10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2014

or

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

For the transition period from __________________ to __________________________

Commission file number: 000-52654

STW Resources Holding Corp

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

Common Stock, $0.001 PER SHARE

(Title of class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[ X ] Yes  [  ] No

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

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

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

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2014 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $12,894,724.

As of April 2, 2015, the Registrant has 31,683,150 shares of common stock outstanding.

TABLE OF CONTENTS

		Page No.
Part I
Item 1.	Description of Business	2
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	20
Item 2.	Description of Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosure	21
Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	23
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 8.	Financial Statements and Supplementary Data	33
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	34
Item 9A.	Controls and Procedures	34
Item 9B.	Other Information	36
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	43
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	51
Item 14.	Principal Accounting Fees and Services	53
Part IV
Item 15.	Exhibits, Financial Statement Schedules	55

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

● our ability to continue as a going concern,

● our ability to develop revenue producing operations,

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

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

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

Unless specifically set forth to the contrary, when used in this Report the terms “STW,” “we”, “our”, the “Company” and similar terms refer to STW Resources Holding Corp., a Nevada corporation and its subsidiaries. In addition, when used herein and unless specifically set forth to the contrary, “2012” refers to the year ended December 31, 2012, “2013” refers to the year ended December 31, 2013 and “2014” refers to the year ended December 31, 2014.

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Corporate History

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

Subsidiaries

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

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

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

Effective April 16, 2014, the Company formed another new subsidiary, STW Water Process & Technologies, LLC (“Water Process”), a Texas limited liability company. The Company is the sole member of Water Process, owning 100% of the membership interest in such entity, which is managed by its members.

Overview

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

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

● Gas shale hydro-fracturing flowback;

● Oil and gas produced water;

● Desalination;

● Brackish water; and

● Municipal wastewater.

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

Market Opportunities

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

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

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

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

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

Fort Stockton Well Development

On August 4, 2014, we entered into a Cooperation Agreement with the City of Fort Stockton, Texas regarding the development of water well(s) in the Capitan Reef Aquifer Formation. The City of Fort Stockton, Texas ("COFS") owns the surface and ground water rights to several areas of Capitan Reef Aquifer Formation; its existing Capitan Reef Aquifer ("CRA") well is currently drilled to an approximate depth of 3,500 feet (the "Existing CRA Well"). We want to deepen the Existing CRA Well to make it a production water well and/or drill an alternate well, which will be at our own expense, and lease CRA groundwater rights from certain sections of COFS' property. Together, we hope that we can develop a CRA water supply project in the area that will serve to meet the future needs of COFS and the municipal and industrial needs within the region.

Through the Agreement, COFS granted and leased the right to explore for, drill for, produce, transport, and treat groundwater from a specific portion of the CRA to us. We also have the right to drill, deepen and/or rework the Existing CRA Well, at our own expense. Through a Post-Well Study, we shall determine the gallons per day ("GPD") of maximum water capacity of the Existing CRA Well and the quality of the water from such well. If however, the results of the Post-Well Study demonstrate that the Existing CRA Well is not suitable to carry out the purpose of the Agreement, we may drill a second water well, at our own expense, at a location mutually agreed on the related property and then we shall conduct a Post-Well Study on such replacement well. Once the well water meets the contractual specifications, we may sell such water to end users; if the water does not meet such standards, we maintain the right to treat the water to other specific levels or sell as is to industrial end-users. We are responsible for the pipelines and pumping facilities required to transport the water to the end-user.

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If the Post-Well Study shows that the well(s) we drilled can produce CRA water at a minimum of 1,200 GPM (the "Critical Criterion") and all regulatory approvals have been obtained, we must pay COFS a $5,000,000 bonus payment and we shall have the right to develop additional wells if we have additional water supply contracts demanding additional production. We shall also pay COFS a 17% royalty of the price we receive per 1,000 gallon of CRA water produced from the well(s). Finally, we are required to provide COFS with 3 million GPD of CRA water at no cost upon their request for delivery of same for their use. For one year following completion of our last post-well study, we have the option to produce and transport the water produced from the CRA (the "Option"); otherwise, the Agreement terminates, unless we pay a monthly royalty of $500 (the "Option Royalty"). We can maintain the Option for three years, so long as we pay the Option Royalty. If we exercise the Option and the wells are capable of producing CRA water for sale, but there are no sales for a consecutive period of 180 days or more, the lease shall terminate unless we pay a monthly royalty of $5,000, which is also only permissible for three years. Other fees payable to COFS include a 7% royalty of the price we receive per 1,000 gallons of CRA water produced and sold from other properties owned by anyone other than COFS within the Pecos County, as a result of our additional right to use existing COFS easements and rights of way within the Pecos County for laying pipelines necessary for the delivery of CRA water produced within such county. COFS agreed to assist us with any negotiations required to procure additional easements and groundwater rights in Pecos County to help us produce and deliver CRA water.

If the Post-Well Study shows that the Critical Criterion has not been met, then we can decide whether or not we want to produce and transport the water. If we decide not to produce, but COFS sells the water from the wells, COFS will reimburse us for some of our expenses related to developing such well; if we decide to produce the water, we will not get any reimbursement. These same options apply if the regulatory approvals have been granted but the permit from the Middle Pecos Groundwater Conservation District does not allow us to transport the full amount we request to use or sell.

Throughout the term of the Agreement, COFS is responsible to maintain insurance for its activities and obtain all property rights related to the activities covered by the Agreement.

Title and ownership of the Existing CRA Well and any other wells we drill on the property shall be transferred to us during the term of the Agreement; upon termination of the Agreement, we shall transfer title back to COFS upon COFS' reimbursement to us of any expenses that are owed.

The term of the Agreement is for 30 years, which shall automatically renew year to year unless terminated by either party upon 60 days written notice after the end of the term. The Agreement provides that we are authorized to maintain and service any contracts to the extent water has been purchased pursuant to a sales agreement with a duration exceeding such 30 year time period and this Agreement shall not terminate during the initial term of any such agreement. We also maintain the right to unilaterally terminate the Agreement related to the initial subject property. So long as we are maintain our obligations under the Agreement, COFS may not terminate the Agreement during certain specific phases of the contemplated transaction. The Agreement requires COFS reimburse us at specified rates and for specified projects if it unilaterally terminates the Agreement during specific time frames.

The Agreement contains covenants that are customary for agreements of this type and provides for indemnification of the parties for losses and expenses arising out of this Agreement.

The Company is currently working to finance the initial project, of which there can be no guarantee. If the Company does not receive adequate funding, it will not be able to carry out the transactions contemplated in the Agreement. The Agreement does not provide for any penalties or defaults if we are unable to carry it out. As of the date of this Report the Company had received funding of over $1.5 million.

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The Permian and Delaware Basins in West Texas

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

Eagle Ford Shale Formation

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

Produced Water

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

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

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

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

Brackish Water

World-wide, there are brackish water zones that contain large volumes of water. The water contains dissolved salts in the 0.5 to 2% (3,000 to 20,000 mg/l Total Dissolved Solids (“TDS”)) range and, hence, is unfit for human use. This water can be treated to reduce the TDS below 500 mg/l or 0.05% TDS making the water fit for human consumption. Factors such as decreasing supplies of fresh ground and surface water, increased competition for surface water resources and changes in population/demand centers are driving the need for brackish water for water supply. STW’s potential customers are private companies and municipalities serving fast growing metropolitan areas where demand for water is outpacing the available supply. For example, aquifers in the Texas Gulf Coast region contain a large volume of brackish water (less than 10,000 part per million TDS) that once desalinized will help meet increasing demand in the region.

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

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

Process

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

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

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

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

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

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

● Analyze fluid volumes and their variability over time.

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

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

● Obtaining permits as needed.

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

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

Technology

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

STW Salttech Dynamic Vapor Recovery (DyVaR) System

STW’s process is capable of handling waters that contain up to 300,000 mg/l TDS, with fresh water recovery rates from 50% to 97%, or greater depending on inlet water quality. The recovered fresh water, or “distillate,” is highly purified water from the evaporative process and has multiple re-use applications. It is particularly applicable in the gas shale and oil production facilities for reclaiming frac and produced waters as well as processing the highly salt laden reject concentrate from reverse osmosis operations with a fresh water recovery rate of 95%-97%.

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

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Reverse Osmosis

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

The reverse osmosis process creates a by-product of concentrated brine with higher TDS. This brine can be processed by our Salttech DyVaR system.

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

Membrane Bioreactor

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

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

Brine Discharge / Deep Injection Wells

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

Oil and Gas Services

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

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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 66,667 shares of its common stock in consideration of this agreement.

Expertise & Differentiators

-   Experienced and entrepreneurial management

-   Unique, high quality and efficient process

-   Highly trained, insured workforce

-   Newest technology; mobile units

-   All inclusive capabilities

Marketing & Sales

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

Oil and Gas Shale

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

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

· Evaluate drilling program and production expansion plans.

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

· Study the flowback water volumes and chemistry over time.

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

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

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

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

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

· Develop a timeline for water reclamation implementation.

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

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

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

Competition

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

Legislative and Regulatory

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

Employees

As of December 31, 2014, we had 119 full-time or part-time employees. Our executive officers provide certain services dedicated to current corporate and business development activities on an as needed part-time basis.

Company’s Office and Website

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

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ITEM 1A.  RISK FACTORS

Risks Related to Our Business

We have a history of operating losses; we incurred a net loss in both fiscal year 2014 and fiscal year 2013. Our revenues are not currently sufficient to fund our operating expenses, and there are no assurances we will develop profitable operations.

The report of our independent registered public accounting firm on our 2014 consolidated financial statements contains an explanatory paragraph which raises substantial doubt about our ability to continue as a going concern, and we will need additional financing to execute our business plan, fund our operations and to continue as a going concern, which additional financing may not be available on a timely basis, or at all.

We have limited remaining funds to support our operations. We have prepared our consolidated financial statements in this Form 10-K on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We will not be able to execute our current business plan, fund our business operations or continue as a going concern long enough to achieve profitability unless we are able to secure additional funds. The Report of Independent Registered Public Accounting Firm on our December 31, 2014, consolidated financial statements includes an explanatory paragraph stating that the recurring losses incurred from operations and a working capital deficiency raise substantial doubt about our ability to continue as a going concern. However, in order to sustain and improve operations, we will need to secure additional funds. If adequate financing is not available, we will not be able to sustain operations. In addition, if one or more of the risks discussed in these risk factors occur or our expenses exceed our expectations, we may be required to raise further additional funds sooner than anticipated.

We will be required to pursue sources of additional capital to fund our operations through various means, including equity or debt financing, funding from a corporate partnership or licensing arrangement or any similar financing. However, we may be unable to obtain such financings on reasonable terms, or at all. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have additional dilutive effects. In addition, if we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish potentially valuable rights to our product candidates or proprietary technologies, or grant licenses on terms that are not favorable to us. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. As a result, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. If we are unable to raise funds to satisfy our capital needs prior to the end of 2015, we may be required to cease operations.

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

STW has a deficit accumulated of $39,112,171 as of December 31, 2014 and had a net loss of $14,756,828 for the year ended December 31, 2014. In addition, as of December 31, 2014, STW had total liabilities of $27,601,280 and total assets of $6,713,243.

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

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

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

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

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

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

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

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

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

We have incurred indebtedness totaling $27,601,280 as of December 31, 2014, which includes: current liabilities of $24,775,985 which includes $4,523,265 in accounts payable, $4,280,180 in related party payables, the short term portion of the notes payable is $5,890,414, $2,671,843 of sales, payroll taxes, and penalties payable, $208,271 of insurance premium finance contract payable, $1,769,117 in accrued expenses, which principally includes accrued interest on our various debt obligations, $643,777 of accrued compensation, $496,067 of accrued board compensation, $2,783,711 of Fees Payable in Common Stock, $27,000 of stock subscriptions payable, and $802,340 of derivative liability. The non-current portion of the notes payable is $2,825,295 for a total of $8,715,709 in notes payable, including convertible notes. As of December 31, 2014, the total of outstanding 14% convertible notes is $2,296,342 of which $688,210 is in default. We do not have adequate funds to satisfy the outstanding obligations. Unless we are able to restructure some or all of this debt and raise sufficient capital to fund our continued development, our current operations do not generate sufficient cash to pay these obligations, when due. Accordingly, there can be no assurance that we will be able to pay these or other obligations we may incur in the future and it is unlikely that we would be able to continue as a going concern.

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As of April 2, 2015, we have $3,701,617 in outstanding convertible notes. We received consent from the holders of approximately 42% of the outstanding principal amount of such notes to extend the maturity date of their notes. Although we continue to seek consent from the remaining note holders, there can be no assurance that we will receive it from any or all of these holders. The notes provide us with a 30 day cure period, but if we are unable to pay the notes when they become due, the note holders maintain the right to demand immediate payment of all outstanding principal and interest or maintain the note at an increased default interest rate of 18% per annum until we remedy the default. If we do not receive consent to extend the maturity date of the notes from the remaining note holders, the notes are not converted into equity or we do not otherwise restructure such debt, our current operations do not generate sufficient cash to pay the interest and principal on these obligations when they become due. Accordingly, there can be no assurance that we will be able to pay these or other obligations which we may incur in the future.

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

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

We depend upon key personnel and need additional personnel.

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

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

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

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

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

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

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

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

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

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

We are delinquent in our payroll tax obligations

As of April 2, 2015, we are delinquent in payment of $2,594,128 of federal employee payroll taxes, including withholding, and filing of payroll tax returns and have submitted an application to the Internal Revenue Service to enable us to pay these delinquent taxes over an extended period. Since these payroll tax liabilities include failure to deposit employee trust funds, we may be subject to 100% trust fund penalties for these taxes and have accrued $1,183,202 of these estimated penalties as of December 31, 2014. We cannot assure you that the Internal Revenue Service will accept our application for installment payments or that we will not incur additional fines and penalties for failure to timely file such federal payroll tax returns.

We compete with many larger, well capitalized companies.

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

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

We have experienced, and may continue to experience, difficulties in implementing the management, operations and accounting systems, controls and procedures necessary to support our growth and expanded operations, as well as difficulties in complying with the reporting requirements related to our growth. With respect to enhancing our management and operations team, we may experience difficulties in finding and retaining additional qualified personnel. If such personnel are not available locally, we may incur higher recruiting, relocation and compensation expenses. In an effort to meet the demands of our planned activities in fiscal year 2015 and, thereafter, we may be required to supplement our staff with contract and consultant personnel until we are able to hire new employees. Further, we may not be successful in our efforts to enhance our systems, accounting, controls and reporting performance. All of this may have a material adverse effect on our business, results of operations, cash flows and growth plans as well as our regulatory standing, listing status and stock price.

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

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

● recoverable reserves;

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

● development and operating costs; and

● Potential environmental and other liabilities.

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

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

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

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

· difficulty associated with coordinating geographically separate organizations; and

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

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

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Risks Related to the Ownership of Our Securities

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

Our executive officers, directors and shareholders holding in excess of five percent (5%) of our issued and outstanding shares, beneficially own over 30% of our common stock as of December 31, 2014. Under our Articles of Incorporation and Nevada law, the vote of a majority of the shares outstanding is generally required to approve most shareholder action. As a result, these shareholders, acting together, would have the ability to control the outcome of matters submitted to our shareholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these shareholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

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

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

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

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

We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of our present shareholders. We are currently authorized to issue 191,666,667 shares of common stock and 10,000,000 shares of Preferred Stock with such designations, preferences and rights as determined by our Board of Directors, as well as additional classes or series of ownership interests or debt obligations which may be convertible into any class or series of ownership interests in the Company. Such securities may be issued without the approval or other consent of the holders of the Common Stock. As of April 2, 2015, there are 31,683,150 shares of our common stock outstanding and no shares of preferred stock outstanding.

However, as of April 2, 2015, the Company has issued or has authorized the issuance of: (i) notes convertible into an aggregate of 8,304,075 shares of our common stock; (ii) fees payable in common stock of 1,184,425 shares, (iv) stock subscriptions payable of 26,154 shares and (v) warrants to purchase up to an aggregate of 3,634,350 shares of our common stock with exercise prices ranging from $0.12 to $1.80 per warrant. Conversion of the preferred stock or exercise of the warrants may cause dilution in the interests of other shareholders as a result of the additional common stock that would be issued upon conversion or exercise. In addition, sales of our common stock issuable upon exercise of the warrants could have a depressive effect on the price of our stock, particularly if there is not a coinciding increase in demand by purchasers of our common stock.

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

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

Our common stock is currently traded on the OTCQB under the symbol STWS. There is currently only a limited public market for the Company’s common stock and common stock is not actively traded. Moreover, the price of our common stock may be volatile due to numerous factors, many of which are beyond our control that may cause the market price of our common stock to fluctuate significantly. These factors include:

· expiration of lock-up agreements;

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

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

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

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

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

· customer demand for our products;

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

· the operating and stock performance of comparable companies;

· general economic conditions and trends;

· major catastrophic events;

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

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

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

· additions or departures of key personnel.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company’s management assessed the design and operating effectiveness of internal control over financial reporting as of December 31, 2014, based on the framework set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992). In connection with the assessment described above, management identified control deficiencies that represent material weaknesses at December 31, 2014, see “Item 9A. Controls and Procedures” for more detailed discussion. Notwithstanding the foregoing, management reviewed the financial statements and underlying information included in this annual report on Form 10-K and believes the procedures performed are adequate to fairly present our financial position, results of operations and cash flows for the periods presented in all material respects.

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

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

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ITEM 1B.  UNRESOLVED STAFF COMMENTS

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

ITEM 2.  DESCRIPTION OF PROPERTY

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

ITEM 3.  LEGAL PROCEEDINGS

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

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE 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.

