendered; this was valued at $558,157. Additional shares of 600,000 were issued to an employee as a signing bonus valued at $60,000. Officer’s compensation was paid by issuing 2,416,250 shares of common stock in lieu of paying $241,625. Consultants were issued 1,121,750 shares of common stock in lieu of paying $112,175 in accrued fees.

On May 22, 2014, the Company converted a 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.

In May 2014 a consultant was issued 500,000 shares of common stock in lieu of fees of $60,000.

In June 2014 the Company issued 375,000 shares of common stock on a unit share offering at $0.08 for proceeds of $30,000. A charitable contribution was made of 1,000,000 shares of common stock valued at $110,000.

In July 2014 the Company issued 6,625,000 shares of common stock on a unit share offering at $0.08 for proceeds of $530,000. The Company also issued 250,000 shares for 50,000 warrants at $.020 for $50,000, 135,366 shares in payment of PIK interest for $10,829, and 500,000 shares for a loan, valued at $40,000. Two employees received 1,700,000 shares of stock for signing bonus and services to the company. These shares were valued at $136,000.

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On August 11, 2014, the Company entered into an agreement with MKM Opportunity Master Fund to extend the maturity date of two of its 14% convertible notes payable that have an aggregate balance of $1,091,590.  The notes mature on June 1, 2015, however, in consideration of an extension of the maturity date to December 31, 2015, the Company agreed to issue 333,334 shares of its common stock.   The Company also agreed to issue 150,000 shares of its common stock to MKM Opportunity Master Fund due to the delay in issuing MKM its initial $30,000 note.

In August 2014 the Company issued 4,375,000 shares of common stock on a unit share offering at $0.10 for proceeds of $437,500. The Company also issued 650,000 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 60,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800, and issued an additional 575,000 shares to employees as signing bonuses.

On September 23, 2014, 600,000 shares of common stock were issued to three employees at $0.22 per share as part of their employment/signing bonuses. 

On October 15, 2014, the Company issued 779,525 shares of common stock to an investor at a unit price of $0.12 per share. 

All of the transactions listed above were made pursuant to the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(a)(2) of the Securities Act for sales not involving a public offering or Rule 506(b) of Regulation D promulgated by the SEC.  The securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Item 3.  Defaults upon Senior Securities

GE Ionics Settlement Agreement

On or about May 22, 2008, STW Resources Holding Corporationentered into a Teaming Agreement, as amended, with GE Ionics, Inc., a Massachusetts corporation (“GE”) (STWR and GE are collectively referred to as the “Parties”). On or about April 4, 2008 STWR and GE entered into a Purchase Order (the “Purchase Order”), pursuant to which there was due and unpaid a debt by STWR to GE in the amount of $11,239,437 as of August 31 2010 (the “Original Debt”).

On August 31, 2010, the Parties entered into a Settlement Agreement (the “GE Settlement Agreement”) pursuant to which GE permitted the Company to substitute for STWR as to all rights and obligations under the Purchase Order (including the Original Debt) and Teaming Agreement, and such that to fully discharge STW financial obligations to GE under the Purchase Order, the Company shall pay GE $1,400,000 pursuant to a senior promissory note (the “GE Note”). The GE Note bore interest at a rate of the WSJ Prime Rate (as published daily in the Wall Street Journal) plus two percent (2%) per annum. Under the terms of the GE Note, the Company had thirteen (13) months to pay off the GE Note plus all accrued interest.  In addition, upon the consummation and closing of a debt or equity financing following the execution of the GE Note, the Company shall pay GE thirty percent (30%) of any and all tranches (“Tranches” being defined as the cash receipts of the proceeds of any equity investments in or loans to the Company or any affiliated entity by third parties, but excluding any conversions of pre-existing debt to equity by any of the Company’s then current convertible note holders or creditors) until the GE Note is paid in full, including all accrued interest.  On September 29, 2011, the Parties agreed to extend the maturity date of the GE Note from September 30, 2011 to October 30, 2011.

On October 30, 2011, the Parties entered into an amendment to the GE Settlement Agreement, effective October 1, 2011, pursuant to which, among other things, the Parties agreed as follows: (i) the Company will have until September 1, 2013 to pay GE $2,100,000 plus interest accrued after October 1, 2011 under the GE Note in accordance with its terms, (ii) upon the consummation and closing of a debt or equity financing following the execution of the GE Note, the Company shall pay GE thirty percent (30%) of any and all tranches (“Tranches” being defined as the cash receipts of the proceeds of any equity investments in or loans to the Company or any affiliated entity by third parties, but excluding any conversions of pre-existing debt to equity by any of the Company’s then current convertible note holders or creditors) until the GE Note is paid in full, including all accrued interest, provided the Company shall not be obligated to pay GE upon, among other things, the following: (a) short term commercial paper of $200,000 or less, up to a cumulative maximum of $500,000 through December 31, 2012, (b) commercial equipment leasing whereby GE is taking a secured interest in the purchased equipment, (c) proceeds from project, lease and equipment funding to any subsidiary of the Company provided the Company does not receive any proceeds of such funding and (d) a one-time general exception for $1,500,000 of new equity financing of the Company, (iii) the Company shall begin making a regular series of installment payments as follows: (a) $10,000 per month beginning on January 1, 2012, and (b) $15,000 per month beginning on June 1, 2012 through the maturity date of the GE Note and (iv) the Company shall be able to prepay the GE Note, without interest, on or before the maturity date.

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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.  

As of the date of this Report, 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 (described more fully in Item 4 Debt, GE Ionics Settlement Agreement), 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.

TCA Loan

On October 16, 2012, the Company and TCA entered into a settlement agreement pursuant to which the Company agreed to pay as follows: (i) $15,000 to be paid on October 18, 2012, (ii) $15,000 to be paid on or before November 1, 2012, (iii) five (5) equal installments of $20,000 to be paid beginning on December 1, 2012 and continuing on the first day of each month thereafter, (iv) $4,280 in principal and $9,068 of interest to be paid on or prior to May 1, 2013 and (v) $3,000 for legal fees to be paid on May 1, 2013.  Under the settlement agreement, if STW is late on any installment, it has ten days after notice from TCA to make a cure payment.   During 2014 and 2013, the Company has not made all of its required payments and the $43,280 balance of the note is in default.

Item 5.  Other Information

On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Salttech B.V, (“Salttech”) a company based in the Netherlands.  See Note 8 for a full description of the agreement with Salttech.

In August 2014, the Company appointed Mr. Brooks as its Chief Operating Officer.

In fiscal 2013, the Board received written consent from a majority of its shareholders authorizing management to effect up to a 10-to-1 reverse split of all authorized and outstanding shares of the Company's common stock for up to twelve months (the "Authorization"), which expires in November 2014.  Management has now determined to effect a 1 for 6 reverse stock split on November 7, 2014 (the "Reverse Split").  For more information about the authority granted, please see the Information Statement on Schedule 14C that the Company filed with the SEC on October 21, 2013.  Following the Reverse Split, every six shares will be combined and converted into 1 share of the Company's Common Stock (with any fraction shares being rounded up to the nearest whole number).  Shareholders will not need to return their stock certificates; the Certificates shall be payable upon surrender; the transfer agent will electronically update all stock certificates then outstanding to reflect the reverse split.Although these actions did not occur during the period covered by this Report, now that they have decided to effect the Reverse Split, management believes it was important to disclose same in its next filing, which is this Report.  We are currently working to supply FINRA with all of the materials it requires to approve the Reverse Split, without which, we cannot effect the Reverse Split.

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ITEM 6.                      EXHIBITS

EXHIBIT INDEX

Exhibit No.	Description
2.1	Order Confirming the Second Amended Plan of Re-organization of Woozyfly, Inc. (4)
2.2	Agreement and Plan of Merger for proposed merger between Woozyfly, Inc. Merger Sub, and STW Resources, Inc. dated January 17, 2010  (3)
3.1	Articles of Incorporation (1)
3.2	Certificate of Amendment to the Articles of Incorporation (2)
3.3	Certificate of Amendment to the Articles of Incorporation – March 1, 2010 (5)
3.4	Articles of Merger between STW Acquisition, Inc. and STW Resources, Inc. (4)
3.5	Articles of Merger filed with the State of Nevada on March 3, 2010 (6)
4.1	Form of 12% Convertible Note dated August 31, 2010 (8)
4.2	Form of Warrant dated August 31, 2010 (8)
4.3	Form of Promissory Note dated August 31, 2010 (9)
4.4	Form of Warrant for December 2010 Financing (10)
4.5	Extension of Note, by and between STW Resources Holding Corp. and GE Ionics, Inc., dated October 28, 2011 (11)
4.6	Amended and Restated Note effective October 1, 2011 in favor of GE Ionics, Inc. (11)
4.7	Form of November 2011 Warrant (13)
4.8	Note Exchange Form of New Note (15)
4.9	Note Exchange Form of New Warrant (15)
4.10	Form of May 2012 Warrant (16)
10.1	Form of securities Purchase Agreement dated August 31, 2010 (6)
10.2	Form of Escrow Agreement by and between the Company, Viewpoint, and TD Bank, N.A. dated March 31, 2010 (8)
10.4	Form of Settlement Agreement by and between STW Resources Holding Corp and GE Ionics, Inc., dated August 31, 2010  (9)
10.5	Form of Subscription Agreement for December 2010 Financing (10)
10.6	Letter of Intent dated April 17, 2011 (12)
10.7	Amendments to Settlement Agreement dated October 30, 2011, by and between STW Resources Holding Corp. and GE Ionics, Inc.  (11)
10.8	Form of November 2011 Subscription Agreement (13)
10.9	Note Exchange Cover Letter (15)
10.10	Note exchange Subscription Agreement Form (15)
10.11	Master Note Agreement with Revenue Participation Subscription Package (15)
10.12	Form of May 2012 Subscription Agreement (16)
16.1	Letter from Weaver & Martin LLC (7)
16.2	Letter from Weaver and Tidwell, LLP (14)
21.1	List of Subsidiaries
31.1	Certification of the Chief Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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
32.2	Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the Securities and Exchange Commission on September 26, 2006..

(2) 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) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 26, 2010.

(4) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.

(5) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2010.

(6) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.

(7) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 5, 2010.

(8) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.

(9) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.

(10) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.

(11) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.

(12) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2011.

(13) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.

(14) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2012.

(15) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.