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. On October 8, 2014, the Parties entered into a Settlement Agreement whereby the Company agreed to pay Sichenzia Ross $80,036.22 on or before November 28, 2014 or within three business days of the Company closing its current round of financing. The agreement to pay was secured by the Company providing Sichenzia Ross an “Affidavit of Judgment by Confession” in the amount of $80,036.22 to be filed only if the Company failed to pay the $80,036.22 by the due date, plus a five day cure period ending on December 03, 2014. On December 10, 2014, Sichenzia Ross filed the Judgement by Confession with the Court, and the Judgment remains unsatisfied.

Bob J. Johnson & Associates Lawsuit. There has been one lawsuit filed 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 and BJJA has sought initial discovery from the Company; 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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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 94,445 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 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. The Award was final April 1, 2014, and on October 28, 2014, Viewpoint filed a lawsuit in San Diego County, California Superior Court seeking to enforce its Arbitration Award, in Case No. 37-2014-00036027-CU-PA-CTL. On December 08, 2014, the Company filed a motion to dismiss the enforcement action due to Viewpoint having forfeited its corporate rights in California due to non-payment of California corporate taxes, and that motion is still pending before the Court. The full amount of this award has been accrued for in Accounts Payable.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable to our operations.

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PART II

ITEM 5.  MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

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

Our common stock is currently traded on the OTCQB, under the symbol “STWS”.

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

	High		Low
Fiscal 2013
March 31, 2013	$	0.90	$	0.23
June 30, 2013	$	0.72	$	0.18
September 30, 2013	$	0.48	$	0.18
December 31, 2013	$	0.72	$	0.35
Fiscal 2014
March 31, 2014	$	0.91	$	0.39
June 30, 2014	$	0.90	$	0.39
September 30, 2014	$	4.26	$	0.60
December 31, 2014	$	2.04	$	0.60
Fiscal 2015
March 31, 2015	$	1.40	$	0.55

The last sale price of our common stock as reported on the OTCQB was $0.80 on April 1, 2015. As of April 2, 2015, there were approximately 327 recorded owners of our common stock.

Dividend Policy

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

Recent Sales of Unregistered Securities

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

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During the period October 1, 2014 through December 31, 2014, we sold an aggregate of 41,539 units pursuant to a Share Purchase Agreement (the "C Purchase Agreement") to two (2) accredited investors (the "Investors"), each consisting of (a) one share of common stock and (b) one half (0.5), 2 year, common stock purchase warrant to purchase one share of common stock at an exercise price of $1.50 per share, subject to adjustment (the "C Warrants," collectively with the shares of common stock, the "C Units"). Each C Unit had a purchase price of $0.65, and the Company received an aggregate of $27,000 in gross funding in the transaction.

Common Shares Issued During The Quarter Ended December 31, 2014

On October 15, 2014, STW Resource Holding Corp, converted a revenue participation note, principal and accrued interest, of $93,543 for 129,921 shares of STW Resource Holding Corp common stock to an investor at a unit price of $0.72 per share. The value of the stock issued was $99,374 resulting in additional interest expense of $5,831 upon the conversion of convertible debt.

On October 23, 2014, the Company issued 33,333 shares of common stock to an investor at a unit value of $1.44 per share on the conversion of $21,920 of a short term convertible note. The value of the stock issued was $48,000 resulting in additional interest expense of $26,880 upon the conversion of convertible debt.

On November 5, 2014 the company issued 70,477 shares of common stock to an investor at a unit value of $1.17 per share on the conversion of $41,102 of a short term convertible note. The value of the stock issued was $82,458 resulting in additional interest expense of $41,356 upon the conversion of convertible debt.

On November 20, 2014, the Company issued 8,333 shares of common stock for a value of $5,000 to one of the investors in the July offering at a unit value of $0.60 per share.

In November and December 2014 an additional 318 shares were issued to cover the rounding effect of the 1 for 6 reverse stock split.

On December 23, 2014 the Company issued 68,522 shares to an investor for the conversion of a 14% note for $30,175 and the accrued interest of $2,715. The value of the stock was $34,169, resulting in additional interest expense of $1,278 upon the conversion of convertible debt.

On December 31, 2014 the Company issued 207,500 shares for a value of $124,500 to 11 investors pursuant to their purchase of the July 2014 offering at $0.60 per unit.

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 6.  SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

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

The following discussion of our financial condition and results of operation for 2014 and 2013 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

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

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

The Report of Independent Registered Public Accounting Firm to our December 31, 2014 consolidated financial statements include an explanatory paragraph stating that the recurring losses and negative cash flows from operations and our working capital deficiency at December 31, 2014 raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Plan of Operations

For the next twelve months, our current operating plan is focused on providing water reclamation services to oil and gas producers and other commercial ventures in Texas. Water reclamation services include treating brackish water for use in fracking operations, landscaping and other commercial applications and reclaiming produced water. During fiscal 2013 and 2014, we earned most of our revenue through our STW Pipeline Maintenance & Construction, LLC subsidiary and while we hope to continue to benefit from our ownership of that entity, we shall continue to focus on successfully implementing our water reclamation services.

As is discussed further in the Liquidity and Capital Resources section below, we have limited funds to support our operations. Our continuation as a going concern subsequent to December 31, 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. 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.

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

Results of Operations

For the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

Revenues

Revenues: During the year ended December 31, 2014, revenues were comprised of $380,657 from water treatment services plus $18,227,371 of oil & gas services, including $2,079,269 from related parties. During the year ended December 31, 2013, revenues consist of $536,735 from the design, build and delivery of a proprietary water desalinization facility plus revenues of $1,408,896 of oil & gas services, including $347,550 from related parties. Total revenues for the year ended December 31, 2014 were $18,608,028 compared to $1,945,631 for the year ended December 31, 2013, an increase of $16,662,397 or 856.4%. The increase in revenues during the year ended December 31, 2014, is attributable largely to the growth in our oil & gas services activities under our Master Services Agreements with major oil & gas exploration and development customers.

Cost of Revenues: Total costs of revenues for the year ended December 31, 2014, were $17,553,588, and are attributable to costs associated with the Company’s oil & gas services and water treatment services projects. These costs include direct labor, labor overhead, equipment rental, supplies, transportation, employee lodging, and other direct costs of revenues. Total costs of revenues for the year ended December 31, 2013 were $1,675,314, and are attributable to the costs of the contract to design, build and deliver a proprietary water desalinization facility and costs associated with the Company’s oil & gas services projects. Costs of revenues during the year ended December 31, 2014, increased by $15,878,274, or 947.8%, over costs of revenues during the year ended December 31, 2014. This increase in costs of revenues is commensurate with the 856.4% increase in revenues.

Gross Profit: Gross Profit was $1,054,440 and $270,317 during the years ended December 31, 2014 and 2013, respectively, an increase of $784,123 or 290.1%. During the year ended December 31, 2014, we realized an overall gross profit percentage of 6% while our overall gross profit during the year ended December 31, 2013, was 14%. The reduction in our 2014 gross profit is attributable to inefficiencies experienced during 2014 from our rapid growth.

Research and development expenses: During the years ended December 31, 2014 and 2013, we incurred $156,346 and $80,556, respectively, an increase of $75,790 or 94.1%. These expenses are attributable to research and development costs in connection with the development of our water treatment technologies.

Sales and marketing expenses: During the years ended December 31, 2014 and 2013, we incurred $1,014,997 and $37,066, respectively, an increase of $977,931 or 2,638.4%. The increase in our sales and marketing expenses are in connection with the rapid ramp up of our oil & gas services business operations that resulted in an 856.4% increase in sales during 2014.

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General and Administrative Expense: General and administrative expenses increased by $9,001,047 or 264.2% to $12,407,485 for the year ended December 31, 2014 from $3,406,438 for the year ended December 31, 2013. Our general and administrative expenses for the year ended December 31, 2014 consisted of board of director fees of $562,500,  professional fees of $983,441, management compensation of $1,623,115, salaries and wages of $1,898,390, consulting fees of $179,904, insurance of $369,218, penalties of $1,079,575, and other general and administrative expenses of $5,620,342, for a total of $12,407,485.

Our general and administrative expenses for the year ended December 31, 2013 consisted of board of director fees of $605,825,  professional fees of $189,478, management compensation of $701,284,  salaries and wages of $298,896, consulting fees of $687,878, insurance of $91,753, penalties of $114,957, and other general and administrative expense of $716,367,  for a total of $3,406,438.

The reasons for the increases in comparing the year ended December 31, 2014 to the year ended December 31, 2013 was due to the decrease in board compensation of $43,325, increase in professional fees of $793,963, increase in management compensation of $921,831, increase in salaries and wages of $1,690,494, decrease in consulting fees of $507,974, increase in insurance expense of $277,465, increase in penalties of $964,618, and a net $4,903,975 increase in other general and administrative expenses. During the years ended December 31, 2014 and 2013, non-cash expenses relating to consulting fees and employment signing bonuses included in general and administrative expenses were $4,916,574 and $810,593, respectively.

Interest Expense: Interest expense increased by $913,923 to $2,119,261 for the year ended December 31, 2014 from $1,205,338 for the year ended December 31, 2013. The increase is due to additional interest expenses incurred on additional debt financing incurred by us since December 31, 2013.

Change in derivative liability: During the year ended December 31, 2014, we incurred a $95,892 change in our derivative liability, a reduction of $2,466,026, or 96.3% from the change of $2,561,918 incurred during the year ended December 31, 2013. The reduction in the change in derivative liability during 2014 is attributable to the conversion of notes payable and expiration of warrants that were subject to a derivative liability.

During the year ended December 31, 2014, the key factors contributing to the change in the derivative liability were the increase in the volatility rate from 623% to 735%, the conversion of 12% notes payable, and the expiration of warrants.

The key factor for the increase in comparing the year ended December 31, 2013 to the corresponding period for 2012, were that we applied an assumed volatility factor of 100% during the year ended December 31, 2012, while during the year ended December 31, 2013, we applied a historical volatility factor, expected for future periods, of 623% due to our transition from the development stage.

Non-controlling interest in Net Loss: During the years ended December 31, 2014 and 2013, we reported $141,550 and $48,824, 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 $7,723,873, or 109.8%, to a net loss of $14,756,828 for the year ended December 31, 2014 from a net loss of $7,032,955 for year ended December 31, 2013. This net loss reflects the increased operating expenses and change in derivative liability discussed above.

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Liquidity and Capital Resources

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

	December 31,		December 31,
	2014		2013
Cash	$	123,629	$	17,301
Total current assets	$	5,178,123	$	583,581
Total assets	$	6,713,243	$	1,515,647
Total current liabilities	$	24,775,985	$	11,951,231
Total liabilities	$	27,601,280	$	14,574,240

At December 31, 2014, the Company had total current assets of $5,178,123, consisting of $123,629 in cash, $3,710,180 in accounts receivable. $519,789 in accounts receivable from related parties, $480,000 in Project Equipment, and $344,525 of prepaid expenses. At December 31, 2014, the Company had total current liabilities of $24,775,985 which includes $4,523,265 in accounts payable, $4,280,180 in related party payables, $5,890,414 in current portion of notes payable (of which $3,192,305 are past due), $2,671,843 of sales, payroll taxes, and penalties payable, $208,271 of insurance premium finance contract payable, $1,769,117 in accrued expenses, which principally includes accrued interest on our various debt obligations, $680,000 in Deferred Revenue, $643,777 of accrued compensation, $496,067 of accrued board compensation, $2,783,711 of Fees Payable in Common Stock, $27,000 of stock subscriptions payable, and $802,340 of derivative liability.

At December 31, 2014, we had a working capital deficit of $19,597,862 compared to a working capital deficit of $11,367,649 at December 31, 2013. Current liabilities increased to $24,775,985 at December 31, 2014 from $11,951,231 at December 31, 2013.

We have been funding our operations through private loans and the sale of common stock in private placement transactions. Management anticipates that significant additional expenditures will be necessary to develop and expand our water treatment and oil & gas services revenue before significant positive operating cash flows will be achieved.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company, since inception, has not had any significant revenues or significant operating history. We had an accumulated deficit of $39,112,171 as of December 31, 2014, and as of that date we were delinquent in payment of $2,594,128 of sales, payroll taxes, and penalties. As of December 31, 2014, $3,192,305 of our notes payable is in default. During the year ended December 31, 2014, the Company had a net loss of $14,898,378 and cash used in operating activities of $5,210,028. The Company had a working capital deficiency and stockholders’ deficit of $19,597,862 and $20,888,037, respectively, at December 31, 2014. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. As of December 31, 2014, we had $123,629 of cash on hand. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts and there can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. 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.

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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.

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

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

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

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

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

Operating Activities

Our operating activities from operations resulted in a net cash used by operations of $5,210,028 for the year ended December 31, 2014 compared to net cash used in operations of $1,534,074 for the year ended December 31, 2013. The net cash used by operations for the year ended December 31, 2014 reflects a net loss of $14,898,378, decreased by $5,485,548 in non-cash charges and by $4,202,802 net increase in the working capital accounts. The net cash used in operations for the year ended December 31, 2013 reflects a net loss of $7,081,379, decreased by non-cash charges of $3,613,744 and $1,933,561 net change in the working capital accounts.

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Investing Activities

Our investing activities used cash of $927,180 during the year ended December 31, 2014, to acquire vehicles and equipment.

Our investing activities used cash of $608,372 during the year ended December 31, 2013, to acquire vehicles and equipment.

Financing Activities

Our financing activities resulted in a cash inflow of $6,243,536 for the year ended December 31, 2014, which represented bank overdrafts reduced by $30,468, $27,000 in stock subscriptions payable, related party payables of $435,759, increase in related party payables of $3,998,260, repayment of $349,134 of notes payable, the proceeds of $1,812,137 from notes payable,  and proceed from issuance of common stock $1,221,500.

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

Short Term

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

Need for Additional Financing

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

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

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

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

Warrants

As of December 31, 2014, the Company had 3,634,350 warrants outstanding to acquire the Company’s common stock.

-29-

Credit Facility

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

On February 26, 2015, we negotiated an extension on the note payable to Black Pearl Energy, a Related Party, and established the balance at $1,079,944 plus $105,363 in interest due. The note is to be paid on a monthly basis of $12,000 per month for 48 months and a balloon payment in February of 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and net the note down to $805,863 and reduce the interest due to approximately $67,000.

Off Balance Sheet Arrangements

None.

Contractual Obligations and Commitments

The following table is a summary of contractual cash obligations for the periods indicated that existed as of December 31, 2014, and is based on information appearing in the notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K:

	TOTAL		Less than 1 Year		1-2 years
14% Convertible Notes	$	2,296,342	$	2,264,800	$	31,542
12% Convertible Notes		100,000		100,000
Short term debt		55,000		55,000
GE Note		2,100,000		2,100,000
Deferred Compensation Notes		279,095		279,095
Revenue Participation Notes		2,317,137		245,000		2,072,137
Dufrane Nuclear Shielding note		725,000		471,205		253,795
Crown Financial equipment note		702,697		333,333		369,364
Capital lease and equipment finance contracts		140,438		41,981		98,457
Total obligations	$	8,715,709	$	5,890,414	$	2,825,295

-30-

Critical Accounting Policies

Use of Estimates

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

Revenue Recognition

Services Revenues from Master Services Agreements

During the years ended December 31, 2014 and 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 realizes revenues from these contracts as the services are performed and signed off by the customer; revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

Services Revenues from Water Reclamation Services

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

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. The Company recognizes revenue on a contract once the services or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonable assured and amounts are fixed and determinable.

Derivative Liabilities

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

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 financial reporting dates.

Cash

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

Income taxes

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

-31-

Fair Value of Financial Instruments

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2014 and 2013.

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

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

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

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

The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2014 and 2013. The Company’s derivative liabilities as of December 31, 2014 and 2013, respectively, were valued at level 3 fair value. The Company did not have any other fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2014 and 2013.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amounts of the assets to future net cash flows expected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets based on estimated future cash flows. No impairment charges were recorded for the years ended December 31, 2014 and 2013.

Share Based Expenses

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

The Company accounts for stock-based compensation issued to non-employees and consultants 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 financial reporting dates.

-32-

Recently Issued Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on disclosure of uncertainties about an entity's ability to continue as a going concern. The new standard provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements. In June 2014, the FASB issued a new standard on accounting for share-based payments. The new standard clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant date fair value of the award. The new standard also clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite service has already been rendered. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In May 2014, the FASB issued a new standard on recognizing revenue in contracts with customers. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new standard creates a five-step process to recognize revenue that requires entities to exercise judgment when considering contract terms and relevant facts and circumstances. The new standard also requires expanded disclosures surrounding revenue recognition. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements. Other recently issued accounting standards are not expected to have a material effect on the Company's consolidated financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The full text of our audited consolidated financial statements as of December 31, 2014, and 2013, begins on page F-1 of this Annual Report on Form 10-K.

TABLE OF CONTENTS

	Page(s)
Report of Independent Registered Public Accounting Firms	F-1
Consolidated Balance Sheets as of December 31, 2014 and 2013	F-2
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	F-3
Consolidated Statements of Changes in Stockholders' Deficit for the years ended December 31, 2014 and 2013	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	F-5 – F-6
Notes to the Consolidated Financial Statements	F-7 –  F-42

-33-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Shareholders

STW Resources Holding Corp

We have audited the accompanying consolidated balance sheets of STW Resources Holding Corp (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the years ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of STW Resources Holding Corp as of December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the years ended December 31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced recurring losses from operations during 2014 and 2013 and has a significant working capital deficiency and accumulated deficit as of December 31, 2014. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

/s/ Marcum LLP

Marcum llp

Los Angeles, CA

April 2, 2015

F-1

STW Resources Holding Corp.