(16) Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized

	STW RESOURCES HOLDING CORP
	(Registrant)
Date:  October 21, 2014	By:  /s/ Stanley T. Weiner
	Stanley T. Weiner
	President and Chief Executive Officer (Principal Executive Officer)
Date: October 21, 2014	By: /s/ Robert J. Miranda
	Robert J. Miranda
	Vice President and Chief Financial Officer (Principal Accounting Officer)

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification (Section 302)

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 quarterly report on Form 10-Q 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 quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The 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: October 21, 2014

By:	/s/ Stanley Weiner
	Stanley Weiner
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification (Section 302)

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 quarterly report on Form 10-Q 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 quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The 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: October 21, 2014

By:	/s/ Robert J. Miranda
	Robert J. Miranda
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF DISCLOSURE PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of STW Resources Holding Corp. (the "Company") on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Stanley Weiner, President and CEO of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 21, 2014

By:      /s/ Stanley Weiner

 Stanley Weiner,

 President, Principal Executive Officer & CEO

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION OF DISCLOSURE PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of STW Resources Holding Corp. (the "Company") on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Robert J. Miranda, CFO of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 21, 2014

By:      /s/ Robert J. Miranda

 Robert J. Miranda,

 Principal Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Stockholders' Deficit (Details Narrative) (USD $)	3 Months Ended	6 Months Ended			6 Months Ended															1 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Preferred Stock [Member]	Jun. 30, 2014 Common Stock Issuance 1 [Member]	Jun. 30, 2014 Common Stock Issuance 2 [Member]	Jun. 30, 2014 Common Stock Issuance 3 [Member]	Jun. 30, 2014 Common Stock Issuance 4 [Member]	Jun. 30, 2014 Common Stock Issuance 5 [Member]	Jun. 30, 2014 PIK Note [Member]	Jun. 30, 2014 PIK Note 1 [Member]	Jun. 30, 2014 PIK Note 2 [Member]	Jun. 30, 2014 PIK Note 3 [Member]	Jun. 30, 2014 MKM Note [Member]	Jun. 30, 2014 Consultant 2 [Member]	Jun. 30, 2014 Consultant 3 [Member]	Jun. 30, 2014 Consultant [Member]	Jun. 30, 2014 Consultant 4 [Member]	Mar. 31, 2014 Investor [Member]	Jun. 30, 2014 Investor [Member]	Jun. 30, 2014 Share Purchase Agreement [Member]	Jun. 30, 2014 Board of Directors [Member]	Jun. 30, 2014 Common Stock Issuance 7 [Member]	Jun. 30, 2014 Common Stock Issuance 8 [Member]
Shares authorized					10,000,000
Common stock shares authorized	250,000,000	250,000,000		250,000,000
Par value per share					$ 0.001						$ 0.08	$ 0.020					$ 0.10			$ 0.08		$ 0.08	$ 0.08	$ 0.22	$ 0.12
Shares outstanding	78,617,973	78,617,973		102,350,791
Shares issued						5,559,617	733,137	7,320,608	9,273,902	375,000	6,625,000	250,000	135,366	500,000	333,334	500,000	4,375,000	1,500,000	60,000	781,250	1,875,000		875,000	600,000	779,525
Estimated value						$ 510,769	$ 67,354	$ 660,684	$ 544,426	$ 30,000	$ 530,000	$ 50,000	$ 10,829	$ 40,000		$ 60,000	$ 437,500	$ 145,000	$ 4,800	$ 62,500	$ 150,000		$ 70,000
Accrued interest									197,486	110,000
Charitable contribution		110,000
Shares sold																						11,465,000
Gross funding																						1,029,000
Shares issued for services rendered			11,969,871																				5,581,568
Value of shares issued for services rendered		558,157	1,317,944																				558,157
Officers compensation, shares paid																							2,416,250
Officers compensation, value of shares		1,655,444	210,000																				241,625
Consultant fees, shares																							1,121,750
Consultant fees, value amount of shares																							112,175
Warrants issued												50,000
PIK shares issued as signing bonus	7,852,917	12,136,571	2,100,000									1,700,000
PIK signing bonus shares, value												136,000
Aggregate balance, 14% Convertible Notes															$ 1,091,590

XML

Derivative Liability (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Annual dividend yield	0.00%	0.00%
Expected volatility	623.00%	623.00%
FairValueInputsLevel3Member
Embedded conversion Options	$ 897,522	$ 1,467,579
Warrants	230,630	163,406
Increase (Decrease) in fair value	$ 1,128,152	$ 1,630,985
Minimum [Member]
Expected life (years)	0 years	0 years
Risk-free interest rate	0.11%	0.11%
Maximum [Member]
Expected life (years)	6 months	7 months 6 days
Risk-free interest rate	0.25%	0.25%

XML

Nature of Business and Significant Accounting Policies (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Fair Value of Derivative Liability	$ 1,128,152	$ 1,630,985
Level 1 [Member]
Fair Value of Derivative Liability
Level 2 [Member]
Fair Value of Derivative Liability
Level 3 [Member]
Fair Value of Derivative Liability	$ 1,128,152	$ 1,630,985

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Commitments and Contingencies (Details Narrative) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Rental expense	$ 1,431,940	$ 3,524	$ 1,952,136	$ 7,044	$ 520,196
Rental expense to related party	268,436		327,134
Operating lease rental expense			14,292
Option to purchase land and building	825,500		825,500
Muller and Beach [Member]
Loss contingency	25,000		25,000
Jennings [Member]
Shares issued as signing bonus	1,200,000		1,200,000
Executive [Member]
Shares issued as signing bonus	2,000,000		2,000,000
Fees payable in common stock	500,000		500,000
Annual salary	180,000		180,000
GE Ionics [Member]
Loss contingency	11,239,437		11,239,437
Land and Building [Member]
Monthly rent payments			9,750
Trailer [Member]
Monthly rent payments			$ 593

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Stockholders' Deficit (Details) (USD $)	Jun. 30, 2014
Securities to acquire common stock outstanding	78,617,973
Warrant 1 [Member]
Securities to acquire common stock outstanding	1,641,496
Exercise price	$ 0.02
Warrant 3 [Member]
Securities to acquire common stock outstanding	425,000
Exercise price	$ 0.20
Warrant 4 [Member]
Securities to acquire common stock outstanding	2,777,500
Exercise price	$ 0.20
Warrant 5 [Member]
Securities to acquire common stock outstanding	1,110,230
Exercise price	$ 0.20
Warrant 6 [Member]
Securities to acquire common stock outstanding	4,000,000
Exercise price	$ 0.20
Warrant 7 [Member]
Securities to acquire common stock outstanding	200,000
Exercise price	$ 0.20
Warrant 8 [Member]
Securities to acquire common stock outstanding	10,281,250
Exercise price	$ 0.20
Warrant Total [Member]
Securities to acquire common stock outstanding	20,435,476
Notes 1 [Member]
Securities to acquire common stock outstanding	8,049,315
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	33,504,187
Exercise price	$ 0.08
Notes 4 [Member]
Securities to acquire common stock outstanding	6,875,000
Exercise price	$ 0.08
JMJ [Member]
Securities to acquire common stock outstanding	629,630
Stock Fees [Member]
Securities to acquire common stock outstanding	7,398,407

XML

Receivable from Factor, Net of Unapplied Customer Credits

6 Months Ended

Jun. 30, 2014

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 Services, LLC (“STW Energy”) entered into an accounts purchase facility with Crown Financial, LLC, 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. As of June 30, 2014 and December 31, 2013, respectively, there were no accounts receivables subject to recourse due to nonpayment of the purchased accounts.

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.

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Segment Information (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Segment Operations
Revenues	$ 5,613,348		$ 9,214,127	$ 541,000
Cost of revenues	5,276,057		8,457,299	459,634
Operating expenses	3,416,357	452,286	5,866,308	1,059,050
Other income (expense)	(2,342,618)	226,271	(1,389,041)	(2,296,160)
Segment income (loss)	(5,421,683)	(226,015)	(6,498,521)	(3,273,844)
Segment Assets
Current Assets	3,831,439		3,831,439		583,581
Fixed assets	1,065,167		1,065,167		606,764
Other assets	144,274		144,274
Segment Assets	5,037,882		5,037,882		1,273,760
Water Reclamation [Member]
Segment Operations
Revenues	10,051		10,051	541,000
Cost of revenues				459,634
Operating expenses	88,037		219,585
Other income (expense)
Segment income (loss)	(77,986)		(209,534)	81,366
Segment Assets
Current Assets	40,000		40,000
Fixed assets
Other assets
Segment Assets	40,000		40,000
Oil and Gas Services [Member]
Segment Operations
Revenues	5,603,298		9,204,077
Cost of revenues	5,276,057		8,457,299
Operating expenses	1,212,795		1,948,574
Other income (expense)
Segment income (loss)	(885,554)		(1,207,797)
Segment Assets
Current Assets	3,236,267		3,236,267
Fixed assets	975,387		975,387
Other assets
Segment Assets	4,211,654		4,211,654
Corporate Segment [Member]
Segment Operations
Revenues
Cost of revenues
Operating expenses	2,115,525	452,286	3,698,149	1,059,050
Other income (expense)	(2,342,618)	226,271	(1,389,041)	(2,296,160)
Segment income (loss)	(4,458,143)	(226,015)	(5,087,190)	(3,355,210)
Segment Assets
Current Assets	555,174		555,174		579,541
Fixed assets	89,780		89,780		606,764
Other assets	144,274		144,274
Segment Assets	$ 786,225		$ 786,225		$ 1,273,760

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Property, Plant and Equipment (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Notes to Financial Statements
Depreciation Expense	$ 63,716		$ 116,487

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Property, Plant and Equipment (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Property Plant And Equipment Details
Office furniture and equipment	$ 27,014	$ 16,838
Tools and yard equipment	149,535	2,302
Facilities and leasehold improvements	34,389
Vehicles and construction equipment	1,041,490	798,273
Total, cost	1,252,428	817,413
Accumulated Depreciation and Amortization	(187,261)	(70,775)
Property and equipment, net	$ 1,065,167	$ 746,638

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Notes Payable (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Unamortized debt discount	$ (116,100)	$ (107,221)
Total Debt	6,787,045	7,291,501
Less: Current Portion	(3,668,471)	(4,668,492)
Total Long Term Debt	3,118,574	2,623,009
CNotes 14% [Member]
Total Debt	2,326,517	2,904,736
CNotes 12% [Member]
Total Debt	100,000	375,000
Other Debt [Member]
Total Debt	43,280	43,280
Short Term Note MKM [Member]
Total Debt	30,000
Convertible Note JMJ [Member]
Total Debt	55,556
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	852,704	852,702
Crown Financial Notes
Total Debt	986,310
Equipment Contract [Member]
Total Debt	119,670	137,573
Capital Lease Obligations [Member]
Total Debt	20,015
Crown Financial [Member]
Total Debt		683,036
Equipment Contracts [Member]
Total Debt		137,573
Capital Lease Obligation [Member]
Total Debt		$ 23,300

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Notes Payable (Details 1) (USD $)	Jun. 30, 2014
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, Plant and Equipment

6 Months Ended

Jun. 30, 2014

Deferred Revenue Disclosure [Abstract]

Property, Plant and Equipment

Property, plant and equipment consisted of the following at June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
Office furniture and equipment	$	27,014		$	16,838
Tools and yard equipment		149,535			2,302
Facilities and leasehold improvements		34,389			--
Vehicles and construction equipment		1,041,490			798,273
Total, cost		1,252,428			817,413
Accumulated Depreciation and Amortization		(187,261	)		(70,775	)
Property and equipment, net	$	1,065,167		$	746,638

Depreciation expense for the three and six month periods ended June 30, 2014 is $63,716 and $116,487, respectively. Depreciation expense for both the three and six month periods ended June 30, 2013 is zero.

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Notes Payable (Details Narrative) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Warrants issued	20,435,476		20,435,476		18,340,726
Annual dividend yield			0.00%		0.00%
Expected volatility			623.00%		623.00%
Cash proceeds from note			$ 80,000	$ 337,525
Principal converted	741,912			25,000
Total Debt	6,787,045		6,787,045		7,291,501
note payable to an accredited investor, amount			95,496	41,000
Interest expense, notes payable	507,903	212,685	945,505	560,562	347,877
Amortization of debt discount and debt issuance costs	47,032	28,084	90,833	56,872	28,788
Monthly lease payment			593
Capital lease obligation	20,015		20,015		23,300
Lease interest rate			10.00%
Common stock issued	150,618,931		150,618,931		111,255,849
Common stock value	150,620		150,620		111,256
Minimum [Member]
Expected life (years)			0 years		0 years
Risk-free interest rate			0.11%		0.11%
Minimum [Member] | Machinery and Equipment [Member]
interest rate of debt			4.70%
Maximum [Member]
Expected life (years)			6 months		7 months 6 days
Risk-free interest rate			0.25%		0.25%
Maximum [Member] | Machinery and Equipment [Member]
interest rate of debt			8.00%
CNotes 14% [Member]
Warrants issued	20,167,871		20,167,871
warrants exercise price	$ 0.20		$ 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		81,656
Embedded conversion feature at issuance	35,546		35,546
notes convertible into common stock share amount	41,734,038		41,734,038
Principal converted			973,869
shares issued in consideration	9,770,008		9,770,008
Total Debt	2,326,517		2,326,517		2,904,736
Total debt matured and in default	294,752		294,752
Notes payable to related parties	171,892		171,892
Interest expense, notes payable			192,532
CNotes 12% [Member]
Warrants issued	1,641,496		1,641,496
warrants exercise price	$ 0.02		$ 0.02
notes convertible into common stock share amount	28,282,534		28,282,534
Principal converted			225,000
shares issued in consideration	6,824,500		6,824,500
Total Debt	100,000		100,000		375,000
Common stock issued	7,928,000		7,928,000
Common stock value	614,205		614,205
Accrued interest			116,225
Notes 12% [Member]
Principal converted	15,000
Other Debt [Member]
Risk-free interest rate			25.70%
Cash proceeds from note			50,000
notes convertible into common stock share amount	7,928,000		7,928,000
Principal converted			240,000
shares issued in consideration	123,191		123,191
Total Debt	43,280		43,280		43,280
note payable to an accredited investor, amount			30,000
unsecured loan agreement, amount			500,000
interest rate of debt			8.00%
Loan discount			55,556
unpaid principal balance of unsecured loan			0
GE Ionics [Member]
Total Debt	2,100,000		2,100,000		2,100,000
Default note rate			10.00%
STW original debt with GE, amount	11,239,437		11,239,437
Deferrable Compensation [Member]
Total Debt	279,095		279,095		279,095
ParticipationNote 1 [Member]
Total Debt	852,702		852,702
Crown [Member]
Warrants issued	4,000,000		4,000,000
warrants exercise price	$ 0.20		$ 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		159,996
Total Debt	1,000,000		1,000,000
Loan facility amount outstanding	986,310		986,310		683,036
Related party interest expense	47,070		83,746
interest rate of debt			15.00%
Equipment Contract [Member]
Total Debt	$ 119,670		$ 119,670		$ 137,573

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Commitments and Contingencies (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Future minimum lease payments
Future minimum lease payments, 2014	$ 62,058
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	754,970
Capital lease obligation	20,015	23,300
Capital Lease Obligations [Member]
Future minimum lease payments
Future minimum lease payments, 2014	3,558
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	23,720
Less interest	(3,705)
Capital lease obligation	20,015
Less current portion	(5,012)
Long-term capital lease obligation	15,003
Operating Lease Expense [Member]
Future minimum lease payments
Future minimum lease payments, 2014	58,500
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	$ 731,250

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Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash	$ 758,240	$ 17,301
Accounts receivable, trade, net	1,510,654	532,910
Accounts receivable from related parties	935,373
Prepaid expenses and other current assets	627,172	33,370
Total current assets	3,831,439	583,581
Property and equipment, net	1,065,167	746,638
Other Assets
Deferred loan costs, net of $146,589 and $102,435 accumulated amortization, respectively	141,274	185,428
Total Assets	5,037,880	1,515,647
Current liabilities
Bank overdraft		30,468
Accounts Payable	3,258,667	1,256,043
Payable to related parties:
Black Pearl Energy, LLC	1,233,060	139,763
Dufrane Nuclear, Inc.	193,553	132,490
Accrued consulting fees - related parties	727,166	584,666
Current portion of notes payable, net of discounts, $958,689 and $854,928 payable to related parties, respectively	3,668,471	4,668,492
Sales and payroll taxes payable	2,336,107	350,074
Insurance premium finance contract payable	526,462
Accrued expenses and interest	1,408,454	1,839,439
Accrued compensation	779,939	285,190
Accrued board compensation	271,067	491,724
Fees payable in common stock	718,687	231,897
Stock subscriptions payable	700,000	310,000
Derivative liability	1,128,152	1,630,985
Total current liabilities	16,949,785	11,951,231
Notes payable, net of discount and current portion	3,118,574	2,623,009
Total liabilities	20,068,359	14,574,240
Stockholders' deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
Common stock; $0.001 par value; 250,000,000 shares authorized, 150,618,931 and 111,255,849 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively	150,620	111,256
Additional paid-in capital	15,718,689	11,231,418
Accumulated deficit	(30,822,936)	(24,355,343)
Total Stockholders' Deficit of STW Resources Holding Corp.	(14,953,627)	(13,012,669)
Non-controlling interest in subsidiary	(76,852)	(45,924)
Total Stockholders' Deficit	(15,030,479)	(13,058,593)
Total Liabilities and Stockholders' Deficit	$ 5,037,880	$ 1,515,647

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Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net Loss	$ (6,467,593)	$ (3,273,844)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	116,487
Share of net loss of subsidiary attributable to non-controlling interest	(30,928)	(771)
Change in derivative liability	443,536	1,736,369
Value of derivative liability associated with converted notes payable	(272,980)
Financing cost of JMJ note payable	42,592
Amortization of discount and debt issuance costs	90,833	56,872
Share based compensation	1,655,444	210,000
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable	(1,913,117)	13,669
(Increase) Decrease in prepaid expenses and other current assets	(593,807)
Increase (Decrease) in accounts payable	2,002,624	89,924
Increase (Decrease) in insurance premium finance contract payable	526,462
Increase (Decrease) in sales and payroll taxes payable	1,986,034
Increase (Decrease) in accrued expenses and interest	854,637	602,081
Increase (Decrease) in accrued compensation	494,749	108,046
Increase (Decrease) in accrued board compensation		288,324
Increase (Decrease) in deferred revenue		(97,346)
Net cash used in operating activities	(1,065,027)	(266,676)
Cash flows used in investing activities
Purchases of equipment, net of equipment loans	(107,431)
Net cash used in investing activities	(107,431)
Cash flows from financing activities
Bank overdraft	(30,468)
Proceeds from stock subscriptions, net	540,000
Accounts payable - related parties	1,296,861	(18,829)
Principal payments of notes payable	(95,496)	(41,000)
Proceeds from notes payable	80,000	337,525
Debt issuance costs		(35,025)
Proceeds from issuance of common stock	122,500
Net cash provided by financing activities	1,913,397	242,671
Net increase (decrease) in cash	740,939	(24,005)
Cash at beginning of period	17,301	59,870
Cash at end of period	758,240	35,865
Supplemental cash flow information:
Cash paid for interest	12,679	3,115
Cash paid for income taxes
Non-cash investing and financing activities:
Related party note payable for Black Wolf investment		420,000
Value of shares issued to consultants	352,175	210,000
Value of shares issued to employees as compensation	301,625
Value of shares issued as board fees	558,157
Value of shares issued as charitable contributions	110,000
Value of shares issued in connection with extension of notes payable	67,354
Value of shares issued in payment of accrued PIK interest	510,769
Value of shares issued upon conversion of notes payable and accrued interest	1,588,074	66,209
Value of warrants issued as debt issuance costs		159,996
Value of warrants issued with revenue participation notes		33,398
Value of conversion feature of JMJ convertible note payable	50,000
Value of derivative associated with convertible note payable	$ 715,981

XML

Derivative Liability (Details Narrative)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Derivative Liability Details Narrative
Common stock, authorized shares	250,000,000	250,000,000
Volatility rate to value derivative instruments	623.00%	623.00%

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Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Securities to acquire common stock outstanding

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with June-September 14% Convertible Notes		425,000	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 2013 and 2014 Unit Share Offerings		10,281,250	0.20		2015
Sub-total of Warrants outstanding		20,435,476
Common stock associated with the 12% Convertible Notes plus accrued interest		8,049,315	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
Common stock associated with 14% convertible notes plus accrued interest		33,504,187	0.08		2015
Common stock associated with 2013 and  2014 Unit Share Offerings		6,875,000	0.08		2015
Common stock associated with the JMJ notes		629,630	various
Common stock payable as fees		7,398,407	various
Total		78,617,973

Warrant activity

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		18,340,726	$	1.21	1.07	$	131,320
Issued		8,281,250		0.19	2.0
Exercised		-
Forfeited		-
Cancelled		(1,875,000)		0.20
Expired		(4,311,500)		5.32
Outstanding at June 30, 2014		20,435,476	$	0.19	1.41	$	131,320
Exercisable		20,435,476	$	0.19	1.41	$	131,320