Consolidated Balance Sheets

	December 31, 2014				December 31, 2013
ASSETS
Current Assets
Cash	$	123,629		$	17,301
Accounts receivable		3,710,180			532,910
Accounts receivable from related parties		519,789			--
Deferred Project Costs		480,000			--
Prepaid expenses and other current assets		344,525			33,370
Total Current Assets		5,178,123			583,581
Property and equipment, net		1,437,999			746,638
Other assets
Deferred loan costs, net		97,121			185,428
TOTAL ASSETS	$	6,713,243		$	1,515,647
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank overdraft	$	--		$	30,468
Accounts payable		4,523,265			1,256,043
Payable to related parties:
Black Pearl Energy, LLC		1,371,305			139,763
Crown Financial, LLC		2,035,495			--
Dufrane Nuclear, Inc.		--			132,490
Accrued compensation - officers		873,380			584,666
Current portion of notes payable, net of discounts, $1,700,394 and $854,928 payable to related parties		5,890,414			4,668,492
Sales and payroll taxes payable		2,671,843			350,074
Insurance premium finance contract payable		208,271			--
Accrued expenses and interest		1,769,117			1,839,439
Deferred Revenue		680,000			--
Accrued compensation		643,777			285,190
Accrued board compensation		496,067			491,724
Fees payable in common stock, including $1,173,500 payable to related parties		2,783,711			231,897
Stock subscriptions payable		27,000			310,000
Derivative liability		802,340			1,630,985
Total Current Liabilities		24,775,985			11,951,231
Notes payable, net of discount and current portion, related parties		2,825,295			2,623,009
Total Liabilities		27,601,280			14,574,240
Commitments and contingencies (Note 10)
Stockholders' Deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2014 and December 31, 2013		-			-
Common stock $0.001 par value 191,666,667 shares authorized, 28,194,953 and 18,542,642 shares issued and outstanding as of December 31, 2014 and 2013, respectively		28,197			18,543
Additional paid-in capital		18,383,411			11,324,131
Accumulated deficit		(39,112,171	)		(24,355,343	)
Total Stockholders' Deficit of STW Resources		(20,700,563	)		(13,012,669	)
Non-controlling interest in subsidiary		(187,474	)		(45,924)
Total Stockholders' Deficit		(20,888,037	)		(13,058,593	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	6,713,243		$	1,515,647

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

F-2

STW Resources Holding Corp.

Consolidated Statements of Operations

For the Years ended December 31, 2014 and 2013

	For the Years Ended December 31,
	2014			2013
Revenues
Contract and service revenues	$	16,528,759		$	1,598,081
Service revenues from related party		2,079,269			347,550
Total revenues		18,608,028			1,945,631
Costs of Revenues		17,553,588			1,675,314
Gross Profit		1,054,440			270,317
Operating expenses
Research and development		156,346			80,556
Sales and marketing		1,014,997			37,066
General and administrative		12,407,485			3,406,438
Depreciation		237,915			60,380
Total operating expenses		13,816,743			3,584,440
Loss from operations		(12,762,303	)		(3,314,123	)
Other Income (Expense)
Interest expense		(2,119,261	)		(1,205,338	)
Loss on disposition of property and equipment		(44,820	)		--
Gain on Debt Settlement - Brooks		123,898			--
Change in derivative liability		(95,892	)		(2,561,918	)
Net Loss		(14,898,378	)		(7,081,379	)
Less: Share of net loss of subsidiary attributable to non-controlling interest		(141,550	)		(48,424)
Net Loss of STW Resources	$	(14,756,828	)	$	(7,032,955	)
Loss per common share – basic and diluted	$	(0.60	)	$	(0.42	)
Weighted average shares outstanding - basic and diluted		24,721,493			16,665,400

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

F-3

STW Resources Holding Corp.

Consolidated Statements of Stockholders’ Deficit

For the Years ended December 31, 2014 and 2013

	Common Stock				Additional					Non-
	$0.001 Par				Paid-In		Accumulated			Controlling			Stockholders’
	Number		Amount		Capital		Deficit			Interest			Deficit
Balance, December 31, 2012		16,051,435	$	16,053	$	8,147,864	$	(17,322,388	)	$	--		$	(9,158,471	)
Conversion of accrued interest on  12% convertible notes to common shares		58,853		59		21,128								21,187
Conversion   of 12% convertible notes to common shares		125,063		125		44,897								45,022
Value of warrants issued for loan fee						171,996								171,996
Value of warrants issued with notes payable						65,555								65,555
Shares issued to board members as directors fees		762,500		762		273,738								274,500
Shares issued to advisory board members as fees		78,125		78		28,047								28,125
Shares issued as consulting fees		1,083,333		1,083		432,917								434,000
Reclassification of derivative liability due to increase share authorization						1,977,372								1,977,372
Shares issued as employment signing bonuses		383,333		383		160,617								161,000
Non-controlling interest investment in subsidiary											2,500			2,500
Net loss for the period								(7,032,955	)		(48,424	)		(7,081,379	)
Balance, December 31, 2013		18,542,642	$	18,543	$	11,324,131	$	(24,355,343	)	$	(45,924	)	$	(13,058,593	)
Shares issued upon conversion of notes payable and accrued interest		3,068,004		3,069		1,849,007								1,852,076
Shares issued upon extension of notes payable		124,818		125		68,491								68,616
Shares issued for conversion of accrued paid in kind interest		946,535		947		539,830								540,777
Shares issued to consultants		788,625		789		774,786								775,575
Shares issued to board members as directors fees		930,261		930		557,227								558,157
Shares issued to employees as compensation		981,875		982		1,010,393								1,011,375
Shares issued as charitable contribution		166,667		167		109,833								110,000
Shares issued from common stock payable		333,333		333		159,667								160,000
Shares issued in connection with unit stock offering		2,311,875		2,312		1,219,187								1,221,499
Shares issued in connection with reverse stock split rounding		318		--		--								--
Value of derivative associated with converted notes payable						694,149								694,149
Value of conversion feature of note						50,000								50,000
Value of warrants issued with notes						26,710								26,710
Net loss for the period								(14,756,828	)		(141,550	)		(14,898,378	)
Balance, December 31, 2014		28,194,953	$	28,197	$	18,383,411	$	(39,112,171	)	$	(187,474	)	$	(20,888,037	)

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

F-4

STW Resources Holding Corp.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2014 and 2013

	Years ended December 31,
	2014			2013
Cash flows from Operating Activities:
Net loss	$	(14,898,378	)	$	(7,081,379	)
Adjustments to reconcile net loss of STW Resources to net cash used in operating activities:
Depreciation		237,915			60,380
Change in fair value of derivative liability		95,892			2,561,918
Loss on disposition of property and equipment		44,820			--
Financing costs of notes payable		69,299			--
Change in fair value of debt instruments converted to equity		(272,980	)		--
Amortization of discount and debt issuance costs		230,723			164,549
Share-based compensation		5,079,879			826,897
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable		(3,177,270	)		(527,870	)
(Increase) Decrease in deferred project costs		(480,000	)		--
(Increase) Decrease in prepaid expense		(311,155	)		55,567
Increase (Decrease) in accounts payable		3,267,222			459,649
Increase (Decrease) in sales and payroll taxes payable		2,321,769			350,074
Increase (Decrease) in insurance premium contract payable		208,271			--
Increase (Decrease) in deferred revenue		680,000			--
Increase (Decrease) in accrued compensation		358,587			157,525
Increase (Decrease) in accrued expenses and interest		1,335,378			976,613
Increase (Decrease) in accrued board compensation		--			559,349
Increase (Decrease) in deferred revenue		--			(97,346	)
Net cash used in operating activities		(5,210,028	)		(1,534,074	)
Cash flows used by investing activities
Purchase of vehicles and equipment		(927,180	)		(608,372	)
Net cash used in investing activities		(927,180	)		(608,372	)
Cash flows provided from financing activities
Bank overdraft (repayment)		(30,468	)		30,468
Stock subscriptions payable		27,000			310,000
Related party accounts receivables		(435,759	)		--
Related party accounts payables, credit facilities, notes, and advances		3,998,260			568,985
Proceeds from notes payable		1,812,137			1,320,611
Principal payments on notes payable		(349,134	)		(97,662	)
Proceeds from issuance of common stock		1,221,500			--
Non-controlling interest contributions		--			2,500
Debt issuance costs		--			(35,025	)
Net cash provided from financing activities		6,243,536			2,099,877
Net increase (decrease) in cash		106,328			(42,569)
Cash at beginning of year		17,301			59,870
Cash at end of year	$	123,629		$	17,301

(continued)

F-5

STW Resources Holding Corp.

Consolidated Statements of Cash Flows

For the years ended December 31, 2014 and 2013

Supplemental cash flow information:

Cash paid for interest	$	29,397	$	10,413
Non-cash investing and financing activities:
Value of warrants issued as debt issuance costs	$	26,710	$	171,996
Value of common shares issued from stock subscriptions payable	$	160,000	$	-
Value of common shares issued as a charitable contribution	$	110,000	$	-
Value of warrants issued with revenue participation notes payable	$	-	$	65,555
Value of common shares issued to board and advisory board for accrued fees	$	558,157	$	302,625
Value of common shares issued to consultants	$	775,575	$	434,000
Value of common shares issued to employees as compensation	$	1,011,375	$	161,000
Value of property, plant & equipment acquired with long term debt	$	-	$	247,004
Value of common shares issued as consideration for extension of notes payable term	$	68,616	$	-
Reclassification of derivative liability due to increased share authorization	$	-	$	1,977,372
Notes and interest settled in stock	$		$	66,209
Value of shares issued upon conversion of notes payable and accrued interest	$	1,852,076	$	-
Value of beneficial conversion feature of note payable	$	50,000	$	-
Value of derivative associated with converted notes payable	$	694,149	$	-
Value of common shares issued in payment of accrued PIK interest	$	540,777	$	-

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

F-6

STW Resources Holding Corp

Notes to Consolidated Financial Statements

Year Ended December 31, 2014 and 2013

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANTACCOUNTING POLICIES

History of the Company

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

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. 

Formation of New Subsidiaries

Effective April 16, 2014, the Company formed another new subsidiary, STW Water Process & Technologies, LLC (“Water Process”), a Texas limited liability company. The Company is the sole member of Water Process, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation policy

The consolidated financial statements for the years ended December 31, 2014 and 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, STW Water Process & Technologies, LLC, and 75% owned subsidiary of STW Energy Services, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

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

Non-Controlling interest

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

Going Concern and Management's Plans

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $39,112,171 as of December 31, 2014, and as of that date was delinquent in payment of $2,594,128 of sales and payroll taxes. As of December 31, 2014, $3,192,305 of notes payable are in default. Since its inception in January 2008 through December 31, 2014, management has raised equity and debt financing of approximately $18,000,000 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.

F-7

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with

oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.

There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

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

Use of Estimates

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

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2014, there were no uninsured deposits.

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

As of December 31, 2014, three vendors accounted for 20% of total accounts payable. During the year ended December 31, 2014, two vendors accounted for 69% of total purchases. As of December 31, 2013, three vendors accounted for 64% of total accounts payable. During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.

As of December 31, 2014, three customers accounted for 43%, 11% and 3% of accounts receivable. During the year ended December 31, 2014, three customers accounted for 39%, 11% and 7% of total revenues. As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.

F-8

Fair Value of Financial Instruments

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

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

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

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities.

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.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment.

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

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

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant.

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

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

F-9

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2014 and 2013.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2014	$	--	$	--	$	802,340	$	802,340
December 31, 2013	$	--	$	--	$	1,630,985	$	1,630,985

Accounting for Derivative Liabilities

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

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

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

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

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

Long-lived Assets and Intangible Assets

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

F-10

The Company had no such asset impairments at December 31, 2014 or 2013. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Services Revenues from Master Services Agreements

During the years ended December 31, 2014 and 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 realizes revenues from these contracts as the services are performed and signed off by the customer; revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

During the year ended December 31, 2014, the Company recognized $18,227,371 of revenues from its oil & gas and water reclamation services contracts, of which $2,079,269 were revenue from related parties. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

Services Revenues from Water Reclamation Services

The Company provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations. Revenues are recognized when the services are performed or the equipment is delivered to the customer. During the years ended December 31, 2014 and 2013, the Company realized $380,657 and $2,735, respectively, of revenues from services and product sales of its water reclamation business segment.

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. The Company recognizes revenue on a contract once the services or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonable assured and amounts are fixed and determinable. During the year ended December 31, 2013, the Company realized $534,000 of contract revenues from this project.

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 Note 11.

Income Taxes

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

F-11

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

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns. The Company files income tax returns in the U.S. federal jurisdiction and Texas jurisdiction. All tax years remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. The Company’s periodic tax returns filed in 2010 and, thereafter, are subject to examination by state taxing authorities in accordance with normal statutes of limitations in the applicable jurisdictions.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits. The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2014 and 2013. The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2014 and December 31, 2013, respectively.

Comprehensive Loss

The Company does not  have any components of other comprehensive income (loss) as defined by ASC 220, "Reporting Comprehensive Income." For the years ended December 31, 2014 and 2013, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

Common Stock, Common Stock Options, and Common Stock Warrants Issued to Employees

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

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

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the anti-dilutive effect on losses. As of December 31, 2014, the Company had 14,442,977 dilutive shares outstanding, 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

F-12

Stock Subscriptions Payable

During the year ended December 31, 2014, the Company received $1,248,500 of proceeds from unit offerings of its common stock in consideration of 2,353,414 shares of its common stock. During the year ended December 31, 2014, the Company cancelled $150,000 of stock subscriptions payable for 312,500 shares of its common stock. As of December 31, 2014, the Company has 41,539 shares remaining to be issued from stock subscriptions at a value of $27,000.

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from unit offerings of its common stock in consideration of 645,833 shares of its common stock. The stock was not issued as of December 31, 2013 and $310,000 was reported as Stock Subscriptions Payable as of December 31, 2013.

Fees Payable in Common Stock

During the year ended December 31, 2014, the Company agreed to issue an aggregate of 4,813,465 shares of its common stock, net of 382,879 of cancelled shares, in payment of consulting fees and employee incentives valued at an aggregate of $4,517,379. During the year ended December 31, 2014, the Company issued 2,061,985 shares of its common stock as fees payable in common stock at an aggregate value of $1,965,566. As of December 31, 2014, the Company has 3,359,762 shares remaining to be issued associated with this obligation at an aggregate value of $2,783,711.

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 2,074,946 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 1,466,667 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 608,279 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on disclosure of uncertainties about an entity's ability to continue as a going concern. The new standard provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In June 2014, the FASB issued a new standard on accounting for share-based payments. The new standard clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant date fair value of the award. The new standard also clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite service has already been rendered. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In May 2014, the FASB issued a new standard on recognizing revenue in contracts with customers. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new standard creates a five-step process to recognize revenue that requires entities to exercise judgment when considering contract terms and relevant facts and circumstances. The new standard also requires expanded disclosures surrounding revenue recognition. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

Other recently issued accounting standards are not expected to have a material effect on the Company's consolidated financial statements.

F-13

NOTE 2 – PROPERTY AND EQUIPMENT

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

	December 31, 2014			December 31, 2013
Office furniture and equipment	$	21,806		$	16,838
Tools and yard equipment		7,661			2,302
Vehicles and construction equipment		1,231,742			798,273
Leasehold improvements		15,933			--
Water wells under development		341,359			--
Total, cost		1,618,501			817,413
Accumulated Depreciation and Amortization		(180,502	)		(70,775	)
Total Property and Equipment	$	1,437,999		$	746,638

Depreciation expense for the years ended December 31, 2014 and 2013 was $237,915 and $60,380, respectively.

NOTE 3 – INVESTMENT IN BLACK WOLF, LLC

On January 8, 2013, the Company and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt, entered into an equity exchange agreement (the “Exchange Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock (the "Pearl Shares"). The Pearl Shares, although supposed to be issued after we amended our articles of incorporation to increase our authorized share capital, were never issued. Other than the Pearl Shares, the Exchange Agreement did not obligate STW to provide any other assets or commitments in consideration of the transaction contemplated thereby. The transaction contemplated by the Agreement - the transfer of ownership in Black Wolf - closed on January 28, 2013. At the time of the Exchange Agreement, Black Wolf commercialized the expertise and services of Lone Wolf Resources, LLC, an environmental and civil construction company operating in the oil and gas industry (“Lone Wolf”). Lone Wolf has worked with the Department of Transportation and the Texas Commission on environmental quality to shape the standards for processing hydrocarbon-impacted soils to a reusable road base. Lone Wolf has completed projects internationally and throughout the United States, including the world's largest in-situ thermal remediation project. BPE is an oilfield service company that has developed an evaporation cover that is conservation friendly, economical and can be floated on to existing ponds or installed during construction for the elimination of evaporation on frac ponds used throughout the oilfield. BPE also provides high quality liners with fusion-welded seams, quality control testing including air tests of seams and destruction testing in West Texas and Eastern New Mexico, and intends to expand into South Texas during the first quarter of next year. Black Wolf combines Lone Wolf’s and BPE’s services and constructs drill sites, reserve pits, frac ponds, roads, pit closings, liners, leak detection systems, evaporation covers, and provides associated maintenance.

F-14

Black Wolf also offers turnkey services for H-11 permitted ponds, including surveys, engineering and design, and permitting for storage of produced and brine waters as well as utilizes proprietary technologies employed by Lone Wolf in the reclamation of hydrocarbon-impacted soils. Black Wolf is currently negotiating on a number of multi-well packages with many of the largest oil and gas producers in West Texas. After 4 months of operations, Lone Wolf initiated their termination clause with Black Pearl and Black Wolf. As a result, Black Wolf was dissolved and we sought to terminate the Exchange Agreement since our investment would no longer be of any value. On October 14, 2013, we entered into a Rescission Agreement with BPE, pursuant to which BPE has agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we are not required to issue the Pearl Shares and BPE agreed to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

NOTE 4 - PAYABLE TO FACTOR

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an accounts purchase facility with Crown Financial, LLC (Crown) pursuant to an Account Purchase Agreement (the “Accounts Purchase Agreement”), pursuant to the Texas Finance Code. At December 31, 2014, and December 31, 2013, the amount payable to Crown, after grossing up the accounts receivable, was $1,746,479 and $0, respectively. These amounts are reflected in the amounts ‘Related party payable, Crown Financial, LLC’ on the Balance Sheet.