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Related Party Transactions (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Weiner [Member]
Consulting fees incurred	$ 37,500	$ 37,500	$ 75,000	$ 75,000
Salary and consulting fees payable	338,083		338,083		263,083
Maddox [Member]
Consulting fees incurred	37,500	37,500	75,000	75,000
Salary and consulting fees payable	245,500		245,500		170,500
Seabolt [Member]
Consulting fees incurred	22,500	22,500	45,000	45,000
Salary and consulting fees payable	143,583		143,583		121,083
Brooks [Member]
Consulting fees incurred	30,000		60,000
Salary and consulting fees payable	60,000		60,000		30,000
Initial grant	2,000,000		2,000,000
Accrued professional fees	120,000		120,000
Officers Salary [Member]
Professional fees	50,000		100,000
Miranda Associates [Member]
Professional fees	168,520		317,118
Accrued professional fees	24,060		24,060		172,956
Due to related parties	72,756		72,756
Related party payable, cash advance	72,175		72,175
Related party payable, common stock	751,750		751,750
Board of Directors [Member]
Consulting fees incurred	168,750	163,012	337,500	304,824
Salary and consulting fees payable	271,067		271,067		491,724
Initial grant	200,000		200,000
Initial cash fee compensation	1,000		1,000
Related party payable, cash advance					558,167
Related party payable, common stock					5,581,568
Other Related Party [Member]
Due to related parties	1,233,060		1,233,060		139,763
Related party sales	37,386		77,378
Dufrane [Member]
Due to related parties	$ 193,533		$ 193,533		$ 132,490

XML

Segment Information (Tables)

3 Months Ended

6 Months Ended

12 Months Ended

Jun. 30, 2014

Jun. 30, 2013

Jun. 30, 2014

Jun. 30, 2013

Dec. 31, 2013

Segment Information Tables

Segment Operations and Assets

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,603,297		$	--		$	5,613,348
Costs of revenues		--			5,276,057			--			5,276,057
Operating expenses		88,037			1,212,795			2,115,525			3,416,357
Other income (expense)		--			--			(964,712	)		(964,712	)
Segment income (loss)	$	(77,986	)	$	(885,555	)	$	(3,080,237	)	$	(4,043,778	)

	June 30, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	40,000	$	3,236,267	$	555,172	$	3,831,439
Fixed assets		--		975,387		89,780		1,065,167
Other assets		-		--		141,274		141,274
Segment Assets	$	40,000	$	4,211,654	$	786,226	$	5,037,880

	Three months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	--	$	--	$	--		$	--
Costs of revenues		--		--		--			--
Operating expenses		--		--		452,286			452,286
Other income (expense)		--		--		225,500			225,500
Segment income (loss)	$	--	$	--	$	(226,786	)	$	(226,786	)

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	9,204,076		$	--		$	9,214,127
Costs of revenues		--			8,457,299			--			8,457,299
Operating expenses		219,585			1,948,574			3,698,149			5,866,308
Other income (expense)		--			--			(1,389,041	)		(1,389,041	)
Segment income (loss)	$	(209,534	)	$	(1,201,797	)	$	(5,087,190	)	$	(6,498,521	)

	Six months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	541,000	$	--	$	--		$	541,000
Costs of revenues		459,634		--		--			459,634
Operating expenses		--		--		1,059,050			1,059,050
Other income (expense)		--		--		(2,296,931	)		(2,296,931	)
Segment income (loss)	$	81,366	$	--	$	(3,355,981	)	$	(3,274,615	)

	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	--	$	583,581	$	583,581
Fixed assets				--		746,638		746,638
Other assets						--		--
Segment Assets	$	--	$	--	$	1,515,647	$	1,515,647

XML

Nature of the Business and Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of the Business and Significant Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission.  Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any other interim period.  These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2013, which are included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014. The December 31, 2013 condensed consolidated balance sheet was derived from the audited condensed consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014.

History of the Company

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.

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. 

Consolidation policy

The condensed consolidated financial statements for the six months ended June 30, 2014, include the accounts of the Company and its wholly owned subsidiaries: STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and its 75% owned subsidiary STW Energy, LLC. The condensed consolidated financial statements as of June 30, 2013, include STW Resources Holding Corp and STW Energy, LLC as the other subsidiaries noted above were not established until the quarterly period ended September 30, 2013. 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 at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously 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 $45,924 for the year ended December 31, 2013. During the six month period ended June 30, 2014, a net loss attributable to the non-controlling interest of $30,928 was incurred. During the six months ended June 30. 2013, a net loss attributable to the non-controlling interest of $771 was incurred. As of June 30, 2014, the net deficit interest in the subsidiary held by the non-controlling interest is $76,852.

Going Concern

The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as 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 $30,822,936 as of June 30, 2014, and as of that date was delinquent in payment of $2,336,107 of sales, payroll taxes, and penalties. As of June 30, 2014, $2,807,127 of notes payable is in default. Since its inception in January 2008 management has raised equity and debt financing of approximately $15,000,000 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.  

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 June 30, 2014, the Company had $758,240 of cash on hand; however, the Company raised $559,000 from the issuance of 5,590,000 shares of its common shares during the period July 1, 2014 through October 21, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations through December 31, 2014. Management is currently seeking 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, 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.

The accompanying condensed 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.

Use of Estimates

Condensed 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 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.

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations.  As of June 30, 2014 and December 31, 2013, respectively, the Company has determined that an allowance for doubtful accounts is required, but has determined it to be immaterial.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

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 per institution. At June 30, 2014, there were no account balance per institution that would have exceeded the $250,000 insurance limit.

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 June 30, 2014, three vendors accounted for 11%, 10% and 7% of total accounts payable.  During the six months ended June 30, 2014, three vendors accounted for 83% of total purchases. During the three months ending June 30, 2014 three vendors totaled 85% of purchases. During the three and six months ended June 30, 2013, one vendor, a subcontractor, accounted for 100% of total purchases.

As of June 30, 2014, three customers accounted for 34%, 7% and 6% of accounts receivable. During the six months ended June 30, 2014, three customers accounted for 27%, 22% and 9% of net revenues. As of June 30, 2013, 100% of accounts receivable were from one customer. During the three and six months ended June 30, 2013, one customer accounted for 100% of revenues.

Fair Value of Financial Instruments

 “Fair value” is defined 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, 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 5).

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 use of assumptions to external and internal information. 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.

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and derivatives due to insufficient authorized shares to settle outstanding contracts which are carried at fair value, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

Management has used the simplified Black Scholes 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 on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2014 and December 31, 2013.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2014	$	--	$	--	$	1,128,152		$	1,128,152
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the statement of operations as 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 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 common stock 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, 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.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 5).

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

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 during the three and six months ending June 30, 2014 or for the year ending December 31, 2013.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. 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 recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the six months ended June 30, 2014, the Company recognized $9,126,698 of revenues from these services contracts, and $77,378 revenues from related parties. During the three months ending June 30, 2014 the Company realized revenue of $5,565,911 from services contracts and $37,386 of the service revenue was from related parties.

Business Segments

The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note10.

Income Taxes

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 basis.  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.   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. 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 reduction in the valuation allowance will be included in income in the year of the change in estimate.

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 June 30, 2014 and December 31, 2013, 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 recognize 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 option pricing model to calculate the fair value of any equity instruments on the grant date.

At June 30, 2014 and December 31, 2013, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net 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 net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2014 and December 31, 2013, the Company had 78,617,973 and 102,350,791 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

The initial balance of stock subscriptions payable as of December 31, 2013, was $310,000 representing 2,000,000 shares to be issued. During the six months ended June 30, 2014, the Company received stock subscriptions and $662,500 of proceeds from a unit offering of its common stock in consideration of 8,281,250 shares of its common stock. During the six months ended June 30, 2014, $272,500 of these stock subscriptions payable were issued representing 3,406,250 shares of common stock, including $150,000, or 1,875,000 shares, of the December 31, 2013 subscription payable. The remaining balance of stock subscriptions payable as of June 30, 2014, is $700,000 representing 6,875,000 shares to be issued.

Fees Payable in Common Stock

During the six months period ending June 30, 2014, the Company agreed to issue an aggregate of 12,136,571 shares and cancelled 166,700 of its common stock in payment of performance bonuses, employment signing bonuses, consulting fees, a loan guaranty, and a partial payment of a technology licensing agreement. During the three months period ending June 30, 2014, the Company agreed to issue an aggregate of 7,852,917 shares of its common stock in payment performance bonuses, employment signing bonuses, consulting fees, a loan guaranty, and a partial payment of a technology licensing agreement and cancelled 166,700 shares. During the six months ended June 30, 2013, the Company agreed to pay 2,100,000 shares for services valued at $210,000. During the three months ended June 30, 2013 there were no additional commitments for the fees payable in common stock. As of December 31, 2013, the Company had outstanding commitments to issue an aggregate of 3,649,673 shares of its common stock valued at $231,897. During the six months ended June 30, 2013, the Company agreed to pay 11,969,871 shares for services valued at $1,317,944. During the six month period ending June 30, 2014, the Company cancelled 166,700 valued at $11,669 and issued 8,221,137 shares valued at $831,154 in payment of these fees which left a remaining of fees payable in common stock of $718,687, or 8,398,407 shares.

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.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Other Assets
Accumulated amortization	$ 146,589	$ 102,435
Current liabilities
Notes payable to related parties	$ 958,689	$ 854,928
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	$ 0.001	$ 0.001
Common stock, authorized shares	250,000,000	250,000,000
Common stock, issued shares	150,618,931	111,255,849
Common stock, outstanding shares	150,618,931	111,255,849

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Nature of the Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission.  Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any other interim period.  These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2013, which are included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014. The December 31, 2013 condensed consolidated balance sheet was derived from the audited condensed consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on June 20, 2014.

History of the Company

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.

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. 

Consolidation Policy

The condensed consolidated financial statements for the six months ended June 30, 2014, include the accounts of the Company and its wholly owned subsidiaries: STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and its 75% owned subsidiary STW Energy, LLC. The condensed consolidated financial statements as of June 30, 2013, include STW Resources Holding Corp and STW Energy, LLC as the other subsidiaries noted above were not established until the quarterly period ended September 30, 2013. 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 at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously 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 $45,924 for the year ended December 31, 2013. During the six month period ended June 30, 2014, a net loss attributable to the non-controlling interest of $30,928 was incurred. During the six months ended June 30. 2013, a net loss attributable to the non-controlling interest of $771 was incurred. As of June 30, 2014, the net deficit interest in the subsidiary held by the non-controlling interest is $76,852.

Going Concern

The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as 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 $30,822,936 as of June 30, 2014, and as of that date was delinquent in payment of $2,336,107 of sales, payroll taxes, and penalties. As of June 30, 2014, $2,807,127 of notes payable is in default. Since its inception in January 2008 management has raised equity and debt financing of approximately $15,000,000 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.  