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

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

Factoring Agreement with Joshua Brooks

On September 26, 2013, STW Oilfield Construction, LLC (Oilfield Construction) entered into an accounts receivable factoring facility (the “Factoring Facility”) with Mr. Joshua Brooks, the Company's former Vice President of Operations, pursuant to a Loan Agreement (the “Factoring Agreement”), which shall not be deemed an account purchase agreement pursuant to the Texas Finance Code. The Factoring Facility includes a loan in the amount of $225,000, of which none is outstanding at December 31, 2014 or 2013.

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

F-15

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

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

On December 22, 2014, we entered into a settlement agreement (the “Settlement”) with Dufrane, to settle our outstanding debts with them. Pursuant to the Settlement, the Company shall issue Dufrane a $725,000 promissory note, which bears interest at the rate of 10% per annum (the “Note”). The Note is due and payable in equal monthly installments beginning on January 15, 2015 and continuing until December 15, 2016, when a balloon payment for all then outstanding amounts under the Note shall be paid. Dufrane maintains the right to charge a 5% late fee if the Company is late on any of its payments due under the Note and interest shall increase to 18% per annum on any matured, unpaid amounts. If the Company fails to comply with any terms or conditions of the Settlement, including the terms of the Note, the Company shall immediately pay Brooks $30,000, which amount shall accrue 18% interest per annum until paid in full. As part of the Settlement, Mr. Brooks shall be released from all personal guarantees previously entered into with the Company; failure to do so constitutes an event of default under the Note. Additionally, the Company will return all vehicles owned by Mr. Brooks to him and maintains the option to return all vehicles and equipment previously leased from Dufrane or enter into a new rental agreement with Dufrane. Brooks and Dufrane agreed to refrain from performing rig washing, pipeline construction or water reclamation services to or for any of the Company’s or Black Pearl Energy, LLC’s current customers with whom they have master service agreements, for a period of one year; Brooks and Dufrane shall also refrain from soliciting same, with limited exceptions, during such time period. Pursuant to the Settlement, the parties, along with specified others, released each other from any and all claims they may have against each other. After netting all of the payables and receivables between the various subsidiaries of the Company, STW Resources Holding booked a gain of $123,898.

F-16

NOTE 5 – NOTES PAYABLE

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

Name	2014			2013
14% Convertible Notes	$	2,296,342		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		55,000			43,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		2,337,500			852,702
Note payable to Crown Financial LLC, a related party		702,697			683,036
Note payable to Dufrane Nuclear Shielding, LLC, a related party		725,000			--
Equipment finance contracts		110,000			137,573
Capital lease obligations		30,437			23,300
Unamortized debt discount		(20,362)			(107,221)
Total Debt		8,715,709			7,291,501
Less: Current Portion		(5,890,414	)		(4,668,492	)
Total Long Term Debt	$	2,825,295		$	2,623,009

14% Convertible Notes

Between November 2011 and December 2012, the Company issued a series of 14% convertible notes payable to accredited investors. The Company also issued 3,361,312 two year warrants to purchase common stock at an exercise price of $1.20 per share. These notes are convertible into 5,854,260 shares of the Company’s common stock as of December 31, 2014.

The Company valued the warrants and the embedded conversion feature at inception using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.17% - 0.33%; expected volatility of 100%. The estimated fair value of the warrants issued between November 2011 and December 2012 was $81,656 and the embedded conversion feature was $35,546 at issuance and was recorded as a derivative liability at such time in the accompanying consolidated balance sheets. The warrants and embedded conversion feature were included in the derivative liabilities account each reporting period as the Company had insufficient authorized shares to settle outstanding contracts (see Note 6). On July 12, 2013, the Company increased its share authorization to 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) and reclassified the $1,977,372 derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

As of December 31, 2014 and December 31, 2013, the aggregate principal balances of these notes are $2,296,342 and $2,904,736, respectively. During the year ended December 31, 2014, the Company converted principal and accrued interest of $977,151 in exchange for 1,696,856 shares of the Company’s common stock. The Company also issued 1,071,353 shares for the extension of notes valued at $609,257. Thirteen (13) notes were extended until June 1, 2015 and one (1) note was extended until December 15, 2019.

The value of the stock issued was $812,607 resulting in additional interest expense of $203,350 upon the conversion of interest. As of December 31, 2014, the total of outstanding 14% convertible notes is $2,296,342 of which $688,210 matured on or before December 31, 2014 and is in default, however, as of April 2, 2015, none of the note holders have declared the notes in default.

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

F-17

12% Convertible Notes

Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that were scheduled to mature on November 30, 2011 and are currently in default. The Company also issued warrants to purchase 273,583 shares of common stock at an exercise price of $0.12 per share that expire at various dates through 2015.

During the year ended December 31, 2014, the Company paid an aggregate of $50,000 of principal of two of these notes. During the year ended December 31, 2014, the Company issued 1,137,417 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. As of December 31, 2014, there is one remaining note payable that has a principal balance of $100,000 and is convertible into 1,391,553 shares of the Company’s common stock.

Other Short-Term Debt

During the year ended December 31, 2014, the Company paid $43,280 of principal balance that was comprised of a settlement of a note payable to an accredited investor.

On January 1, 2014, the Company issued a $30,000 short term note to an investor, MKM Capital. The note bears interest at 8% and matures on January 1, 2015. The balance of this note payable as of December 31, 2014, is $30,000.

In September and October 2014, the Company entered into short term loan agreements, which matured in October 2014, with eight accredited investors totaling $170,000, to sustain some of its daily operating expenses; the loans had a 5% transaction fee at maturity and the lenders were entitled to receive 18% interest if the notes were not paid at maturity. As additional consideration for the loan, the Company agreed to issue the lenders an aggregate of 202,916 shares of common stock, which are only issuable if and when the Company increases its authorized capital. In October 2014 five of the investors extended their notes to October 24, 2015 for the additional consideration of 17,918 shares of common stock in lieu of interest. These shares were included in the "Fees Payable in Common Stock" and were expensed as interest in the current period. As of the date of this Report, all but $25,000 of the loans have been repaid, but the remaining lender has not declared a default on the payment of his note. On January 28, 2015, 158,335 of the shares were issued. The remaining shares are accrued as Fees Payable in Common Stock. (See Note10 and Note 12).

GE Ionics Note

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

Under the terms of the August 31, 2010 note, interest at the rate of WSJ prime plus 2% is due on the note, upon default, interest is due at the maximum legal rate which is 10% in the state of Texas. The note matured on September 1, 2013, and is in default. Interest on the note through December 31, 2014, 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%.

F-18

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

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

Deferred Compensation Notes

As of December 31, 2014, the Company has a balance of $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in-house counsel. The notes matured December 31, 2012, and the notes are in default.

Revenue Participation Notes

As of December 31, 2014, the Company has an outstanding balance of $2,337,500 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		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,573,000
Total revenue participation notes	$	2,337,500

These notes are described as follows:

2012 Revenue Participation Notes

During February 2012, the Company issued to certain accredited investors (the “Investors”) revenue participation interest notes with a principal amount of $165,000 (the “March 2012 Notes”). These March 2012 Notes mature on January 31, 2017 and carry an interest rate of 12%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received two times their investment amount and 10% of the net revenues thereafter until such time as they have received an additional $295,000 at which time the March 2012 Notes are retired in full. The Investors received warrants to purchase 27,500 shares of the Company’s common stock. These warrants have an exercise price of $1.20, are immediately exercisable and a two year maturity. The Company incurred cash fees of $16,500 which is recorded as a loan origination fee and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet and is being amortized to interest expense, and issued 2,750 warrants under the same terms as those received by the Investors. As of December 31, 2014, the Company has not generated revenue related to these revenue participating notes.

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

As of December 31, 2014, the aggregate principal balance of these notes payable is $165,000.

F-19

2013 Revenue Participation Notes – STW Resources Salt Water Remediation Technology

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

The Company also issued 100,833 warrants in connection with this investment. These warrants have an exercise price of $1.20, are immediately exercisable and expire on various dates through June 30, 2015.

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

As of December 31, 2014, the aggregate principal balance of these notes payable is $302,500.

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

During the year ended December 31, 2013, the Company issued to four (4) accredited investors revenue participation note with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These notes mature eighteen (18) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 9.4%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Energy services contracts. The Investor shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 15,167 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on various dates through June 30, 2015.

The 6% original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $325,000. The Notes maintain an original issue discount of $75,000 and are due on or before March 26, 2015; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained. The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Energy Services, LLC ("Energy Services") subsidiary, until each Note has been paid in full. All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes. If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full. In consideration for the Note, the Company shall issue 2 year warrants to purchase one share of common stock for each two dollars of such holder's investment, at an exercise price of $1.80 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 27,083 shares. The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.

The Company valued the 15,167 warrants associated with the $182,000 notes using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $5,004 and recorded this loan discount to be amortized to interest expense over the term of the loan.

As of December 31, 2014, the aggregate principal balance of these notes payable is $182,000.

F-20

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

During the year ended December 31, 2013, the Company issued to two (2) accredited investors convertible revenue participation notes with an aggregate principal amount of $207,115 and an original issue discount of $27,015, yielding net cash proceeds of $180,100 to the Company. These notes mature seven (7) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 8.1%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Pipeline Maintenance &Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 69,039 warrants in connection with this investment. These two year warrants bear an exercise price of $1.80 per share. The notes are convertible into 287,660 shares of the Company’s common stock.

The 6% convertible original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $207,000. The Notes maintain an original issue discount of $27,000 and are due on or before May 18, 2014; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained. The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Pipeline Maintenance & Construction, LLC ("Pipeline") subsidiary, until each Note has been paid in full. All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes. If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full. The Notes are convertible into shares of the Company's common stock at $0.12 per share, subject to adjustment for standard anti-dilution features. In consideration for the Notes, the Company issued 2-year warrants to purchase two shares of common stock for each one dollar of such holder's investment, at an exercise price of $1.20 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 69,000 shares. The Company is required to reserve a sufficient number of shares to be able to issue all of the shares underlying the Notes if same are fully converted. The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.

The Company valued the 69,039 warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $27,153 and recorded this debt discount to be amortized to interest expense over the term of the loan agreement.

On October 15, 2014 the Company, STW Resource Holding Corp, converted a revenue participation offering of STW Pipeline. Principal and accrued interest of $93,543 was exchanged for 129,921 shares of STW Resource Holding Corp common stock to an investor at a unit price of $0.72 per share. The value of the stock issued was $99,374 resulting in additional interest expense of $5,831 upon the conversion of convertible debt.

As of December 31, 2014, the aggregate principal balance of the remaining note payable is $115,000.

2014 Revenue Participation Notes – STW Resources Upton Project

From September 30, 2014 through December 31, 2014, the Company issued an aggregate of $1,573,000 of notes to eleven (11) accredited investors for the Upton Project. The financing is a Senior Secured Master Note, with a 15% coupon and a maturity of 18 months with interest only payments paid the first three months and equal monthly payments of principal and interest paid for months four though eighteen of the Master Note with Revenue Participation Interest. Additionally, a 5% royalty is assigned to the Master Note, which will be distributed based on pro rata ownership by investors in the Master Note. Principal and interest payments will come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish water. This Agreement, including but not limited to the revenue sharing arrangement, is applicable to the brackish water processing facility being built with the proceeds of the Notes. As of December 31, 2014, the aggregate principal balance of these notes payable is $1,573,000.

F-21

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of December 31, 2014 and 2013, the Company had drawn down $702,697 and $683,036, respectively of this loan facility.

The Company issued 666,667 warrants in connection with this loan agreement, in lieu of a cash loan fee. These warrants have an exercise price of $1.20, are immediately exercisable and a two year maturity. The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $159,996 and recorded this loan fee a prepaid loan fee to be amortized to interest expense over the term of the loan.

Related party interest expense for this loan was $32,461 and $113,623, for the years ended December 31, 2014 and 2013, respectively.

Note payable to Dufrane Nuclear Shielding, LLC, a related party

On December 22, 2014, the Company entered into an unsecured loan agreement with Dufrane Nuclear Shielding, LLC, in the amount of $725,000 (See note 7). The note bear interest at 10.0% and is payable in monthly principal and interest installments of $43,541 commencing on January 15, 2015. The note matures on December 15, 2016. Dufrane Nuclear Shielding, LLC is a related party since the company is owed by Joshua Brooks, the Company’s former COO.  The note provides for default interest rate of $18% and requires the payment of $60,000 of accrued officers’ compensation in the event of default.

Related party interest expense for this loan was $1,788 for the year ended December 31, 2014.

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 $0.66 per share or 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. During the year ended December 31, 2014, the Company drew $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 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%. In October and November 2014 the note and interest was paid off by the issuance of 103,810 shares of common stock valued at an average of $0.535 per share.

Equipment Finance Contracts

During the year ended December 31, 2013, the Company financed the purchase of vehicles and other equipment with equipment finance contracts from various banks and finance institutions. The contracts mature in three to five years and bear interest rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of December 31, 2014 and2013, the Company has an aggregate balance of $110,000 and $137,573, respectively, payable on these equipment finance contracts.

F-22

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%. In July of 2014, the Company entered into a lease for a commercial ice machine with Executive Leasing, Inc. The lease contract calls for Thirty six (36) monthly payments of $505 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $14,854 with an implicit interest rate in the lease of 12%. As of December 31, 2014 and December 31, 2013, the principal balances on these capital leases totaled $30,437 and $23,300, respectively.

For the years ended December 31, 2014 and 2013, interest expense on all notes payable described above was $2,089,356 and $1,205,338, respectively, which included $230,723 and $164,549, respectively, of amortization of debt discount and debt issuance costs. There was no interest capitalized in 2014 and 2013. As of December 31, 2014 and 2013, net deferred loan costs, net of $190,742 and $102,435 accumulated amortization, respectively were $97,121 and $185,428, respectively. The balance of unamortized discount at December 31, 2014 and 2013, were $20,362 and $107,221, respectively.

NOTE 6 - DERIVATIVE LIABILITIES

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

From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments. On July 12, 2013, the Company increased its share authorization to 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) and removed this $1,977,372 derivative liability due to the availability of sufficient authorized shares to settle these outstanding contracts.

During the year ended December 31, 2014, the Company recalculated its historical volatility factor to be 735% and applied this factor in estimating the value of the derivative instruments. During the year ended December 31, 2013, the Company computed a historical volatility of 623% using daily pricing observations for recent periods. We applied a historical volatility rate during the year ended December 31, 2013, 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.

F-23

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of December 31, 2014 and December 31, 2013:

	For the year ended December 31, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.60 – 0.47			0.60 – 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		735	%		623	%

	December 31, 2014		December 31, 2013
Embedded Conversion features	$	751,439	$	1,467,579
Warrants		50,901		163,406
	$	802,340	$	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 year ended December 31, 2014			For the year ended December 31, 2013
Balance beginning	$	1,630,985		$	1,046,439
Value of derivative liability associated with JMJ note payable		42,592			--
Value of derivative liability attributable to conversion of notes payable and accrued interest		(694,149	)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980	)		--
Reclassification of derivative liability due to increased share authorization		--			(1,977,372	)
Change in fair  value		95,892			2,561,918
Balance ending	$	802,340		$	1,630,985

NOTE 7– RELATED PARTY TRANSACTIONS

Officers’ Compensation

During years ended December 31, 2014 and 2013, we incurred $150,000 annually in officers’ compensation due to our Director, Chairman and CEO, Mr. Stanley Weiner. As of December 31, 2014 and 2013, the balances of $413,083 and $263,083, respectively, were payable to Mr. Weiner for his officers’ salary.

F-24

During the years ended December 31, 2014 and 2013, we incurred $75,000 and $150,000, respectively, in officers’ compensation due our former Director and Chief Operating Officer, Mr. Lee Maddox. As of December 31, 2014 and 2013, the balances of $220,500 and $170,500, respectively, were payable to Mr. Maddox for his officers’ salary.

During the years ended December 31, 2014 and 2013, we incurred $90,000 annually in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. As of December 31, 2014 and 2013, the balances of $179,797 and $121,083, respectively, were payable to Seabolt Law Group for these services.

During the years ended December 31, 2014 and 2013, we incurred $449,496 and $63,107, respectively, in CFO, audit preparation, tax, and SEC compliance services expense with Miranda & Associates, a Professional Accountancy Corporation, and Miranda CFO Services, Inc., (“Miranda”) firms owned by our Chief Financial Officer, Mr. Robert J. Miranda.  During the year ended December 31, 2014, we paid Miranda cash of $182,110 and 120,292 shares of common stock valued at $72,175 toward these fees. As of December 31, 2014, we have agreed to pay 206,667 shares of common stock valued at $155,000 toward these obligations, which would leave an accounts payable balance of $64,271 as of December 31, 2014. The stock awards are accrued as fees payable in common stock as of December 31, 2014. As of December 31, 2014 and December 31, 2013, the balances of $219,271 and $24,060, respectively, were payable to these firms for these services.  The December 31, 2014, balances are comprised of $64,271 of accounts payable and $155,000 of fees payable in common stock, for a combined balance payable of $219,271.

As of December 31, 2013, the balance of $132,490 was payable to Dufrane Nuclear Shielding, LLC (“Dufrane”). Additionally, as of December 31, 2013, the balance of $150,000 was payable as Fees Payable in Common Stock and $30,000 was payable to Joshua Brooks as accrued officers compensation. During the years ended December 31, 2014 and 2013, we incurred $90,000 and $30,000, respectively, in officers’ compensation due to our former Chief Operating Officer, Mr. Joshua Brooks. During the year ended December 31, 2014, we also incurred with Mr. Joshua Brooks a performance bonus comprised of 333,333 shares of the Company’s common stock valued at $120,000.

During the year ended December 31, 2013, the Company cancelled the $150,000 of stock subscriptions payable and incurred an additional $593,358 of net related party payables with Dufrane. On December 22, 2014, the Company entered into a settlement agreement and a $725,000 note payable to Dufrane. Under the terms of the settlement agreement, the 333,333 shares of common stock payable was cancelled and $180,000 of accrued officers’ compensation payable were discharged leaving a balance of accrued officers’ compensation of $60,000 as of December 31, 2014.

The settlement agreement with Joshua Brooks also provided for the transfer of various items of tools, vehicles, and other equipment to Dufrane.  The agreement further requires that the Company remove Mr. Brooks from any personal guarantees or co-signatures that he made on vehicle loans or other liabilities of the Company.

During the years ended December 31, 2014 and 2013, we incurred $180,000 and $18,461, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC. Mr. Adam Jennings. During year ended December 31, 2014, we incurred with Mr. Adam Jennings signing bonuses comprised of 266,667 shares of the Company’s common stock valued at $142,000. As of December 31, 2014 and 2013, the balance of $121,000 and $27,000, respectively, were 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.

During the year ended December 31, 2014, we incurred $107,692, in officers’ salary due to the President of our wholly-owned subsidiary, STW Water Process and Technologies, LLC. Mr. Alan Murphy. During year ended December 31, 2014, we incurred with Mr. Alan Murphy a signing bonus comprised of 333,333 shares of the Company’s common stock valued at $200,000.

F-25

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 33,333 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.

The Company’s advisory board was comprised of three members. Each advisory board member was granted 9,375 shares upon joining the board and 12,500 shares annually thereafter. The advisory board was dissolved on June 12, 2013.

During the year ended December 31, 2014, we incurred $635,000 in board and consulting fees with Paul DiFrancesco, a Director. Mr. DiFrancesco was paid cash of $282,500, awarded 538,870 shares of common stock in the Company, valued at $277,500 for services related to 2014 activities, and $75,000 per year as compensation for serving on our board of directors.

During the year ended December 31, 2014, the Company recorded board fees in the accompanying consolidated statement of operations of $562,500 and issued 930,261 shares of its common stock valued at $558,157, leaving a balance of $496,067 of accrued board fees payable as of December 31, 2014.

During the year ended December 31, 2013, the Company recorded board fees in the accompanying consolidated statement of operations of $602,849 and made payments of $43,500 in cash and issued 840,625 shares of its common stock having valued at $302,625, leaving a balance of $491,924 of accrued board fees as of December 31, 2013.

Other related party transactions

As of December 31, 2014 and 2013, the Company has $1,371,305 and $139,763, respectively, of related party payables to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, former COO, and General Counsel.

As of December 31, 2014, STW Energy, a subsidiary of the Company, has a related party receivable of $519,789 from Black Pearl Energy, LLC.

During the years ended December 31, 2014 and 2013, the Company, had related party sales of $2,079,269 and $347,550, respectively. Related party sales are a combination of sales to three companies, (1) Black Pearl Energy, LLC, (2) Dufrane Construction, LLC and (3) Dufrane Nuclear Shielding LLC.

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 $1,054,944 has been advanced as of December 31, 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 250,000 restricted shares of our common stock and a $25,000 transaction fee to be paid on the final closing date of the credit line.

F-26

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, STW Resource Holding Corp 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.

As of December 31, 2014, the Company has a related party payable of $2,035,495 to Crown Financial.

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 $0.72 per share, as is equal to the amount of the guaranty (the "Guaranty Shares"). The value of the 63,667 shares of common stock was recorded on September 24, 2013, as fees payable in common stock.

F-27

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, former Chief Operating Officer	September 24, 2013	$	45,800	(1	)		63,667

(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.

The service agreement was terminated by mutual agreement on December 24, 2014, when the Company executed a Settlement Agreement and Note Payable to Dufrane Nuclear Shielding, LLC, a company controlled by Mr. Joshua Brooks, the Company’s former executive officer.

NOTE 8 – STOCKHOLDERS’ DEFICIT

Preferred Stock

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

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

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

F-28

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

Common Stock

As of the date of this Report, the Company has authorized 191,666,667 shares of common stock with a par value of $0.001. During the years ended December 31, 2014 and 2013, the Company issued common shares as follows:

Year ended December 31, 2013:

On June 6, 2013, the Company issued 58,853 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible note payable and 125,063 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 14% convertible note payable. The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

Prior to the July 12, 2013, amendment to our Articles of Incorporation to increase our authorized capital from 16,666,667 shares of common stock to 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) of common stock (the "Amendment"), we did not have sufficient shares of authorized capital to meet all of our outstanding security obligations. Some of these obligations required us to issue shares of common stock to our officers and directors, pursuant to the agreements we maintain with them or board approved issuances to such persons; following the Amendment, on September 16, 2013 the company issued an aggregate of 840,628 shares of common stock, with a value of $297,581, as follows:

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		104,167	2012 Director Compensation
Manfred E. Birnbaum		104,167	2012 Director Compensation
D. Grant Seabolt, Jr.		104,167	2012 Director Compensation
Joseph I. O'Neill III		104,167	2012 Director Compensation
Audry Lee Maddox		59,375	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		104,167	2012 Director Compensation
Paul DiFrancesco		104,167	2012 Director Compensation
Bill G. Carter		104,167	2012 Director Compensation
Steven Schachman		26,042	2012 Advisory Board Compensation
Hunter Hill		26,042	2012 Advisory Board Compensation

On September 16, 2013, the Company issued 350,000 shares of its Common stock in payment of accrued compensation. These shares were authorized by the board of directors at a value of $0.10 per share based on the value on March 5, 2013, the date that the board of directors approved the payment in shares. At the time of the March 5, 2013, board action to approve the payment of the accrued fees in stock, the Company did not have adequate shares authorized to settle the contracts so the issuance of shares was delayed until September 16, 2013. These shares were issued on September 16, 2013, at a value at the time of issuance of $126,000, resulting in a reduction of accrued compensation expense of $84,000.

F-29

During August and October, 2013, the Company issued to four (4) accredited investors revenue participation notes with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company.

These note mature eighteen (18) months from the date of issuance and carry stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Energy services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 15,167 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on various dates through June 30, 2015.

During September, 2013, the Company issued to a related party accredited investor convertible a revenue participation note with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 21,935 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on September 27, 2015. The note is convertible into 91,391 shares of the Company’s common stock. On December 6, 2013, the Company and this investor agreed to a mutual rescission of this note and the related warrants. The net cash proceeds of $50,418 are included in the total balance of $134,013 as Payable to Related Party, Dufrane Nuclear Shielding Inc., a company controlled by our former COO, Mr. Joshua Brooks.

In the months of October and December 2013 seven (7) of the Company’s consultants were issued 1,083,333 shares in exchange for their invoice amounts due from the company.

On December 9, 2013, the Company issued 333,333 shares to an employee as a signing bonus under an employment contract. The Company also issued 50,000 shares of its common stock to an employee of its subsidiary, STW Pipeline Maintenance & Construction, LLC, as an installment on a signing bonus under an employment contract with the subsidiary.

Year ended December 31, 2014:

During January 2014, the Company issued an aggregate of 926,603 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 122,190 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 1,220,101 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 250,000 shares of its common stock valued at $145,000 to consultants for services rendered.

During March 2014, the Company issued 312,500 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 130,208 shares of its common stock in consideration of $62,500 cash proceeds realized from the sale of stock to accredited investors at $0.48 per share.

F-30

In April 2014 the Company issued 104,166 shares of common stock on a unit share offering at $0.48 for proceeds of $70,000. The Company issued 930,261 shares of common stock to the Board of Directors for services rendered; this was valued at $558,157. Additional shares of 100,000 were issued to an employee as a signing bonus valued at $60,000. Officer’s compensation was paid by issuing 402,708 shares of common stock in lieu of paying $241,625. Consultants were issued 186,958 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 1,545,650 shares of its common stock.

In May 2014 a consultant was issued 83,333 shares of common stock in lieu of fees of $60,000.

On June 4, 2014 the company issued 58,333 shares to a consultant at $0.10 per share in payment of $35,000 of consulting fees.

In June 2014 the Company issued 20,833 shares of common stock on a unit share offering at $0.48 for proceeds of $30,000. A charitable contribution was made of 166,667 shares of common stock valued at $110,000.

In July 2014 the Company issued 1,104,167 shares of common stock on a unit share offering at $0.48 for proceeds of $530,000. The Company also issued 41,667 shares for 8,333 warrants at $0.12 for $50,000, 22,561 shares in payment of PIK interest for $10,829, and 83,333 shares for a loan, valued at $40,000.

Two employees also received 283,333 shares of stock for signing bonus and services to the company; these shares were valued at $136,000.

In August 2014 the Company issued 724,167 shares of common stock on a unit share offering at $0.60 for proceeds of $437,500. The Company also issued 108,333 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 10,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800 and issued an additional 95,833 shares to employees as signing bonuses.

On September 23, 2014, 100,000 shares of common stock were issued to three employees at $1.32 per share as part of their employment/signing bonuses. 

On October 15, 2014 the Company, STW Resource Holding Corp, converted a revenue participation offering of STW Pipeline. Principal and accrued interest of $93,543 was exchanged for 129,921 shares of STW Resource Holding Corp common stock to an investor at a unit price of $0.72 per share. The value of the stock issued was $99,374 resulting in additional interest expense of $5,831 upon the conversion of convertible debt.

On October 23, 2014, the Company issued 33,333 shares of common stock to an investor at a unit value of $1.44 per share on the conversion of $21,120 of a short term convertible note. The value of the stock issued was $48,000 resulting in additional interest expense of $26,880 upon the conversion of convertible debt.

On November 5, 2014 the company issued 70,477 shares of common stock to an investor at a unit value of $1.17 per share on the conversion of $41,102 of a short term convertible note. The value of the stock issued was $82,458 resulting in additional interest expense of $41,356 upon the conversion of convertible debt.

On November 20, 2014, the Company issued 8,333 shares of common stock for a value of $5,000 to one of the investors in the July offering at a unit value of $0.60 per share.

In November and December 2014 it was necessary to issue an additional net of 319 shares to cover the rounding effect of the 1 for 6 reverse stock split.

On December 23, 2014 the Company issued 68,522 shares to an investor for the conversion of a 14% note for $30,175 and the accrued interest of $2,715. The value of the stock was $34,169, resulting in additional interest expense of $1,278 upon the conversion of convertible debt.

F-31

On December 31, 2014 the Company issued 207,500 shares for a value of $124,500 to 11 investors pursuant to their purchase of the July 2014 offering at $0.60 per unit.

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

Security	Number  of Underlying Common Shares		ExerciseP rice		Expire
Warrants issued for Professional Services		250,000		24		2014
Warrants associated with the January 14, 2009 Bridge Note		80,000		18		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		250,000		48		2014
Warrants associated with the 12% Convertible Notes		273,583		0.12		2014-2015
Warrants associated with 2012 Revenue Participation Notes		30,250		1.2		2014
Warrants associated with May 2012 Subscription Agreement		87,500		1.2		2014
Warrants associated with June-September 14% Convertible Notes		91,667		1.2		2014
Warrants associated with November 14% Convertible notes		462,917		1.2		2014
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20 – 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with November 2013 Unit Share Offering		645,833		1.2		2015
Sub-total of Warrants outstanding		3,056,788
Common stock associated with the 12% Convertible Notes plus accrued interest		4,627,570		0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		287,660		0.12		2015
12/31/2013 Accrued Default interest		86,186		0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		7,685,772		0.08		2015
12/31/2013 Accrued Default interest		33,050		0.08		2014
12/31/2013 Calibre Note interest		27,328		0.08		2014
Common stock associated with November 2013 Unit Share Offering		645,833		0.08		2015
Common stock payable as fees		608,279	various			2014
Total securities		17,058,466

F-32

As of December 31, 2014, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

Security	Number of Underlying Common Shares		Exercise Price		Expire
Warrants associated with the 12% Convertible Notes		66,667		0.012		2015
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20– 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with 2013 and 2014 Unit Share Offerings		2,682,645		1.20– 1.50		2015 - 2016
Sub-total of Warrants outstanding		3,634,350
Common stock associated with the 12% Convertible Notes plus accrued interest		1,391,553		0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		164,513		0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		5,854,260		0.48		N/A
Common stock associated with 2013 and  2014 Unit Share Offerings		41,539		0.48		N/A
Common stock payable as fees		3,356,762	various
Total		14,442,977

Warrants

A summary of the Company’s warrant activity and related information during the year ended December 31, 2014 follows:

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2013		5,401,239		$	5.16	1.06	$	32,830
Issued		1,552,807			1.26	2.0
Exercised		--
Forfeited		--
Cancelled		--
Expired		(3,897,258	)		1.92
Outstanding at December 31, 2013		3,056,788		$	1.26	1.07	$	131,320
Exercisable		3,056,788		$	1.26	1.07	$	131,320
Outstanding at January 1, 2014		3,056,788		$	4.29	1.07	$	131,320
Issued		2,349,312			1.27	1.46
Exercised		--
Forfeited		--
Cancelled		(312,500	)
Expired		(1,459,250	)		13.89
Outstanding at December 31, 2014		3,634,350		$	1.27	1.18	$	851,313
Exercisable		3,634,350		$	1.27	1.18	$	851,313

F-33

NOTE 9 – INCOME TAXES

The Company's net loss before income taxes totaled $14,756,828 and $7,032,955 for the years ended December 31, 2014 and 2013, respectively, accordingly, no provision for income taxes were provided in the accompanying financial statements.

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

	Years Ended December 31,
	2014			2013
Income tax benefit at the U.S. statutory income tax	$	(5,017,321	)	$	(2,391,205	)
Change in fair value of derivative liability		32,603			871,052
Non-controlling interest in loss of subsidiary		48,127			16,464
Non-deductible penalties and other expenses		472,619			290,420
Changes in Valuation allowance		4,463,972			1,213,269
Total	$	—		$	—

Based on the weight of available evidence and uncertainties regarding the Company's ability to generate profits in the near future, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not be realized.  Therefore, the company has recorded a full valuation allowance against the net deferred tax assets.

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

	December 31, 2014			December 31, 2013
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,036,123		$	1,481,871
Accrual to Cash conversion		3,991,660			1,480,682
Stock based compensation		1,361,342			--
Depreciation		(38,995	)		(38,995	)
Charitable Contributions		37,400			18,768
Valuation allowance		(7,387,530	)		(2,942,326	)
Total	$	—		$	—

The future utilization of the Company's federal net operating loss and tax credit carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future.

At December 31, 2014, the Company had federal income tax net operating losses of approximately $6.7 million.  The federal net operating losses expire at various dates beginning in 2029.The Company files income tax returns in the U.S. federal jurisdiction and Texas jurisdiction.  All tax years remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. The Company’s periodic tax returns filed in 2010 and, thereafter, are subject to examination by state taxing authorities in accordance with normal statutes of limitations in the applicable jurisdictions.

NOTE 10 – COMMITMENTS AND CONTINGINCIES

Lease Commitments

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

F-34

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%. In July of 2014, the Company entered into a lease for a commercial ice machine with Executive Leasing, Inc. The lease contract calls for Thirty six (36) monthly payments of $505 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $14,854 with an implicit interest rate in the lease of 12%. As of December 31, 2014 and 2013, the principal balances on these capital leases totaled $30,438 and $23,300, respectively.

Future minimum lease payments under the capital lease and operating lease as of December 31, 2014, are as follows:

Years ending December 31:	Capital Leases			Operating Lease		Totals
2015	$	13,176		$	117,000	$	130,176
2016		13,176			117,000		130,176
2017		8,960			117,000		125,960
2018		--			117,000		117,000
2019		--			117,000		117,000
Thereafter		--			87,750		87,750
Total minimum lease payments		35,312			672,750		708,062
Less interest		(4,874	)
Capital lease obligation		30,438
Less current portion		(10,382	)
Long-term capital lease obligation	$	20,056

Rental expense for all property, including equipment rentals in the cost of sales, and equipment operating leases during the years ended December 31, 2014 and 2013, respectively, was $4,041,793 (which includes approximately$3.6million of equipment rental used on projects and reflected in cost of revenues) and $78,558, respectively. Related party rental expense during the years ended December 31, 2014 and 2013, was $472,450 and $14,292, 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 66,667 shares of its common stock in consideration of this agreement.

F-35

As of December 31, 2014, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2015	$	324,000
2016		240,000
2017		240,000
2018		240,000
2019		120,000
Total minimum royalty payments	$	1,164,000

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

On September 23, 2013, one of our wholly owned subsidiaries, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), entered into an Executive Employment Agreement with Adam Jennings to serve as Pipeline Maintenance's President (the "Jennings Agreement") for a term of one year, unless otherwise terminated or mutually extended. The Company is a party to the Jennings Agreement only to the extent of the obligations it is required to perform under the Jennings Agreement. Pursuant to the Jennings Agreement, Mr. Jennings may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent. The Company also agreed to issue an aggregate of 200,000 shares of its common stock to Mr. Jennings as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following Mr. Jennings employment; provided however that the first installment shall be paid within 30 days of signing the agreement and if Mr. Jennings voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company. The Company also has sole discretion to grant Mr. Jennings stock options in the Company. Mr. Jennings is also entitled to receive 10% of Pipeline Maintenance's distributable limited liability company net profits during his employ. The Company has sole rights to terminate Mr. Jennings' employment for cause. The value of the first installment of the signing bonus of 50,000 shares of common stock was recorded on September 23, 2013 as fees payable in common stock.

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The Company amended the employment agreement with Mr. Jennings on April 1, 2014 for an additional year. The terms of the amendment, Mr. Jennings base salary was increased to $200,000 per year. He was also awarded an additional 166,667 shares of its common stock to Mr. Jennings valued at $100,000 as an additional signing bonus.