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 June 30, 2014, the Company had $758,240 of cash on hand; however, the Company raised $559,000 from the issuance of 5,590,000 shares of its common shares during the period July 1, 2014 through October 21, 2014, to sustain its operations.  Management expects that the current funds on hand will be sufficient to continue operations through December 31, 2014. Management is currently seeking 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, 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.

The accompanying condensed 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.

Use of Estimates

Condensed 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 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.

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations.  As of June 30, 2014 and December 31, 2013, respectively, the Company has determined that an allowance for doubtful accounts is required, but has determined it to be immaterial.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

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 per institution. At June 30, 2014, there were no account balance per institution that would have exceeded the $250,000 insurance limit.

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 June 30, 2014, three vendors accounted for 11%, 10% and 7% of total accounts payable.  During the six months ended June 30, 2014, three expense categories accounted for 83% of total purchases. During the three months ending June 30, 2014 three expense categories totaled 85% of purchases. During the three and six months ended June 30, 2013, one vendor, a subcontractor, accounted for 100% of total purchases.

As of June 30, 2014, three customers accounted for 34%, 7% and 6% of accounts receivable. During the six months ended June 30, 2014, three customers accounted for 27%, 22% and 9% of net revenues. As of June 30, 2013, 100% of accounts receivable were from one customer. During the three and six months ended June 30, 2013, one customer accounted for 100% of revenues.

Fair Value of Financial Instruments

“Fair value” is defined 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, 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 5).

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 use of assumptions to external and internal information. 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.

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and derivatives due to insufficient authorized shares to settle outstanding contracts which are carried at fair value, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

Management has used the simplified Black Scholes 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 on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2014 and December 31, 2013.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2014	$	--	$	--	$	1,128,152		$	1,128,152
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the statement of operations as 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 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 common stock 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, 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.  The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using Black-Scholes (see Note 5).

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

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 during the three and six months ending June 30, 2014 or for the year ending December 31, 2013.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

During the year ended December 31, 2013, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. 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 recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the six months ended June 30, 2014, the Company recognized $9,126,698 of revenues from these services contracts, and $77,378 revenues from related parties. During the three months ending June 30, 2014 the Company realized revenue of $5,565,911 from services contracts and $37,386 of the service revenue was from related parties.

Business Segments

The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note10.

Income Taxes

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 basis.  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.   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. 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 reduction in the valuation allowance will be included in income in the year of the change in estimate.

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 June 30, 2014 and December 31, 2013, 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 recognize 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 option pricing model to calculate the fair value of any equity instruments on the grant date.

At June 30, 2014 and December 31, 2013, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net 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 net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2014 and December 31, 2013, the Company had 78,617,973 and 102,350,791 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

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.

Comprehensive Income or Loss

The Company does not have any components of other comprehensive income (loss) as defined. For the three and six month periods ended June 30, 2014 and 2013, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Comprehensive Loss has not been included in these condensed consolidated financial statements.

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2014	Oct. 21, 2014	Jun. 30, 2013
Document And Entity Information
Entity Registrant Name	STW RESOURCES HOLDING CORP.
Entity Central Index Key	0001357838
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
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		167,368,821
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

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Nature of the Business and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fair Value of Derivative Liability

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2014	$	--	$	--	$	1,128,152		$	1,128,152
December 31, 2013	$	--	$	--	$	1,630,985		$	1,630,985

Estimated useful life of property and equipment

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

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues
Water treatment services	$ 10,051		$ 10,051	$ 541,000
Energy and Construction Services revenues	5,565,911		9,126,698
Related parties services revenues	37,386		77,378
Net revenues	5,613,348		9,214,127	541,000
Costs of Revenues	5,276,057		8,457,299	459,634
Gross Profit	337,291		756,828	81,366
Operating Expenses
Research and Development	56,465	9,118	151,955	9,118
Sales and marketing	266,681		439,189
General and administrative	3,029,495	443,168	5,158,764	1,049,932
Depreciation and amortization	63,716		116,400
Total operating expenses	3,416,357	452,286	5,866,308	1,059,050
Loss from operations	(3,079,066)	(452,286)	(5,109,480)	(977,684)
Other Income (Expense)
Interest expense	(507,903)	(212,685)	(945,505)	(560,562)
Change in fair value of derivative liability	(456,809)	438,185	(443,536)	(1,736,369)
Net Loss	(4,043,778)	(226,786)	(6,498,521)	(3,274,615)
Less: Share of net income (loss) of subsidiary attributable to non-controlling interest	10,641	(771)	(30,928)	(771)
Net Loss of STW Resources Holding Corp.	$ (4,054,419)	$ (226,015)	$ (6,467,593)	$ (3,273,844)
Net loss per common share	$ (0.03)	$ 0.00	$ (0.05)	$ (0.03)
Weighted average shares outstanding - basic and diluted	141,671,620	96,606,172	132,569,539	96,456,559

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Related Party Transactions

Officers’ Compensation

During six month periods ended June 30, 2014 and 2013, we incurred $75,000 and $75,000, respectively, in officers’ compensation due our Director, Chairman and CEO, Mr. Stanley Weiner. During three month periods ended June 30, 2014 and 2013, we incurred $37,500 and $37,500, respectively. As of June 30, 2014 and December 31, 2013, the balances of $338,083 and $263,083, respectively, were payable to Mr. Weiner for his officers’ salary.

During six month periods ended June 30, 2014 and 2013, we incurred $75,000 and $75,000, respectively, in officers’ compensation due our Director and Chief Operating Officer, Mr. Lee Maddox. During three month periods ended June 30, 2014 and 2013, we incurred $37,500 and $37,500, respectively.  As of June 30, 2014 and December 31, 2013, the balances of $245,500 and $170,500, respectively, were payable to Mr. Maddox for his officers’ salary.

During six month periods ended June 30, 2014 and 2013, we incurred $45,000 and $45,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. During three month periods ended June 30, 2014 and 2013, we incurred $22,500 and $22,500, respectively.  As of June 30, 2014 and December 31, 2013, the balances of $143,583 and $121,083, respectively, were payable to Seabolt Law Group for these services.

During six month periods ended June 30, 2014 and 2013, we incurred $317,118 and none, respectively, in CFO, audit preparation, tax, and SEC compliance services expense with Miranda & Associates, a Professional Accountancy Corporation, and Miranda CFO Services, Inc., firms owned by our Chief Financial Officer, Mr. Robert J. Miranda. During three month periods ended June 30, 2014 and 2013, we incurred $168,520 and none, respectively.  As of June 30, 2014 and December 31, 2013, the balance of $172,956 and $24,060, respectively, were payable to these firms for these services. During the three and six months ended June 30, 2014, we paid Miranda & Associates in the form of common stock 751,750 shares of common stock valued at $72,175 toward these fees. As of June 30, 2014, we have agreed to pay 1.0 million in share of common stock valued at $100,000 toward these obligations, leaving a cash payable balance due of $72,756 as of June 30, 2014.

During six month periods ended June 30, 2014 and 2013, we incurred $60,000 and none, respectively, in officers’ consulting fees due to our Chief Operating Officer, Mr. Joshua Brooks. During three month periods ended June 30, 2014 and 2013, we incurred $30,000 and none, respectively. During the six month period ended June 30, 2014, we also incurred with Mr. Joshua Brooks a performance bonus comprised of 2.0 million shares of the Company’s common stock valued at $120,000. As of June 30, 2014 and December 31, 2013, the balance of $60,000 and $30,000, was payable to Mr. Brooks for his officers’ salary. Under the terms of his employment agreement, Mr. Brooks is paid in common stock in lieu of cash compensation. These stock awards are accrued as fees payable in common stock the awards are vested.

During six month periods ended June 30, 2014 and 2013, we incurred $100,000 and none, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC. Mr. Adam Jennings. During three month periods ended June 30, 2014 and 2013, we incurred $50,000 and none, respectively. During the six month period ended June 30, 2014, we incurred with Mr. Adam Jennings a signing bonus comprised of 1,600,000 shares of the Company’s common stock valued at $148,000. During the three month period ended June 30, 2014, we incurred with Mr. Adam Jennings a signing bonus comprised of 1,300,000 shares of the Company’s common stock valued at $127,000. As of June 30, 2014 and December 31, 2013, the balance of $100,000 and $21,000, was payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards are accrued as fees payable in common stock as the awards are vested.

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. For the six months ended June 30, 2014 and 2013, the Company incurred board of director fees of $337,500 and $304,824, respectively. For the three months ended June 30, 2014 and 2013, the Company incurred board of director fees of $168,750 and $163,012, respectively.  During the three and six months ended June 30, 2014, the Company issued zero and 5,581,568 shares of its common stock in payment of these fees, valued at zero and $558,167, respectively. As of June 30, 2014 and December 31, 2013, the Company has accrued compensation due to its directors (both current and former) of $271,067 and $491,724, respectively.

As of June 30, 2014 and December 31, 2013, the Company has $1,233,060 and $139,763, respectively, of related party payables to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel. During six months ended June 30, 2014 and 2013, the Company, had sales of $77,378 and none, respectively, to Black Pearl Energy, LLC, a related party. During three months ended June 30, 2014 and 2013, the Company, had sales of $37,386 and none, respectively.

As of June 30, 2014 and December 31, 2013, the Company has a related party payable of $193,553 and $132,490, respectively, to Dufrane Nuclear, Inc. a company controlled by Mr. Joshua Brooks, the Company’s Chief Operating Officer.

Line of credit with Black Pearl Energy, LLC

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, of which $749,334 has been advanced as of June 30, 2014. 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 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 with Crown Financial, LLC

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.  Although our former Chief Operating Officer, Lee Maddox, 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, such guaranty was terminated when Mr. Maddox resigned as our COO in July 2014, pursuant to the terms of the related Termination Agreement.

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 our 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.

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.

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares
Joshua Brooks, Chief Operating Officer	September 24, 2013	$	45,800	(1)		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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Derivative Liability

6 Months Ended

Jun. 30, 2014

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 derivative liability associated with the 14% convertible notes due to the availability of sufficient authorized shares to settle these outstanding contracts.