On September 20, 2013, the Company entered into an Executive Employment Agreement with Joshua Brooks (the "Brooks Agreement"), to serve as the Company's Vice President of Operations, primarily focusing on the Company's oilfield construction, services and maintenance operations and to observe and learn the other activities that the Company is involved in including water processing. The term of the Brooks Agreement is for a term of one year, unless otherwise terminated or mutually extended. Pursuant to the Brooks Agreement, Mr. Brooks is entitled to an annual salary of $120,000, which shall be paid on a quarterly basis, in shares of the Company's common stock at a price per share equal to the weighted average trading value of such stock during the same quarter. As incentive to help develop the operation and profitability of Pipeline Maintenance, Mr. Brooks is entitled to an aggregate of an additional 4,000,000 shares of the Company's common stock upon the occurrence of certain Company milestones in gross sales and/or profit. As a signing bonus, the Company shall issue Mr. Brooks 333,333 shares of its common stock, which Mr. Brooks must return on a pro-rata basis, if he voluntarily resigns before March 20, 2014. Mr. Brooks shall be entitled to bonuses and stock options, which the Company may award and grant in its sole discretion, and to the benefits offered to similarly situated executives. The Company shall reimburse Mr. Brooks for reasonable business expenses he incurs while carrying out his duties under the Brooks Agreement, and they shall also reimburse him for use of his personal vehicle at standard mileage rates and provide him with a laptop computer and cellular phone, if needed to carry out such duties. The Company shall indemnify Mr. Brooks to the fullest extent permitted under Nevada law. Unless Mr. Brooks is terminated for cause by the Company, which they maintain the right to do, or as a result of disability, Mr. Brooks is entitled to certain severance as set forth in the Brooks Agreement. Mr. Brooks maintains the right to terminate his employment at any time upon 30 days advance written notice and shall be entitled to all compensation payable up through such thirtieth day, after which all of the Company's obligations (other than indemnification and specific benefits) shall cease. Pursuant to the Brooks Agreement, Mr. Brooks is under a 1 year non-compete/solicitation agreement. The value of the signing bonus of $140,000 was recorded as fees payable in common stock on September 20, 2013.The Company has issued 333,333 shares of common stock to satisfy the obligation. As of December 31, 2013 there was no remaining obligation.

On May 27, 2014, one of our wholly owned subsidiaries, STW Water Process and Technologies, LLC (“STW Water”), entered into an Executive Employment Agreement with Alan Murphy to serve as STW Water’s President (the "Murphy Agreement") for a term of three years, unless otherwise terminated or mutually extended. The initial base salary pursuant to the Murphy agreement is $200,000 annually. The base salary is subject to an annual review and Mr. Murphy is entitled to receive performance bonuses up to 100% of his base salary, subject to the sole discretion of the Company’s CEO. The Company is a party to the Murphy Agreement only to the extent of the obligations it is required to perform under the Murphy Agreement. Pursuant to the Murphy Agreement, Mr. Murphy may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent. The Company also agreed to issue an aggregate of 333,333 shares of its common stock valued at $200,000 to Mr. Murphy as a signing bonus. The Company also agreed to grant Mr. Murphy 500,000 stock options in the Company upon the formation and funding of the Company’s employee stock option plan. The Company has sole rights to terminate Mr. Jennings' employment for cause.

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 $0.72 per share, as is equal to the amount of the guaranty (the "Guaranty Shares"). The value of the 63,667 shares of common stock was recorded on September  24, 2013, as fees payable in common stock. The Company maintains the right to terminate these service agreements at any time with written notice. The term of the agreement/guaranty is for 6 months. The following table provides salient information about this service agreement, which is attached as an exhibit to this Report.

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Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, former Chief Operating Officer	September 24, 2013	$	45,800	(1)		63,667		63,667

(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. The service agreement was terminated by mutual agreement on December 24, 2014, when the Company executed a Settlement Agreement and Note Payable to Dufrane Nuclear Shielding, LLC, a company controlled by Mr. Joshua Brooks, the Company’s former executive officer.

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 Note 5, Notes Payable - 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.

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. On October 8, 2014, the Parties entered into a Settlement Agreement whereby the Company agreed to pay Sichenzia Ross $80,036.22 on or before November 28, 2014 or within three business days of the Company closing its current round of financing. The agreement to pay was secured by the Company providing Sichenzia Ross an “Affidavit of Judgment by Confession” in the amount of $80,036.22 to be filed only if the Company failed to pay the $80,036.22 by the due date, plus a five day cure period ending on December 03, 2014. On December 10, 2014, Sichenzia Ross filed the Judgement by Confession with the Court and the Judgment remains unsatisfied.

J. Johnson & Associates Lawsuit. There has been one lawsuit filed 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 and BJJA has sought initial discovery from the Company; 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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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 94,444 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 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. The Award was final on April 1, 2014, and on October 28, 2014, Viewpoint filed a lawsuit in San Diego County, California Superior Court seeking to enforce its Arbitration Award, in Case No. 37-2014-00036027-CU-PA-CTL. On December 08, 2014, the Company filed a motion to dismiss the enforcement action due to Viewpoint having forfeited its corporate rights in California due to non-payment of California corporate taxes, and that motion is still pending before the Court. The full amount of this award has been accrued for in Accounts Payable.

NOTE 11 – 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

	Year Ended December 31, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	380,657		$	18,227,371		$	--		$	18,608,028
Costs of revenues		312,277			17,241,311			--			17,553,588
Operating expenses		1,283,862			3,468,949			9,063,932			13,816,743
Other income (expense)		--			--			(2,136,075	)		(2,136,075	)
Segment income (loss)	$	(1,215,482	)	$	(2,482,889	)	$	(11,200,007	)	$	(14,898,378	)
	Year Ended December 31, 2013
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	536,735		$	1,408,896		$	--		$	1,945,631
Costs of revenues		472,978			1,202,336			--			1,675,314
Operating expenses		102,210			763,900			2,718,330			3,584,440
Other income (expense)		--			--			(3,767,256	)		(3,767,256	)
Segment income (loss)	$	(38,453	)	$	(557,340	)	$	(6,485,586	)	$	(7,081,379	)

Segment Assets

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	3,561,024	$	247,665	$	5,178,123
Fixed assets		837,602		524,219		76,178		1,437,999
Other assets		--		--		97,121		97,121
Segment Assets	$	2,207,036	$	4,085,243	$	420,964	$	6,713,243
	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	579,541	$	4,040	$	583,581
Fixed assets		--		694,219		52,419		746,638
Other assets		--		--		185,428		185,428
Segment Assets	$	--	$	1,273,760	$	241,887	$	1,515,647

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NOTE 12 – SUBSEQUENT EVENTS

Management evaluated all activity of the Company through April 2, 2015, the consolidated financial statements issuance date, and has concluded that no material subsequent events have occurred that would require recognition in the financial statements or disclosures in the notes to the financial statements, except as discussed below.

On January 22, 2015, the Company filed a Certificate of Amendment to increase the number of common stock shares from 41,666,667 to 191,666,667.

Issuance of convertible notes and common stock:

In January of 2015 the Company started to raise capital for the purpose of retiring some of the older loans with higher interest rates. To the date of this Report, the Company has issued $1,375,000 of new debt to 4 investors; after reductions for discounts and fees, the Company raised approximately $1,144,000 for that purpose. The new convertible notes bear interest of 5% through July 15, 2015, and  15% if in default and are convertible, subject to limitations, at $0.65. In connection with this funding, in February 2015, the Company issued 525,000 shares of common stock valued at $481,500 to the four investors as further inducement.

On January 15, 2015 the Company issued 62,500 shares of common stock to an investor, at a unit price of $1.59, in payment of interest on a short term loan for a value of $99,375 and an additional 170,000 shares of common stock, at a unit price of $1.40, to a consultant for services valued at $238,000.

On January 27, 2015 the Company issued 281,167 shares of common stock, at various unit prices, valued at $210,642 to 19 employees for signing bonuses and continued service to the company.

On January 28, 2015 the Company issued 158,335 shares of common stock, at various unit prices, to 7 investors valued at $223,501 in payment of interest on 7 short term loans.

In the first week of February 2015 the Company issued 378,334 shares of common stock, at various unit prices, valued at $429,834 to 4 employees pursuant to their employment contracts.

On February 3, 2015 the Company issued 15,385 shares of common stock, at a unit price of $0.65, to an accredited investor based on a unit offering at $0.65 per unit raising $10,000 of additional capital for the Company.

On February 6, 2015 the Company 150,001 shares of common stock, at various unit prices, to 2 consultants valued at $144,333 in payment of services rendered in 2014 and the renewal of a 2015 contract.

On February 18, 2015 the Company issued 184,975 shares of common stock to an investment group, at a unit price of $0.65, valued at $140,581 for services rendered in procuring investors for the company.

On February 23, 2015 the Company issued 562,500 shares of common stock to 6 directors, at a unit price of $0.80, valued at $450,000 for services rendered in prior year(s).

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On February 24, 2015 the Company issued 100,000 shares of common stock, at a unit price of $0.65, to a consultant for services valued at $65,000.

On February 27, 2015, pursuant to the January 8, 2015 Board of Director’s Minutes, a total of 900,000 shares were issued by the Company to 2 employees and 1 consultant for services performed in 2014. They were issued at a unit price of $0.80 per common share at a value of $720,000.

On January 21, 2015 the Company interred into a securities purchase agreement with 3 accredited investors and received aggregate gross proceeds of $750,000 for 5% Convertible Promissory  Notes of the Company.

On February 24, 2015, the Board voted to increase the short term financing round previously approved by the Board on January 08, 2015 shall be increased in authorization by $250,000 to $1,250,000, together with authorizing an additional 100,000 shares of the Company’s stock in order to close on an offer from an additional $250,000 investor.

The Board also agreed that in exchange for MKM Master Opportunity Fund, Ltd. extending the Company’s note obligation that the shares of the Company’s restricted common stock shall be increased from the original extension amount of 41,667 (250,000 pre-reverse merger) to 55,556 shares (333,334 pre-reverse merger).

Black Pearl note payable:

On February 26, 2015, the Company negotiated an extension on the note payable to Black Pearl Energy, a Related Party, and established the balance at $1,079,944 plus $105,363 in interest due. The note is to be paid on a monthly basis of $12,000 per month for 48 months and a balloon payment in February of 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and net the note down to $805,863 and reduce the interest due to approximately $67,000. Additionally Black Pearl is to be granted 75,000 shares to cure the default and 131,704 shares of common stock to make the extension.

On March 26, 2015, the Company approved three Executive Long Term Agreements for Stanley T. Weiner (as President and CEO), Paul DiFrancesco (as Head of Finance) and D. Grant Seabolt, Jr. (as General Counsel and Corporate Secretary).

On March 26, 2015, the Board approved amending certain outstanding employment agreements to clarify that any options issuable thereunder, shall only be issued at such time when the Company’s option plan is fully funded and implemented; the Company circulated these amendments to the respective employees and has no reason to believe they will not be countersigned by each such employee.

The terms of the employment agreements are as follows:

Stanley T. Weiner shall be employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary shall be $15,000 monthly ($180,000 annually) during the first year of employment, $22,000 monthly ($264,000 annually) during the second year of employment, and $29,000 monthly ($348,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock.  He will also be subject to a twelve month severance award in the event of termination.

Paul DiFrancesco shall be employed as Head of Finance for a three year term effective February 1, 2015. His base salary shall be $12,000 monthly ($144,000 annually) during the first year of employment, $16,000 monthly ($192,000 annually) during the second year of employment, and $16,000 monthly ($192,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

Grant Seabolt shall be employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary shall be $8,000 monthly ($96,000 annually) during the first year of employment, $9,500 monthly ($114,000 annually) during the second year of employment, and $9,500 monthly ($114,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 100,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 25,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

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

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

ITEM 9A.  CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

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

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

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

Management's Report on Internal Control Over Financial Reporting

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

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

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

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

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

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2014, due to the existence of the material weaknesses discussed below. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5), or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Management identified the following material weaknesses that have caused management to conclude that as of December 31, 2014, our internal control over financial reporting was not effective:

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

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

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

4.	Management determined that we did not implement financial controls that were properly designed to meet the control objectives or address all risks of the processes or the applicable assertions of the significant accounts.
5.	Management determined that its inability to file timely quarterly SEC forms 10Q and annual SEC forms 10K constitute material weaknesses in disclosure controls and internal control over financial reporting.

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

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Remediation Plan for Material Weaknesses

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

· We are in the process of upgrading our accounting systems to an enterprise resource planning (ERP) platform that will enable us to improve our accounting systems and document our policies, procedures and related internal controls.

· We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.  These supervisory review procedures are being designed to enhance controls over the custody of assets, the incurring of liabilities, and the recording of transactions by separate individuals.  

· We are evaluating improved entity level controls that we plan to implement during the 2015 accounting year.

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

· Effective December 22, 2014, we were fully current with our quarterly SEC filings and we have instituted controls to ensure that we are current in our filings going forward.  

We believe that these measures, if effectively implemented and maintained, will remediate the material weaknesses discussed above. We do not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated. We expect to complete this process during our annual testing for fiscal 2015.

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

Changes in Internal Control Over Financial Reporting

Other than as described above, there have been no changes in our internal control over financial reporting during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

ITEM 9B.  OTHER INFORMATION

[Not applicable]

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PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

During the second and third quarter of fiscal 2014, Mr. Maddox resigned as our Chief Operating Officer and Mrrs. Dorn and Bowman resigned as Directors.

The following table and text set forth the names and ages of all directors and executive officers as of April 2, 2015.

Name	Age	Current Position
Stanley Weiner	61	Chief Executive Officer, President and Chairman
Robert Miranda	61	Chief Financial Officer
D. Grant Seabolt, Jr.	59	Director, Outside Legal Counsel and Corporate Secretary
Joseph I. O’Neill	66	Director
Hon. Bill Carter	82	Director
Manfred Birnbaum	81	Director
Paul DiFrancesco	48	Director

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

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

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

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

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

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

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

Involvement in Certain Legal Proceedings

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Corporate Governance & Board Independence

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

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

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

· Audit Committee: The audit committee selects, on behalf of our Board of Directors, an independent public accounting firm to audit our financial statements, discusses with the independent auditors their independence, reviews and discusses the audited financial statements with the independent auditors and management, and recommends to the Board of Directors whether the audited financials should be included in our Annual Reports to be filed with the SEC. The membership of the Audit Committee is comprised of Messrs.Seabolt and DiFrancesco, the latter of whom acts as Chairman of the committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Moreover, the Company believes that it has inadequate financial resources at this time to hire such an expert. Nonetheless, the Company intends to continue searching for a qualified financial expert for hire. During the year ended December 31, 2014, the audit committee held 4 meetings.

Audit Committee Report

The audit committee has reviewed and discussed the audited financial statements included within this Report with management. The audit committee has discussed with our independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61 as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The audit committee has received the written disclosures and the letter from our independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. Based on the foregoing review and discussion, the audit committee recommended to the board that the audited financial statements be included in our annual report on Form 10-K for fiscal year 2014.

Grant Seabolt

Paul DiFrancesco

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

During the year ended December 31, 2014, the compensation committee, held 6 meeting.

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

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

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

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

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

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

Involvement in Certain Legal Proceedings

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

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

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Compliance with Section 16(a) of the Exchange Act

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

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

The table below accounts for the missed Form 4 and Form 5s of each person subject to Section 16(a) for the year ended December 31, 2014.

Name	# of Late Reports		Transactions Not Timely Reported		Known Failures to File a Required Form(1)
Mr. Weiner		2		2		3
Mr. Maddox		2		2		0
Mr. Seabolt		0		0		0
Mr. O'Neill		1		1		1
Hon. Carter		1		1		1
Mr. Birnbaum		3		3		1
Mr. DiFrancesco		1		1		0
Mr. Dorn		1		1		1
R.H. Bowman		1		1		1
Robert Miranda		0		0		1
Joshua C. Brooks		0		0		0

(1) This reflects the failure of such person to file an Annual Statement of Changes in Beneficial Ownership of Securities that was due in the fiscal year ended December 31, 2014.

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

Due to our size and limited number of employees, the Company has not yet adopted a Code of Ethics which applies to our directors, officers, employees and representatives. We intend to adopt a code of ethics during fiscal year 2015.

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ITEM 11.  EXECUTIVE COMPENSATION

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

Summary Compensation Table

Name and Principal Position		Year Ended Dec. 31	Salary ($)			Bonus ($)		Stock Award(s) ($)		Option Awards ($)	Non- Equity Incentive Plan Compen- sation	Non- Qualified Deferred Compen- sation Earnings ($)	All Other Compen- sation ($)	Total ($)
(a)		(b)	(c)			(d)		(e)		(f)	(g)	(h)	(i)	(j)
Stanley Weiner	(1)	2014		150,000				395,000						545,000
		2013		150,000				75,000						225,000
Lee Maddox	(2)	2014		75,000				37,500						112,500
		2013		150,000				137,754						287,754
Robert Miranda	(3)	2014		377,321	(6)			72,175						449,496
		2013		63,107	(7)									63,107
Joshua Brooks	(4)	2014		90,000	(8)			90,000						180,000
		2013		30,000	(9)			140,000						170,000
Adam Jennings	(5)	2014		180,000		121,000	(11)	142,000						443,000
		2013		18,461	(10)	27,000	(11)	51,000	(12)					96,461
Alan Murphy	(13)	2014		107,692				200,000						307,692
		2013												--

(1)	Mr. Weiner has served as our Chief Executive Officer since March 28, 2012 and is on the Board of Directors, see Compensation of Directors Note 4.
(2)	Mr. Maddox served as our Chief Operating Officer from March 28, 2012 until July 2014.
(3)	Mr. Miranda was appointed as our Chief Financial Officer on October 21, 2013.
(4)	Mr. Brooks served as our Vice President of Operations from September 20, 2013 until August 2014, when he became our Chief Operating Officer until his resignation on December 24, 2014.
(5)	Mr. Jennings was appointed as the President of our wholly owned subsidiary: STW Pipeline Maintenance & Construction, LLC on September 23, 2013.
(6)	Mr. Miranda is serving as our CFO as part of our agreement with Miranda & Associates, an accounting corporation that serves as our accountant pursuant to an engagement agreement with us (the "Engagement Agreement"). Under the Engagement Agreement, we shall pay Miranda & Associates $50,000 for their initial work and it expected that annual amounts payable to them for Mr. Miranda's continuing CFO services will likely exceed $120,000. During the year ended December 31, 2014, the Engagement Agreement was amended whereby effective July 1, 2014, Miranda CFO Services, Inc. a company owned by Robert Miranda, agreed to provide CFO services at a monthly retainer of $15,000. During the year ended December 31, 2014, we incurred $449,496 and paid $182,110 in cash and $72,175 in stock for fees with Miranda & Associates and Miranda CFO Services, Inc. As of December 31, 2014, we have agreed to pay 133,333 shares of common stock valued at $100,000 toward our obligations, leaving an accounts payable balance due of $119,271as of December 31, 2014.