Management has used the simplified Black Scholes 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 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 June 30, 2014 and December 31, 2013:

	For the six months ended June 30, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.00– 0.50			0.00 – 0.60
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		623	%		623	%

	June 30, 2014		December 31, 2013
Embedded Conversion features	$	897,522	$	1,467,579
Warrants		230,630		163,406
	$	1,128,152	$	1,630,985

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 six months ended June 30, 2014		For the year ended December 31, 2013
Balance beginning	$	1,630,985	$	1,046,439
Change in derivative liability due to increased share authorization		--		(1,977,372)
Value of derivative liability associated with JMJ note payable		42,592
Value of derivative liability attributable to conversion of notes payable and accrued interest		(715,981)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980)
Change in fair  value		443,536		2,561,918
Balance ending	$	1,128,152	$	1,630,985

The reduction in fair value of the derivative liability is largely attributable to the effect on the derivative liability from the payment of $50,000 of notes and the conversion of $225,000 of notes, and related accrued interest.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Restatements Tables

Future minimum lease payments

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	3,558		$	58,500	$	62,058
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		23,720			731,250		754,970
Less interest		(3,705	)
Capital lease obligation		20,015
Less current portion		(5,012	)
Long-term capital lease obligation	$	15,003

Minimum royalty obligation payable

Years ending December 31:	Minimum Royalty Obligation
2014	$	160,000
2015		324,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments		1,324,000

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2014

Property Plant And Equipment Tables

Property, Plant and Equipment

	June 30, 2014			December 31, 2013
Office furniture and equipment	$	27,014		$	16,838
Tools and yard equipment		149,535			2,302
Facilities and leasehold improvements		34,389			--
Vehicles and construction equipment		1,041,490			798,273
Total, cost		1,252,428			817,413
Accumulated Depreciation and Amortization		(187,261	)		(70,775	)
Property and equipment, net	$	1,065,167		$	746,638

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Segment Information

6 Months Ended

Jun. 30, 2014

Segment Information

Segment Information

We have three reportable segments, (1) water reclamation services, (2) oil & gas services, and (3) corporate overhead, as described herein.

Water reclamation services

The Company plans to provide 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 a range of oilfield and pipeline construction, maintenance 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.

Corporate Operations

Corporate operations include senior management salaries and benefits, accounting and finance, legal, business development, and other general corporate operating expenses.

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:

· 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

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	9,204,076		$	--		$	9,214,127
Costs of revenues		--			8,457,299			--			8,457,299
Operating expenses		219,585			1,948,574			3,698,149			5,866,308
Other income (expense)		--			--			(1,389,041	)		(1,389,041	)
Segment income (loss)	$	(209,534	)	$	(1,201,797	)	$	(5,087,190	)	$	(6,498,521	)

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,603,297		$	--		$	5,613,348
Costs of revenues		--			5,276,057			--			5,276,057
Operating expenses		88,037			1,212,795			2,115,525			3,416,357
Other income (expense)		--			--			(964,712	)		(964,712	)
Segment income (loss)	$	(77,986	)	$	(885,555	)	$	(3,080,237	)	$	(4,043,778	)

	Six months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	541,000	$	--	$	--		$	541,000
Costs of revenues		459,634		--		--			459,634
Operating expenses		--		--		1,059,050			1,059,050
Other income (expense)		--		--		(2,296,931	)		(2,296,931	)
Segment income (loss)	$	81,366	$	--	$	(3,355,981	)	$	(3,274,615	)

	Three months ended June 30, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	--	$	--	$	--		$	--
Costs of revenues		--		--		--			--
Operating expenses		--		--		452,286			452,286
Other income (expense)		--		--		225,500			225,500
Segment income (loss)	$	--	$	--	$	(226,786	)	$	(226,786	)

Segment Assets

	June 30, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	40,000	$	3,236,267	$	555,172	$	3,831,439
Fixed assets		--		975,387		89,780		1,065,167
Other assets		-		--		141,274		141,274
Segment Assets	$	40,000	$	4,211,654	$	786,226	$	5,037,880

	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	--	$	583,581	$	583,581
Fixed assets				--		746,638		746,638
Other assets						--		--
Segment Assets	$	--	$	--	$	1,515,647	$	1,515,647

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Stockholders' Deficit

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Stockholders' Deficit

Preferred Stock

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

Common Stock

The Company has authorized 250,000,000 shares of common stock with a par value of $0.001.  During the six months ended June 30, 2014 and 2013, the Company issued common shares as follows:

During January 2014, the Company issued an aggregate of 5,559,617 shares of its common stock valued at $510,769 in payment of accrued paid-in-kind (“PIK”) interest to twelve (12) investors.

During January, 2014, the Company issued an aggregate of 733,137 shares of its common stock to twelve (12) investors valued at $67,354 as consideration for the extension of the maturity date to June 1, 2015, on the 14% convertible notes that matured on November 30, 2013 and in default.

During January, 2014, the Company issued an aggregate of 7,320,608 shares of its common stock valued at $660,684 upon the conversion of a 14% convertible note and two 12% convertible notes (see Note 5).

During January and February, 2014, the Company issued 1,500,000 shares of its common stock valued at $145,000 to consultants for services rendered.

During March 2014, the Company issued 1,875,000 shares of its common stock to an investor that had subscribed and paid $150,000 for the shares on November 15, 2013. This subscription of shares was previously reported as Stock Subscriptions Payable as of December 31, 2013.

During March 2014, the Company issued 781,250 shares of its common stock in consideration of $62,500 cash proceeds realized from the sale of stock to accredited investors at $0.08 per share.

During the period April 1, 2014 through September 17, 2014, we sold an aggregate of 11,465,000 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to fifty (50) 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 $1,029,000 in gross funding in the transaction (the "Offering").  One of the investors, because of additional circumstances, received an additional 100,000 warrants so total warrants were 11,565,000.

In April 2014 the Company issued 875,000 shares of common stock on a unit share offering at $0.08 for proceeds of $70,000. The Company issued 5,581,568 shares of common stock to the Board of Directors for services rendered; this was valued at $558,157. Additional shares of 600,000 were issued to an employee as a signing bonus valued at $60,000. Officer’s compensation was paid by issuing 2,416,250 shares of common stock in lieu of paying $241,625. Consultants were issued 1,121,750 shares of common stock in lieu of paying $112,175 in accrued fees.

On May 22, 2014, the Company converted a 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.

In May 2014 a consultant was issued 500,000 shares of common stock in lieu of fees of $60,000.

In June 2014 the Company issued 375,000 shares of common stock on a unit share offering at $0.08 for proceeds of $30,000. A charitable contribution was made of 1,000,000 shares of common stock valued at $110,000.

In July 2014 the Company issued 6,625,000 shares of common stock on a unit share offering at $0.08 for proceeds of $530,000. The Company also issued 250,000 shares for 50,000 warrants at $.020 for $50,000, 135,366 shares in payment of PIK interest for $10,829, and 500,000 shares for a loan, valued at $40,000. Two employees received 1,700,000 shares of stock for signing bonus and services to the company. These shares were valued at $136,000.

On August 11, 2014, the Company entered into an agreement with MKM Opportunity Master Fund to extend the maturity date of two of its 14% convertible notes payable that have an aggregate balance of $1,091,590.  The notes mature on June 1, 2015, however, in consideration of an extension of the maturity date to December 31, 2015, the Company agreed to issue 333,334 shares of its common stock.   The Company also agreed to issue 150,000 shares of its common stock to MKM Opportunity Master Fund due to the delay in issuing MKM its initial $30,000 note.

In August 2014 the Company issued 4,375,000 shares of common stock on a unit share offering at $0.10 for proceeds of $437,500. The Company also issued 650,000 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 60,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800 and issued an additional 575,000 shares to employees as signing bonuses.

On September 23, 2014, 600,000 shares of common stock were issued to three employees at $0.22 per share as part of their employment/signing bonuses.

On October 15, 2014, the Company issued 779,525 shares of common stock to an investor at a unit value of $0.12 per share.

As of June 30, 2014, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		1,641,496	0.02		2014-2015
Warrants associated with June-September 14% Convertible Notes		425,000	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 2013 and 2014 Unit Share Offerings		10,281,250	0.20		2015
Sub-total of Warrants outstanding		20,435,476
Common stock associated with the 12% Convertible Notes plus accrued interest		8,049,315	0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		1,725,958	0.12		2015
Common stock associated with 14% convertible notes plus accrued interest		33,504,187	0.08		2015
Common stock associated with 2013 and  2014 Unit Share Offerings		6,875,000	0.08		2015
Common stock associated with the JMJ notes		629,630	various
Common stock payable as fees		7,398,407	various
Total		78,617,973

Warrants

A summary of the Company’s warrant activity and related information during the six months ended June 30, 2014 follows:

	Number of Shares		Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		18,340,726	$	1.21	1.07	$	131,320
Issued		8,281,250		0.19	2.0
Exercised		-
Forfeited		-
Cancelled		(1,875,000)		0.20
Expired		(4,311,500)		5.32
Outstanding at June 30, 2014		20,435,476	$	0.19	1.41	$	131,320
Exercisable		20,435,476	$	0.19	1.41	$	131,320

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

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 of a mobile trailer office unit that commenced on October16, 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 June 30, 2014, are as follows:

Years ending December 31:	Capital Lease			Operating Lease		Totals
2014	$	3,558		$	58,500	$	62,058
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		23,720			731,250		754,970
Less interest		(3,705	)
Capital lease obligation		20,015
Less current portion		(5,012	)
Long-term capital lease obligation	$	15,003

Rental expense for all property and equipment operating leases during the six month periods ended June 30, 2014 and 2013, respectively, was $1,952,136 and $7,044. Rental expense for all property and equipment operating leases during the three month periods ended June 30, 2014 and 2013 were $1,431,940 and $3,524, respectively. Related party rental expense during the six months ended June 30, 2014 and 2013, was $327,134 and none, respectively. Related party rental expense during the three months ended June 30, 2014 and 2013, was $268,436 and none, respectively.

Product Purchase and Manufacturing license agreement

On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Salttech B.V, (“Salttech”) a company based in the Netherlands. The agreement provides exclusive rights to purchase Salttech’s DyVaR devices which are used to remove salinity from brackish/brine water streams. The agreement grant’s to the Company exclusive United States rights to purchase these products for use in the municipal and oil & gas industries.  The agreement also grants to the Company the right of first refusal for this technology in North America.

The initial term of the agreement is for five years and is renewable automatically for five years and every five year period unless terminated by written notice of the parties at least three months before the termination date.

The initial royalty for the first year of the agreement is for $324,000, payable quarterly beginning with the calendar quarter starting July 1, 2014 as follows: Q3 2014 $60,000, Q4 2014 $60,000, Q1 2015 $100,000 and Q2 2015 $104,000.  The Company also agreed to pay a continuing royalty of $240,000 per year for years 2-5, plus 3% of the invoice price of any products sold by the Company under the agreement.  The Company also agreed to issue 400,000 shares of its common stock in consideration of this agreement.