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(7)	During the year ended December 31, 2013, we incurred $63,107 and paid $39,047 in fees with Miranda & Associates, leaving an unpaid balance of $24,060 as of December 31, 2013.
(8)	On December 22, 2014, the Company entered into a settlement agreement and a $725,000 note payable with Dufrane Nuclear Shielding, LLC, a Company owned by Mr. Joshua Brooks.  Under the terms of the settlement agreement, the 333,333 shares of common stock payable to Mr. Brooks was cancelled and the $90,000 of officers’ compensation payable were combined into the aggregate balance of the note payable to Dufrane Nuclear Shielding, LLC.
(9)	In lieu of cash payments, Mr. Brooks received shares of the Company’s common stock at the price of the weighted average trading value over the three (3) months leading up to the end of the (3) month pay period; however, all of the Mr. Brooks' compensation was accrued until the date of his resignation of December 24, 2014.
(10)	Mr. Jennings' salary was pro-rated based on his start date; his annual salary was initially set at $120,000 and on April 1, 2014, his annual salary was raised to $200,000, therefore he is one of the Company's most highly compensated individuals.
(11)	As of December 31, 2014 and 2013, the balance of $121,000 and $27,000, respectively, were payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards are accrued.
(12)	Pursuant to Mr. Jennings executive employment agreement, he is entitled to an aggregate of 200,000 shares of our common stock as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following his start date; provided however that the first installment shall be paid within 30 days of signing the agreement and if he voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company. On April 1, 2014, Mr. Jennings was awarded an additional signing bonus of 166,667 shares of our common stock.
(13)	On May 27, 2014, Mr. Alan Murphy joined the Company as the President of its subsidiary STW Water Process and Technologies, LLC. Mr. Murphy received a signing bonus of 333,333 shares of common stock valued at $200,000 and 500,000 options, upon the formation and funding of the Company’s employee stock option plan. Mr. Murphy has an annual salary of $200,000 and a possible performance bonus of 100%. During 2014, Mr. Murphy was paid $107,692 in salary and the $200,000 value of the common stock was accrued in Fees Payable in Common Stock.

Pension Benefits

Nonqualified Deferred Compensation

Retirement/Resignation Plans

As of the December 31, 2014, none of the persons included the table above are entitled to receive any pension benefits, nonqualified deferred compensation or are part of any other retirement/resignation plans.

The terms of the 2015 employment agreements are as follows:

Stanley T. Weiner shall be employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary shall be $15,000 monthly ($180,000 annually) during the first year of employment, $22,000 monthly ($264,000 annually) during the second year of employment, and $29,000 monthly ($348,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock.  He will also be subject to a twelve month severance award in the event of termination.

Paul DiFrancesco shall be employed as Head of Finance for a three year term effective February 1, 2015. His base salary shall be $12,000 monthly ($144,000 annually) during the first year of employment, $16,000 monthly ($192,000 annually) during the second year of employment, and $16,000 monthly ($192,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

Grant Seabolt shall be employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary shall be $8,000 monthly ($96,000 annually) during the first year of employment, $9,500 monthly ($114,000 annually) during the second year of employment, and $9,500 monthly ($114,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 100,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 25,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

Outstanding Equity Awards at 2013 Year-End

As of the year ended December 31, 2014, there were no unexercised options, stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

Independent Contractor and Executive Employment Agreements

Stanley Weiner

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

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

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

Lee Maddox

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

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

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

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In connection with his resignation in July 2014, the Company entered into a Termination Agreement with Mr. Maddox, effective retroactively on June 30, 2014, pursuant to which Mr. Maddox agreed that he would immediately resign from all positions as an employee, officer or director of the Company, including any subsidiary, effective June 30, 2014. Further, Mr. Maddox agreed, as of July 1, 2014, to waive any obligation of the Company or any of its subsidiaries to pay him any manner of compensation under his independent contractor agreements with the Company. The Company agreed to use its best efforts to remove Mr. Maddox from any and all guarantees of the Company’s financial obligations in which Mr. Maddox serves as a guarantor, and to the extent that any guaranty obligations remain unreleased, the Company agreed to indemnify or hold Mr. Maddox harmless in connection therewith. With regard to outstanding cash compensation in the amount of $245,500, as a result of Mr. Maddox’s various employment with the Company and its subsidiaries through June 30, 2014, the Company agreed to pay a minimum monthly payment of $5,000 commencing on August 1, 2014, over a thirty-six (36) month period. As to the outstanding director compensation in the amount of $37,500, as a result of Mr. Maddox’s directorship through June 30, 2014, both parties agreed it should be subject to approval by the Company’s Board of Directors at the meeting where all directors’ compensation for 2014 is approved or modified and then paid in cash or the Company’s shares of common stock in the sole discretion of the Board of Directors, which Board shall treat Mr. Maddox in the same manner as all of the other directors of the Company. As of the date of this Report, Mr. Maddox’s director fees are still accrued and payable. As additional consideration to Mr. Maddox for the services he has provided over the years, the Company agreed to assign any of its rights in his membership in Ranchland County Club of Midland, Texas to Mr. Maddox in his sole name and issue Mr. Maddox as severance compensation one million five hundred (1,500,000) shares of the Company’s restricted common stock, issuable 30 days of the date of the Termination Agreement.

Joshua Brooks

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

Mr. Brooks resigned from all of his positions on December 24, 2014. (See Item 13. Certain Relationships and Related Party Transactions)

Robert Miranda

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

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On March 14, 2014, we entered into an Addendum to the Accounting Agreement in light of the amount of additional time and expense Miranda and Associates spent helping us prepare and file our periodic reports over the past year. Pursuant to the Addendum, we agreed to issue to Robert Miranda 721,750 shares of our common stock that represents $57,740 value of their services. Additionally, we agreed that they shall bill us on a bi-weekly basis for all fees incurred as a result of their services in connection with the closing of our financial statements, management of the independent audit, and preparation of this Report, each of which shall be due within 30 days of the date issued. We further agreed to indemnify Mr. Miranda, individually, and Miranda & Associates, from any liabilities that may arise from his services as Chief Financial Officer of our company, including our failure to timely file and pay approximately $1,100,000 of federal payroll tax liabilities.

Adam Jennings

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

The Company amended the employment agreement with Mr. Jennings on April 1, 2014 for an additional year. Pursuant to the amendment, Mr. Jennings’ base salary was increased to $200,000 per year and he was also awarded an additional 166,667shares of common stock to Mr. Jennings as an additional signing bonus.

Alan Murphy

On May 27, 2014, one of our wholly owned subsidiaries, STW Water Process and Technologies, LLC (“STW Water”), entered into an Executive Employment Agreement with Alan Murphy to serve as STW Water’s President (the "Murphy Agreement") for a term of three years, unless otherwise terminated or mutually extended. The initial base salary pursuant to the Murphy agreement is $200,000 annually. The base salary is subject to an annual review and Mr. Murphy is entitled to receive performance bonuses up to 100% of his base salary, subject to the sole discretion of the Company’s CEO. The Company is a party to the Murphy Agreement only to the extent of the obligations it is required to perform under the Murphy Agreement. Pursuant to the Murphy Agreement, Mr. Murphy may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent. The Company also agreed to issue an aggregate of 333,333 shares of its common stock valued at $200,000 to Mr. Murphy as a signing bonus. The Company also agreed to grant Mr. Murphy 500,000 stock options in the Company upon the formation and funding of the Company’s employee stock option plan. The Company has sole rights to terminate Mr. Jennings' employment for cause.

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Compensation of Directors

Per the Director Agreements, the Company compensates each of the directors through the initial grant of 33,333 shares of common stock, 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, which usually takes the form of common shares.

As of December 31, 2014, the Company has accrued compensation due to its directors (both current and former) of $496,067, which is calculated based upon time of service and the number of Board meetings attended.

The following table sets forth all cash compensation paid by us, as well as certain other compensation paid or accrued, in 2014, to each of the following named directors.

Name	Fees Earned or Paid in Cash ($)			Stock Awards ($)(4)		Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Paul DiFrancesco		282,500	(3)	352,500	(3)						635,000
Bill Carter				75,000							75,000
Joseph O’Neill				75,000							75,000
Manfred Birnbaum				75,000							75,000
Dale Dorn				37,500	(2)						37,500
D. Grant Seabolt				235,000							235,000
R.H. Bowman				37,500	(1)						37,500
Audry Lee Maddox				37,500	(2)						37,500

(1)   Mr. Bowman received 1,088,000 shares for the services he provided to us a Board member from December 2010 until he voluntarily resigned in August 2011. Mr. Bowman was re-appointed as a director on October 24, 2013; accordingly, he was only entitled to two months of the director's annual salary of $75,000. On April 24, 2014, Mr. Bowman received 125,000 shares of common stock in payment of his board fees for 2013. Mr. Bowman verbally agreed to defer all of his compensation until such time as our cash position improves. Pursuant to his resignation in June 2014 and as of the date of this Report the director fees of Mr. Bowman are still accrued and payable.

(2)   Messrs. Dorn and Maddox also resigned at mid-year and are only due payment for the first two quarters of 2014.

(3)   During the year ended December 31, 2014, we incurred $635,000 in board and consulting fees with Paul DiFrancesco, a Director. Mr. DiFrancesco was paid cash of $282,500, awarded 538,870 shares of common stock in the Company, valued at $277,500 for services related to 2014 activities, and $75,000 per year as compensation for serving on our board of directors.

(4)   The ‘Stock Awards’ contains $487,500 of accrued board of director fees and $437,500 of consulting fees that are accrued in ‘Fees payable in Common Stock’ account. In addition there are $75,000 in board fees and $320,000 of Officer’s Salaries included in Executive Compensation.

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Indemnification Agreements

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

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

Compensation Policies and Practices as they Relate to Risk Management

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

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

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of April 2, 2015 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 2, 2015. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 2, 2015 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

As of April 2, 2015, we had 31,683,150 shares of common stock issued and outstanding. Unless otherwise indicated, the business address of each person listed is in care of the Company at its corporate address. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

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Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner			Percent of Class (1)
Common Stock	Stanley Weiner		3,476,808	(2)		11.7	%
Common Stock	Paul DiFrancesco		1,532,416			5.1	%
Common Stock	Joseph O’Neill		1,284,472			4.3	%
Common Stock	Hon. Bill Carter		1,389,139			4.7	%
Common Stock	Manfred Birnbaum		20,834	(3)		*	%
Common Stock	D. Grant Seabolt, Jr.		673,939	(4)		*	%
Common Stock	Robert Miranda		120,292	(5)		*	%
Common Stock	All Directors and Officers as a Group (7 Persons)		8,497,900			28.5	%
Common Stock	Adam Jennings		316,667	(6)		*	%
Common Stock	Alan Murphy		*	(7)		*	%

* Indicates less than 1%

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

(2)   Includes 833,334 shares received pursuant to our consulting agreement with Mr. Weiner, 83,334 shares held by his daughter and 83,334 shares held by his son; Mr. Weiner has sole voting control and power over the shares held by his children.

(3)   Includes 20,834 shares held by Mr. Birnbaum’s relatives; Mr. Birnbaum has sole voting control over the shares held by his relatives.

(4)   Includes 166,667 shares received pursuant to our consulting agreement with Mr. Seabolt and 100,000 shares held by Pathfinder Worldwide Financial, an entity over which Mr. Seabolt maintains sole voting power and control.

(5)   As the President of Miranda & Associates, A PC and Miranda CFO Services, Inc., Mr. Miranda beneficially owns the 120,292 shares of our common stock we issued to him as per our agreement with Miranda & Associates.

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

(7)   As a name executive officer included in Item 11, we are required to include Mr. Murphy in this table.

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Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of December 31, 2014.

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

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

Related Party Transactions

Other than the relationships and transactions discussed below, we are not a party to, nor are we proposed to be a party, to any transaction since the beginning of the fiscal year ending December 31, 2014 involving an amount that exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years and in which a related person, as such term is defined by Item 404 of Regulation S-K, had or will have a direct or indirect material interest.

Transactions with Officers and Directors

We maintain a convertible note, with a current balance of approximately $145,000 with our CEO.

The Seabolt Law Group, which serves as our General Counsel, is owned by one of our Directors: Mr. Grant Seabolt. As of the date of this Report, we have an outstanding balance of $175,661 payable to Seabolt Law Group for their services as our General Counsel.

As of January 1, 2014, the Company has a related party payable of $132,490 to Dufrane Nuclear Shielding, LLC (“Dufrane”), a company controlled by Mr. Josh Brooks (“Brooks”), the Company’s former Chief Operating Officer. On December 22, 2014, we entered into a settlement agreement (the “Settlement”) with Dufrane, to settle our outstanding debts with them. Pursuant to the Settlement, the Company shall issue Dufrane a $725,000 promissory note, which bears interest at the rate of 10% per annum (the “Note”). The Note is due and payable in equal monthly installments beginning on January 15, 2015 and continuing until December 15, 2016, when a balloon payment for all then outstanding amounts under the Note shall be paid. Dufrane maintains the right to charge a 5% late fee if the Company is late on any of its payments due under the Note and interest shall increase to 18% per annum on any matured, unpaid amounts. If the Company fails to comply with any terms or conditions of the Settlement, including the terms of the Note, the Company shall immediately pay Brooks $30,000, which amount shall accrue 18% interest per annum until paid in full. As part of the Settlement, Mr. Brooks shall be released from all personal guarantees previously entered into with the Company; failure to do so constitutes an event of default under the Note. Additionally, the Company will return all vehicles owned by Mr. Brooks to him and maintains the option to return all vehicles and equipment previously leased from Dufrane or enter into a new rental agreement with Dufrane. Brooks and Dufrane agreed to refrain from performing rig washing, pipeline construction or water reclamation services to or for any of the Company’s or Black Pearl Energy, LLC’s current customers with whom they have master service agreements, for a period of one year; Brooks and Dufrane shall also refrain from soliciting same, with limited exceptions, during such time period. Pursuant to the Settlement, the parties, along with specified others, released each other from any and all claims they may have against each other. After netting all of the payables and receivables between the various subsidiaries of the Company, STW Resources Holding booked a gain of $123,898.

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Additionally, the Company will return all vehicles owned by Mr. Brooks to him and maintains the option to return all vehicles and equipment previously leased from Dufrane or enter into a new rental agreement with Dufrane. Brooks and Dufrane agreed to refrain from performing rig washing, pipeline construction or water reclamation services to or for any of the Company’s or Black Pearl Energy, LLC’s current customers with whom they have master service agreements, for a period of one year; Brooks and Dufrane shall also refrain from soliciting same, with limited exceptions, during such time period. Pursuant to the Settlement, the parties, along with specified others, released each other from any and all claims they may have against each other. After netting all of the payables and receivables between the various subsidiaries of the Company, STW Resources Holding booked a gain of $123,898.

On January 13, 2014, we entered into an accounts receivable factoring facility (the “Factoring Facility”) with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement (the “Factoring Agreement”). Crown maintains a 25% non-controlling interest in our subsidiary: STW Energy Services, LLC. The Factoring Agreement is secured through a Security Agreement between the Company, two of our subsidiaries: STW Pipeline Maintenance & Construction, LLC and STW Oilfield Construction, LLC (collectively, the "Subsidiaries") and Crown, by all of the instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment of the Company and the Subsidiaries. The Factoring Facility includes a loan in the amount of $4,000,000. At the time we entered into the Factoring Agreement, 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; however, the Guaranty Agreement was terminated when Mr. Maddox resigned in July 2014.

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

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

Transactions with Black Pearl

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

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

As of December 31, 2014, the Company, on a consolidated basis, has a $1,371,305 related party payable to Black Pearl and a $569,533 receivable from Black Pearl Energy, LLC.

During the years ended December 31, 2014 and 2013, the Company, had related party sales of $2,079,269 and $347,550, respectively. Related party sales are a combination of sales to three companies, (1) Black Pearl Energy, LLC, (2) Dufrane Construction, LLC and (3) Dufrane Nuclear Shielding LLC.

Promoters and Certain Control Persons

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

Director Independence

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

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table represents aggregate fees billed to us for fiscal years ended December 31, 2014 and 2013, by Marcum LLP our new principal accountant for 2013.

	2014		2013
Audit Fees	$	270,000	$	200,371
Audit-Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0
Total	$	270,000	$	200,371

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

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

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

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

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

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ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit No.	Description
2.1	Order Confirming the Second Amended Plan of Reorganization of Woozyfly, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.
2.2	Agreement and Plan of Merger for proposed merger between Woozyfly, Inc. Merger Sub, and STW Resources, Inc. dated January 17, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 26, 2010.
3.1	Articles of Incorporation	Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the Securities and Exchange Commission on September 26, 2006.
3.2	Certificate of Amendment to the Articles of Incorporation	Incorporated by reference to the Registrant’s Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on September 4, 2008.
3.3	Certificate of Amendment to the Articles of Incorporation – March 1, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2010.
3.4	Certificate of Amendment to the Articles of Incorporation – January 22, 2014	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 22, 2014.
3.5	Articles of Merger between STW Acquisition, Inc. and STW Resources, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.
3.6	Articles of Merger filed with the State of Nevada on March 3, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.
4.1	Form of 12% Convertible Note dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
4.2	Form of Warrant dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
4.3	Form of Promissory Note dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.
4.4	Form of Warrant for December 2010 Financing	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.