As of June 30, 2014, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2014	$	160,000
2015		324,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments		1,324,000

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

The Company has an employment agreement with Joshua Brooks that expired on September 19, 2014, but is renewable by mutual consent of the Company and Mr. Brooks. The agreement entitles Mr. Brooks to an annual salary of $120,000.  The Company’s subsidiary, STW Pipeline Maintenance & Construction, LLC, has an employment agreement with Adam Jennings that expired on September 22, 2014, but is renewable by mutual consent of the Company and Mr. Jennings. The employment agreement for Mr. Jennings has been renewed and we are currently in negotiations with Mr. Brooks.

On March 13, 2014, the board of directors approved a motion to enter into an employment contract with Herb Roberts to be the assistant to the Chief Operating Officer and Chief Financial Officer, at an annual salary of $180,000, plus a grant of 500,000 shares of the company’s common stock, ESOP participation, and $10,000 of moving expenses.  Mr. Roberts was terminated during June 2014 and the stock award was rescinded.

Contingencies

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, GE Ionics Settlement Agreement), 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.  The lawsuit is in the discovery phase of litigation.

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 uncontested claim.  Since that date, the Company has made all agreed upon payments of debt, interest and attorney fees to Muller and Beach and the related matter has been resolved.

TCA Global Credit Master Fund, LP Lawsuit.  On April 04, 2014, TCA Global Credit Master Fund, LP filed a lawsuit against the Company in the Circuit Court of the 11th Judicial District of Miami-Dade County, Florida y, Florida, cause No. 2014-8956-CA-06, alleging the Company’s breach of an October 16, 2012 debt settlement agreement (the “TCA Lawsuit”). The Company did not have to file an answer, as it and TCA agreed to a First Addendum to the October 16, 2012 settlement agreement, wherein STW agreed to pay TCA Global the sum of $77,068 in unpaid principal, accrued interest and attorneys’ fees, and TCA Global agreed to conditionally dismiss the TCA Lawsuit.  Should there be a default in the Company’s payments under the First Addendum, the Company agreed to the entry of a Final Consent Judgment for the $77,068, less amounts paid prior to filing of the Consent Judgment.  The Company is currently in default under the Settlement Addendum, and still owes TCA Global $37,068 to discharge the obligation in full.  At this time, TCA Global has accepted partial payments and has yet to file the Consent Judgment.  The Company is confident it will pay the remaining balance in a short period of time.

Sichenzia and Ross Lawsuit.  On June 13, 2014, Sichenzia Ross Friedman Ference LLP filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $180,036 in legal fees and expenses from the Company.  The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters.  The parties filed a stipulation with the Court on August 25, 2014, which extended the Company’s date to file an Answer to the lawsuit to September 22, 2014.  The Company is currently scheduling negotiations with Sichenzia Ross to agree upon an amount owed and a mechanism for payment.

Arbitration Judgment

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 $196,727 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 commending 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.  The Award is final and Viewpoint has expressed an intention of attempting to enforce the Award through judicial means. The full amount of this award has been accrued for in Accounts Payable.

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Litigation

Bob J. Johnson & Associates Lawsuit.  On July 14, 2014 against the Company’s subsidiary, STW Water Process & Technologies, LLC (“STW Water”), Bob J. Johnson & Associates, Inc. (BJJA) v. Alan Murphy and STW Water & Process Technologies, LLC, Case No. CV50473 in the 238th District Court of Midland County, Texas (the “BJJA Lawsuit”). BJJA sought to enforce an allegedly enforceable covenant not to compete and a confidentiality agreement signed by Alan Murphy, STW Water’s recently hired President, who was a former vice president and employee of BJJA.  On July 14, 2014, BJJA obtained a TRO against Alan Murphy, STW Water and those associated with the Defendants, which, by the Company’s ownership of STW Water, included the Company.  The TRO temporarily prohibited the Company, STW Water and Alan Murphy from contacting two key customers of STW and STW Water, Pioneer Energy Resources and the City of Ft. Stockton, Texas.  On July 28, 2014, the Court held a temporary injunction hearing, which resulted in the TRO being dissolved and the Court refusing to further enjoin STW, STW Water or Alan Murphy from competing with BJJA.  The case is still on the docket; however, the Company is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction.

Unit offering of Common Shares

During the period July 1, 2014 through October 21, 2014, we sold an aggregate of 5,590,000 units pursuant to a Share Purchase Agreement (the "Purchase Agreement") to thirty six (37) 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 $0.10, and the Company received an aggregate of $559,000 in gross funding in the transaction (the "Offering").  

On August 11, 2014, the Company entered into an agreement with MKM Opportunity Master Fund to extend the maturity date of two of its 14% convertible notes payable that have an aggregate balance of $1,091,590.  The notes mature on June 1, 2015, however, in consideration of an extension of the maturity date to December 31, 2015, the Company agreed to issue 333,334 shares of its common stock.   The Company also agreed to issue 150,000 shares of its common stock to MKM Opportunity Master Fund due to the delay in issuing MKM its initial $30,000 note.

Shares Issued

In July 2014 the Company issued 6,625,000 shares of common stock on a unit share offering at $0.08 for proceeds of $530,000. The Company also issued 250,000 shares for 50,000 warrants at $.020 for $50,000, 135,366 shares in payment of PIK interest for $10,829, and 500,000 shares for a loan, valued at $40,000. Two employees received 1,700,000 shares of stock for signing bonus and services to the company. These shares were valued at $136,000.

Extension of 14% convertible notes payable and Shares Issued in Connection with Note Payable

In August 2014 the Company issued 4,375,000 shares of common stock on a unit share offering at $0.10 for proceeds of $435,500. The Company also issued 650,000 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 60,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800 and issued an additional 575,000 shares to employees as signing bonuses.

On September 23, 2014, 600,000 shares of common stock were issued to three employees at $0.22 per share as part of their employment/signing bonuses.

On October 15, 2014, the Company issued 779,525 shares of common stock to an investor at a unit value of $0.12 per share.

In fiscal 2013, the Board received written consent from a majority of its shareholders authorizing management to effect up to a 10-to-1 reverse split of all authorized and outstanding shares of the Company's common stock for up to twelve months (the "Authorization"), which expires in November 2014.  Management has now determined to effect a 1 for 6 reverse stock split on November 7, 2014 (the "Reverse Split").  For more information about the authority granted, please see the Information Statement on Schedule 14C that the Company filed with the SEC on October 21, 2013.  Following the Reverse Split, every six shares will be combined and converted into 1 share of the Company's Common Stock (with any fraction shares being rounded up to the nearest whole number).  Shareholders will not need to return their stock certificates; the Certificates shall be payable upon surrender; the transfer agent will electronically update all stock certificates then outstanding to reflect the reverse split. Although these actions did not occur during the period covered by this Report, now that they have decided to effect the Reverse Split, management believes it was important to disclose same in its next filing, which is this Report.  We are currently working to supply FINRA with all of the materials it requires to approve the Reverse Split, without which, we cannot effect the Reverse Split.

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.

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Derivative Liability (Details 1) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Derivative Liabilities Details 1
Beginning Balance			$ 1,630,985	$ 1,046,439	$ 1,046,439
Change in derivative liability due to increased share authorization					(1,977,372)
Value of derivative liability associated with JMJ note payable			42,592
Value of derivative liability attributable to conversion of notes payable and accrued interest			(715,981)
Change in derivative liability associated with conversion of notes payable and accrued interest			(272,980)
Change in fair value	456,809	(438,185)	443,536	1,736,369	2,561,918
Ending Balance	$ 1,128,152		$ 1,128,152		$ 1,630,985

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Derivative Liability (Tables)

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Warrants and embedded conversion options which have no observable market data

	For the six months ended June 30, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.00– 0.50			0.00 – 0.60
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		623	%		623	%

	June 30, 2014		December 31, 2013
Embedded Conversion features	$	897,522	$	1,467,579
Warrants		230,630		163,406
	$	1,128,152	$	1,630,985

Warrants and embedded conversion options measured at fair value on a recurring basis

	For the six months ended June 30, 2014		For the year ended December 31, 2013
Balance beginning	$	1,630,985	$	1,046,439
Change in derivative liability due to increased share authorization		--		(1,977,372)
Value of derivative liability associated with JMJ note payable		42,592
Value of derivative liability attributable to conversion of notes payable and accrued interest		(715,981)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980)
Change in fair  value		443,536		2,561,918
Balance ending	$	1,128,152	$	1,630,985

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Nature of Business and Significant Accounting Policies (Details 1)	6 Months Ended
	Jun. 30, 2014
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

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Commitments and Contingencies (Details 1) (Royalty Arrangement [Member], USD $)	Jun. 30, 2014
Royalty Arrangement [Member]
2014	$ 160,000
2015	324,000
2016	240,000
2017	240,000
2018	240,000
Thereafter	120,000
Total minimum lease payments	$ 1,324,000

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Condensed Consolidated Statement of Stockholders' Deficit (USD $)	Common Stock	Additional Paid In Capital	Accumulated Deficit	Non-Controlling Interest	Total
Beginning balance, Amount at Dec. 31, 2013	$ 150,620	$ 15,718,689	$ (30,822,936)	$ (76,852)	$ (13,058,593)
Beginning Balance, Shares at Dec. 31, 2013	150,618,931
Shares issued upon conversion of notes payable and accrued interest, Shares	16,594,510
Shares issued upon conversion of notes payable and accrued interest, Amount	16,595	1,571,479			1,588,074
Shares issued upon extension of maturity dates on notes payable, Shares	733,137
Shares issued upon extension of maturity dates on notes payable, Amount	733	66,621			67,354
Shares issued upon conversion of PIK accrued interest, Shares	5,559,617
Shares issued upon conversion of PIK accrued interest, Amount	5,560	505,209			510,769
Shares issued for consulting fees, Shares	3,471,750
Shares issued for consulting fees, Amount	3,472	348,703			352,175
Shares issued as board of director fees, shares	5,581,568
Shares issued as board of director fees, amount	5,582	552,575			558,157
Shares issued to employees as compensation, shares	3,016,250
Shares issued to employees as compensation, amount	3,016	298,609			301,625
Shares issued as a charitable contribution, shares	1,000,000
Shares issued as a charitable contribution, amount	1,000	109,000			110,000
Proceeds from sale of common stock, Shares	1,531,250
Proceeds from sale of common stock, Amount	1,531	120,969			122,500
Shares issued for common stock payable, shares	1,875,000
Shares issued for common stock payable, amount	1,875	148,125			150,000
Value of derivative associated with converted notes payable		715,981			715,981
Value of conversion feature of JMJ convertible note payable		50,000			50,000
Net Loss for the period			(6,467,593)	(30,928)	(6,498,521)
Ending Balance, Amount at Jun. 30, 2014	$ 150,620	$ 15,718,689	$ (30,822,936)	$ (76,852)	$ (15,030,479)
Ending Balance, Shares at Jun. 30, 2014	150,618,931

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Notes Payable

6 Months Ended

Jun. 30, 2014

Notes Payable [Abstract]

Notes Payable

The Company’s notes payable at June 30, 2014 and December 31, 2013, consisted of the following:

	June 30,			December 31,
Name	2014			2013
14% Convertible Notes	$	2,326,517		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		33,280			43,280
Short term note - MKM		30,000			--
Convertible note – JMJ Financial		55,556			--
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue participation notes		852,702			852,702
Crown Financial note		986,310			683,036
Equipment finance contracts		119,670			137,573
Capital lease obligation		20,015			23,300
Unamortized debt discount		(116,100)			(107,221)
Total debt		6,787,045			7,291,501
Less: Current Portion		(3,668,471	)		(4,668,492	)
Total long term debt	$	3,118,574		$	2,623,009

14% Convertible Notes

Between November 2011 and September 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 41,734,038 shares of the Company’s common stock.

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 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 are included in the derivative liabilities account each reporting period as the Company has insufficient authorized shares to settle outstanding contracts (see Note 5). On July 12, 2013, the Company increased its share authorization to 250,000,000 shares, adjusted the gain or loss on the change in fair value through the statement of operations and then reclassified this derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

As of June 30, 2014 and December 31, 2013, the aggregate principal balances of these notes are $2,326,517 and $2,904,736, respectively. During the six month period ended June 30, 2014, the Company converted principal and accrued interest of $973,869 in exchange for 9,770,008 shares of the Company’s common stock. The value of the stock issued was $781,337 resulting in additional interest expense of $192,532 upon the conversion of convertible debt. During the three month period ended June 30, 2014, the Company converted principal and accrued interest of $741,912 in exchange for 9,273,900 shares of the Company’s common stock. The value of the stock issued was $927,390 resulting in additional interest expense of $185,478 upon the conversion of convertible debt. As June 30, 2014, the total of outstanding 14% convertible notes is $2,326,517 of which $294,752 matured on November 30, 2013 and is in default, however, as of October 21, 2014, none of the note holders have declared the notes in default. During the six month period ended June 30, 2013, the Company converted principal of $25,000. There was no additional activity in the three months ending June 30, 2013 in this area.

As of June 30, 2014 and 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 matured on November 30, 2011 and are currently in default.  At June 30, 2014, the remaining balance is $100,000. 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.

During the six months ended June 30, 2014, the Company issued 6,824,500 shares of its common stock valued at $614,205 in payment of $225,000 of principal and $116,225 accrued interest (total of $341,225). The conversion of these notes payable and accrued interest for common stock resulted in a non-cash charge of $272,980 to the derivative liability upon the conversion of convertible debt. During the six months ended June 30, 2013, the Company issued 7,928,000 shares of its common stock in payment of $240,000 of principal and $123,191 accrued interest (total of $363,191). During the three months ended June 30, 2013, the Company issued 1,103,500 shares of its common stock valued at $66,209 at the date of issuance, resulting in an expense of $44,243, in payment of $15,000 of principal and $6,966 accrued interest. Additionally, the Company paid $50,000 of principal and $5,532 in accrued interest on two notes.

Other Short-Term Debt

Other short term debt is comprised of a note payable to an accredited investor in the amount of $33,280. The Company did not make its required payments during 2013 or 2014 and the balance is in default.

On January 1, 2014, the Company issued a $30,000 short term note from an investor, MKM Capital. The note bears interest at 8% and matures on January 1, 2015.  The balance of the note payable as of June 30, 2014, is $30,000.

Convertible note payable with original issue discount

On March 19, 2014, the Company issued a $500,000 convertible note to JMJ Financial, an accredited private investor.  The note bears interest at 6% and matures on March 19, 2016. The note is convertible under a variable conversion price formula that is based on the lesser of $0.11 per share of 60% of the lowest trade price in the 25 trading days previous to the conversion date. The note bears a $50,000 original issue discount which would yield $450,000 of net cash proceeds to the Company.  As of June 30, 2014, the Company has drawn $50,000 cash proceeds from this note. The $50,000 cash draw plus the applicable pro-rata original issue discount results in a gross note payable balance of $55,556. The value of the conversion feature of this note, accounted for as a liability, was determined under the Black-Scholes pricing model to be $92,592 as of the date of issuance, of which $42,592 was recorded as a financing cost in the condensed consolidated statement of operations and $50,000 was recorded as a loan discount.  The conversion feature and the original issue discount have been recorded as a loan discount of $55,556 that will be amortized as interest expense over the term of the note under the effective interest method. The effective interest rate of this note was determined to be 25.7%.

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 June 30, 2014 and 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.  (See Note 9)

Deferred Compensation Notes

As of June 30, 2014, and 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 June 30, 2014 and 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 more fully described in the notes to the consolidated financial statements for the year ended December 31, 2013 which was included in the Company’s Form 10-K as filed with the SEC on June 20, 2014.

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 our subsidiary: 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 June 30, 2014 and December 31, 2013, the Company had drawn down $986,310 and $683,036, respectively, of this loan facility.

In lieu of a cash loan fee, the Company issued 4,000,000 warrants in connection with this loan agreement. These warrants have an exercise price of $0.20, are immediately exercisable and have 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 as a deferred loan cost to be amortized to interest expense over the term of the loan.  Related party interest expense for this loan was $47,040 and $83,746 for the three and six months ended June 30, 2014, respectively. There was no such expense for the three and six months ended June 30, 2013.

Equipment Finance Contracts

During 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 at rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of June 30, 2014 and December 31, 2013, respectively, the Company has an aggregate balance of $119,670 and $137,573 payable on these equipment finance contracts.

Capital lease obligation

During 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%. As of June 30, 2014 and December 31, 2013, the principal balance on this capital lease is $20,015 and $23,300, respectively.

For the six month periods ended June 30, 2014 and 2013, interest expense on all notes payable described above was $945,505 and $560,562, respectively, which included $90,833 and $56,872, respectively, of amortization of debt discount and debt issuance costs. For the three months ended June 30, 2014 and 2013, interest expense on all notes payable described above was $507,903 and $212,685, respectively. This included $47,032 and $28,084, respectively, of amortization of debt discount and debt issuance. There was no interest capitalized in 2014 or 2013.

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Nature of Business and Significant Accounting Policies (Details Narrative) (USD $)	3 Months Ended	6 Months Ended			12 Months Ended	77 Months Ended
	Jun. 30, 2014	Sep. 13, 2014	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014
Noncontrolling member interest					250000.00%
Common stock issued	150,618,931		150,618,931		111,255,849	150,618,931
Preferred stock issued
Net loss attributable to non-controlling interest			$ 30,928	$ 771	$ 45,924
Net deficit interest in subsidiary held by non-controlling interest			76,852
Accumulated (Deficit)	(30,822,936)		(30,822,936)			(30,822,936)
Accrued sales and payroll taxes	2,386,107		2,386,107			2,386,107
Notes payable in default	2,807,127		2,807,127			2,807,127
Raised net equity and debt financing						15,000,000
Cash on hand	758,240		758,240		17,301	758,240
Debt			10,219,000
Equity		5,875,000
Common Stock equivalents outstanding	78,617,973		78,617,973		102,350,791	78,617,973
Shares issued for consulting fees, value			352,175
Revenues from service contracts	5,565,911		9,126,698	541,000
Revenues from related parties	37,386		77,378
Stock subscriptions			662,500		310,000
Shares in considerations - stock subscriptions			8,281,250
Subscription payable issued - shares			3,406,250		1,875,000
Subscription payable issued - amount			272,500		150,000
Remaining balance of subscription payable			700,000
Remaining balance of subscription payable - shares			6,875,000
Shares issued in payment performance bonus	7,852,917		12,136,571	2,100,000
Loan guaranty			210,000
Shares issued for services rendered				11,969,871
Value of shares issued for services rendered			$ 558,157	$ 1,317,944
Vendor One [Member]
Concentration risk			83.00%	100.00%
Percent of accounts payable	11.00%		11.00%			11.00%
Customer One [Member]
Concentration risk			27.00%
Percent of accounts receivable	34.00%		34.00%			34.00%
Customer Two [Member]
Concentration risk			22.00%
Percent of accounts receivable	7.00%		7.00%			7.00%
Customer Three [Member]
Concentration risk			9.00%
Percent of accounts receivable	6.00%		6.00%			6.00%
One Customer [Member]
Concentration risk				100.00%
Vendor Two [Member]
Percent of accounts payable	10.00%		10.00%			10.00%
Vendor Three [Member]
Percent of accounts payable	7.00%		7.00%			7.00%

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Stockholders' Deficit (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2014
Number of Shares Under Warrants
Warrants outstanding at beginning of period	18,340,726
Warrants Issued	8,281,250
Warrants Exercised
Warrants Forfeited
Warrants Cancelled	(1,875,000)
Warrants Expired	(4,311,500)
Warrants outstanding at end of period	20,435,476
Warrants exercisable at end of period	20,435,476
Weighted Average Exercise Price
Warrants outstanding at beginning of period	$ 1.21
Warrants Issued	$ 0.19
Warrants Exercised
Warrants Forfeited
Warrants Cancelled	$ 0.20
Warrants Expired	$ 5.32
Warrants outstanding at end of period	$ 0.19
Warrants exercisable at end of period	$ 0.19
Remaining Contractual Life (Years)
Warrants outstanding at beginning of period	1 year 24 days
Warrants Issued	2 years
Warrants outstanding at end of period	1 year 4 months 28 days
Warrants exercisable at end of period	1 year 4 months 28 days
Aggregate Intrinsic Value
Warrants outstanding at beginning of period	$ 131,320
Warrants outstanding at end of period	131,320
Warrants exercisable at end of period	$ 131,320

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2014

Notes Payable Tables

Notes Payable

	June 30,			December 31,
Name	2014			2013
14% Convertible Notes	$	2,326,517		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		33,280			43,280
Short term note - MKM		30,000			--
Convertible note – JMJ Financial		55,556			--
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue participation notes		852,702			852,702
Crown Financial note		986,310			683,036
Equipment finance contracts		119,670			137,573
Capital lease obligation		20,015			23,300
Unamortized debt discount		(116,100)			(107,221)
Total debt		6,787,045			7,291,501
Less: Current Portion		(3,668,471	)		(4,668,492	)
Total long term debt	$	3,118,574		$	2,623,009

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