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4.5	Extension of Note, by and between STW Resources Holding Corp. and GE Ionics, Inc., dated October 28, 2011	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
4.6	Amended and Restated Note effective October 1, 2011 in favor of GE Ionics, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
4.7	Form of November 2011 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.
4.8	Note Exchange Form of New Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
4.9	Note Exchange Form of New Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
4.10	Form of May 2012 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.
4.11	Form of November 2012 14% Convertible Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
4.12	Form of November 2012 Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
4.13	Form of April 30 2013 Revenue Participation Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013
4.14	Note of STW Energy Services, LLC in name of Crown Financial, LLC dated June 26, 2013,	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
4.15	Form of 6% Convertible Original Issue Discount Notes with Revenue Participation Interests	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
4.16	Form of Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
4.17	Form of 6% Convertible Original Issue Discount Notes with Revenue Participation Interests	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.

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4.18	Form of Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.
10.1	Form of securities Purchase Agreement dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.
10.2	Form of Escrow Agreement by and between the Company, Viewpoint, and TD Bank, N.A. dated March 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
10.4	Form of Settlement Agreement by and between STW Resources Holding Corp and GE Ionics, Inc., dated August 31, 2010	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.
10.5	Form of Subscription Agreement for December 2010 Financing	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.
10.6	Letter of Intent dated April 17, 2011	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2011.
10.7	Amendments to Settlement Agreement dated October 30, 2011, by and between STW Resources Holding Corp. and GE Ionics, Inc.	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
10.8	Form of November 2011 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.
10.9	Note Exchange Cover Letter	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.10	Note exchange Subscription Agreement Form	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.11	Master Note Agreement with Revenue Participation Subscription Package	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
10.12	Form of May 2012 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.
10.13	Form of November 2012 Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 3, 2012.
10.14	Form of April 30, 2013 Revenue Participation Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013

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10.15	Form of April 30, 2013 Revenue Participation Subscription Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 7, 2013
10.16	Loan Agreement, dated June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.17	Security Agreement, dated June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.18	Guaranty, dated June 26, 2013 by STW Resources Holding Corp. in favor of Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.19	Account Purchase Agreement, effective June 26, 2013, by and between STW Energy Services, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 16, 2013.
10.20	Executive Employment Agreement with Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.21	Employment Agreement between STW Pipeline Maintenance & Construction, LLC and Adam Jennings	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.22	Form of Service Agreement with Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.23	Form of Service Agreement with Lee Maddox	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.24	Rescission Agreement between the Company and Black Pearl Energy, LLC dated October 14, 2013	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.25	Form of Guaranty Agreement between the Company and Joshua C. Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.26	Form of Loan Agreement between STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.27	Form of Account Purchase Agreement between STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.

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10.28	Form of Escrow Agreement between the Company and Seabolt Law Group	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.29	Form of Security Agreement STW Oilfield Construction, LLC and Joshua Brooks	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.30	Form of Engagement Agreement with Miranda & Associates, LLC, including the Addendum	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.31	Form of Board of Directors Appointment Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 29, 2013.
10.32	Form of Share Purchase Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 25, 2013.
10.34	Form of Account Purchase Agreement between the Company and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.35	Form of Security Agreement between the Company, STW Pipeline Maintenance & Construction, LLC, STW Oilfield Construction, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.36	Form of Security Agreement between the Company, STW Pipeline Maintenance & Construction, LLC, STW Oilfield Construction, LLC and Crown Financial, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.37	Form of Line of Credit Agreement between the Company and Black Pearl Energy, LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.38	Form of Note	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2014.
10.39	Form of Addendum to Agreement with Miranda & Associates, PCA	Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 20, 2014.
10.40	Form of Securities Purchase Agreement	Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 20, 2014
10.41	Form of Warrant	Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 20, 2014

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10.42	Form of Escrow Agreement	Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 20, 2014
10.43	Form of Securities Purchase Agreement	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 19, 2014
10.44	Form of Warrant	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 19, 2014
10.45	Cooperation Agreement between the Company and the City of Fort Stockton, Texas	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 6, 2014
10.46	Form of Exclusive Product Purchase Manufacturing and License Agreement between the Company and Salttech, BV	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 27, 2014
10.47	Employment Agreement between STW Water Process & Technologies, LLC and Alan Murphy	Filed Herewith
10.48	Executive Long Term Agreement between the Company and Stanley Weiner	Filed Herewith
10.49	Executive Long Term Agreement between the Company and Paul DiFrancesco as Head of Finance	Filed Herewith
10.50	Independent Contract Agreement between the Company and Grant Seabolt as General Counsel and Corporate Secretary	Filed Herewith
16.1	Letter from Weaver & Martin LLC	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 5, 2010.
16.2	Letter from Weaver and Tidwell, LLP	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2012.
16.3	Letter from KMJ Corbin & Company LLP	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 31, 2013.
20.1	Letter to Shareholders dated November 14, 2013	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 24, 2013
21.1	List of Subsidiaries	Filed as part of this Report.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed as part of this Report.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed as part of this Report.
32.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed as part of this Report.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

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

April 2, 2015	STW Resources Holding Corp.
	By: /s/ Stanley Weiner
	Stanley Weiner, CEO

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

Name	Positions	Date
/s/ Stanley Weiner Stanley Weiner	Chief Executive Officer, President, Director, principal executive officer	April 2, 2015
/s/ Robert Miranda Robert Miranda	CFO	April 2, 2015
/s/ D. Grant Seabolt D. Grant Seabolt	Director	April 2, 2015
/s/ Joseph I. O'Neill Joseph I. O'Neill	Director	April 2, 2015
/s/ Hon. Bill Carter Hon. Bill Carter	Director	April 2, 2015
/s/ Manfred Birnbaum Manfred Birnbaum	Director	April 2, 2015
/s/ Paul DiFrancesco Paul DiFrancesco	Director	April 2, 2015

EX-10.47

Exhibit 10.47

STW WATER PROCESS & TECHNOLOGIES, LLC/STW RESOURCES HOLDING CORP

EMPLOYMENT AGREEMENT

INCORPORATED TERMS

This Employment Agreement (the “Agreement”), is made by and between STW Water Process and Technologies, a Texas LLC (the “Company”) whose mailing address is 3424 South County Road 1192, Midland, Texas 79706 and Alan Murphy (“Employee” or “you”), on May 27, 2014 (the “Commencement Date”).

RECITALS

WHEREAS, the Company desired to employ Employee and to have the benefit of his skills and services, and Employee desired to accept employment with the Company, and therefore retained Employee as the Company’s President as of the Commencement Date; and

WHEREAS, the Company and the Employee have negotiated the terms of Employee’s employment;

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants and conditions set forth herein and in the Non-Disclosure, Non-Solicitation and Non-Compete Agreement (“Non-Disclosure Agreement”), attached as Exhibit A and hereinafter defined, and the performance of each, the parties hereto, intending legally to be bound, hereby agree as follows:

1.           Position.  The terms of your new position with the Company are as set forth below:

(a)           You shall serve as the President of the Company with such responsibilities, duties and authority as are customary for a President of similarly situated companies.  The Employee shall report to the CEO of Company.

You shall perform such other duties and shall have authority consistent with your position as may be from time to time specified by the Board of Directors of the Company (“Board”) and subject to the discretion of the Board.  You shall perform your duties for the Company at the Company’s offices except for travel that may be necessary or appropriate in connection with the performance of your duties hereunder. The offices are located at 3424 South County Road 1192, Midland, Texas 79706.

 (b)           Employee shall faithfully devote his full business/working time, attention and energy to the business and affairs of the Company and the performance of his duties hereunder and as later identified by the Board and to use his best efforts to perform such responsibilities faithfully and efficiently.  Without limiting the generality of the foregoing paragraph, during the Term Employee may join professional associations and otherwise be involved with any other business activities, Board positions consulting and advisory services or trusts to the extent that, in the reasonable judgment of the Board or its designee, such other business pursuits and activities do not (i) interfere in any material respect with Employee’s ability to discharge Employee’s duties and responsibilities to the Company, whether or not such activity is pursued for gain, profit or other pecuniary advantage, or (ii) violate the Conflicts provision of Employee’s Non-Disclosure Agreement. Notwithstanding the foregoing, Employee shall be entitled to finish up his work on the current projects described on Schedule A attached hereto (collectively, the "Current Projects"), provided however that Employee shall be phased out of such Current Projects no later than August 1, 2014 (the "Cut-Off Date"), unless the Company consents in writing to an extension of such time for a specific assignment related to the Current Projects.  Employee hereby acknowledges and agrees that any and all future projects or assignments not listed on Schedule A shall constitute the work and property of the Company.

2.           Employment Term. The term of Employee’s employment hereunder (such term of employment, as it may be extended or terminated, is herein referred to as the "Term") shall be for a term commencing on the Effective Date and, unless terminated earlier as provided in Section 6 hereof, ending on the third anniversary of the Effective Date (the "Original Employment Term").

3.           Compensation.   In consideration of the services to be rendered hereunder, the Company hereby agrees to pay Employee the compensation as set forth herein.  Employee stock options and stock grants will be adjusted on the same basis as all other shareholders to account for any stock split, stock dividend, combination or recapitalization.

(a)Base Salary. You will be paid an annual base salary of $200,000 dollars, which will be paid in accordance with the Company's regular payroll practices (“Base Salary”).

(b)Intentionally Left Blank.

(c)Performance Bonus.  In addition to the Base Salary, Employee shall be entitled to receive an annual bonus (the “Bonus”) in such amounts equal to 100% of Base Salary, and shall be determined in the sole discretion of the CEO of Company following the end of each fiscal year of the Company.

(d)Annual Review of Base Salary and Performance Bonus. the CEO of STW Resources Holding Corp. ("Parent Company"), the Company's parent company, shall perform an annual review of your Base Salary and Performance Bonus and shall determine the appropriate adjustments to each component of your total compensation within sixty (60) days of the start of each Additional Term, if any (the “Annual Review”). The Annual Review shall be submitted to the Parent Company's Compensation Committee for review and approval. Notwithstanding anything contained herein to the contrary, you understand and agree that the Board is not required to increase the Base Salary or pay you any Performance Bonuses to such, or any other amount, contemplated herein.

(f)Options.  In addition to (and not in lieu of) the Base Salary and any Bonus, Employee shall be entitled to an aggregate of 3,000,000 options to purchase shares of STW’s common stock, which shall be issued upon signing and vested in accordance to the schedule in the Option Agreement, commencing on the Effective Date; provided however, that Employee shall only be entitled to the Options and vesting schedule if he remains in his position as the Company's President on any such installment date.

(g)           Withholding of Taxes.  You understand that the services to be rendered hereunder will cause you to recognize taxable income, which is considered under the Internal Revenue Code of 1986, as amended, and applicable regulations thereunder as compensation income subject to the withholding of income tax (and Social Security or other employment taxes).  You hereby consent to the withholding of such taxes as are required by the Company.

(h)           Company Vehicle, iPad, and Phone.  During the Term, the Company shall provide you with an iPad, company phone, and vehicle and shall pay the reasonable gas charges and maintenance for such vehicle.

4.           Benefits.

(a)           Benefit Plan – Health Insurance, Retirement and Stock Option Plan. The Company will provide you with the opportunity to participate in the standard benefits plans currently available to other similarly situated employees and their dependents, for whom the costs will be covered by you. The Company reserves the right to cancel and/or change the benefits plans it offers to its employees at any time, subject to applicable law.

(b)           Vacation; Sick Leave.  You will be entitled to twenty (20) days of paid time off per year, pro-rated for the remainder of this calendar year and pro-rated by the number of hours worked.  Vacation may not be taken before it is accrued.

(c)           Other Benefits.  The Company will provide you with standard business reimbursements (including supplies, long distance calls), subject to Company policies and procedures and with appropriate receipts.  In addition, you will receive any other statutory benefits required by law.

(d)           Reimbursement of Expenses.  You shall be reimbursed for all normal items of travel and entertainment and miscellaneous business expenses reasonably incurred by you on behalf of the Company, provided such expenses are documented and submitted in accordance with the reimbursement policies in effect from time to time. Notwithstanding anything herein to the contrary, any items that would result in Employee’s annual expenses exceeding $3,000, must be pre-approved by the Company in writing.

5.           Confidential Information and Non-Disclosure Agreement.  Your acceptance of this offer and commencement of employment with the Company is contingent upon the execution, and delivery to an officer of the Company, of the Company’s Non-Disclosure Agreement, a copy of which is annexed as Exhibit A for your review and execution, prior to or on your Commencement Date.

6.           Termination of Employment.

(a)You and the Company may extend the term of your employment, which will automatically extend all of the terms of this Agreement unless specifically modified as permitted herein, by mutual written agreement.

(b) Upon Termination for Cause, as hereinafter defined, you shall be immediately paid all accrued unpaid salary on a pro rata basis through the date of termination, bonuses, incentive compensation to the extent earned, vested deferred compensation pension plan and profit sharing plan benefits, which will be paid in accordance with the applicable plan, and accrued vacation pay, all to the date of termination.

(c)Except as otherwise specifically set forth in Sections 6(h) through 6(l) below, upon any termination other than for cause, you will immediately be paid all accrued salary on a pro rata basis through the date of termination, all incentive compensation to the extent earned, severance compensation as provided below, vested deferred compensation (other than pension plan or profit sharing plan benefits, which will be paid in accordance with the applicable plan), and accrued vacation pay, all to the date of termination.

(d)Forfeiture of Rights.  In the event that, subsequent to termination of Employee’s employment hereunder, Employee breaches any of the provisions of the Confidentiality Agreement in any material respect, all payments and benefits to which Employee may otherwise have been entitled to pursuant to this Section 6 hereof shall immediately terminate and be forfeited.

(e)Base Salary Continuation.  Any Base Salary continuation set forth in this Section 6 shall be intended either (i) to satisfy the safe harbor set forth in the regulations issued under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (Treas. Regs. 1.409A-1(n)(2)(ii)) or (ii) be treated as a Short-term Deferral as that term is defined under Code section 409A (Treas. Regs. 1.409A-1(b)(4)).  To the extent such continuation payments exceed the applicable safe harbor amount or do not constitute a Short-term Deferral, the excess amount shall be treated as deferred compensation under Section 409A (as defined below) and as such shall be payable pursuant to the following schedule:  such excess amount shall be paid via standard payroll in periodic installments in accordance with the Company’s usual practice for its senior executives.

Notwithstanding any provision in this Agreement to the contrary, in the event that Employee is a “specified employee” as defined in Section 409A, any continuation payment, continuation benefits or other amounts payable under this Agreement that would be subject to the special rule regarding payments to “specified employees” under Section 409A(a)(2)(B) of the Code shall not be paid before the expiration of a period of six months following the date of Employee’s termination of employment or before the date of Employee’s death, if earlier.

(g)           Termination For Cause.  The Company shall have the right to terminate Employee’s employment for Cause, effective immediately upon notice thereof by the Company to Employee.  In the event the Company terminates Employee’s employment for Cause (as such term is defined below), such termination (“Termination For Cause”) shall be effective immediately upon notice thereof, in which case Employee will have no rights or claims against the Company under this Agreement except as set forth in Section 6(b) above.  “Termination for Cause” means termination by Company of Employee's employment (i) by reason of Employee's willful fraud upon, or deliberate injury or attempted injury to, the Company; (ii) by reason of Employee's gross negligence or intentional misconduct with respect to the performance of Employee's duties under this Agreement or any contract between Employee and the Company; (iii) conduct of Employee that, based upon a good faith and reasonable factual investigation and determination by the Board, demonstrates Employee’s gross unfitness to serve; (iv) by reason of Employee's material breach of: (x) this Agreement or the Confidentiality Agreement or (y) any statutory (including fiduciary) duty of the Employee to the Company; provided, however, that no such termination under subsection (iii) or (iv) above will be deemed to be a Termination for Cause unless the Company has provided Employee with written notice of what it reasonably believes are the grounds for any Termination for Cause and Employee fails to take appropriate remedial actions during the thirty day period following receipt of such written notice.

(h)           Death or Disability.  The Company may by written notice to Employee or his personal representative terminate Employee’s employment on account of his Total Disability.  Employee’s employment shall terminate automatically upon his death.  For purposes hereof, Employee shall be deemed to experience a “Total Disability” if Employee is considered totally disabled under any group disability plan maintained by the Company and in effect at that time, or in the absence of any such plan, Employee shall be deemed to experience a Total Disability if he shall have been unable to perform his duties hereunder on a full-time basis for 90 consecutive days or longer, or for shorter periods aggregating 120 days in any 360-day period.  In the event of any dispute under this Section 6(h), Employee shall submit to a physical examination by a licensed physician mutually satisfactory to the Company and Employee, the cost of such examination to be paid by the Company, and the determination of such physician shall be determinative.  In the case of a Total Disability, until the Company shall have terminated Employee’s employment hereunder in accordance with the foregoing, Employee shall be entitled to receive compensation provided for herein notwithstanding any such Total Disability.  In the event of the termination of Employee’s employment on account of his Total Disability, such termination shall be effective immediately upon notice, in which case Employee or his representative will have no rights or claims against the Company under this Agreement except as follows:

(i)           Employee (or his estate or representative, as applicable) shall be paid (A) any unpaid portion of his Base Salary computed on a pro rata basis through the effective date of his termination and (B) any unreimbursed expenses properly incurred;

(ii)           All other of Employee’s accrued but unpaid rights shall be as determined under any incentive compensation, stock option, retirement, employee welfare or other employee benefits plan or program of the Company in which Employee is then participating at the time of his termination; and

(iii)           In the case of Employee’s Total Disability only, the Company shall continue Employee’s medical benefits coverage existing at the time of his termination for as long as permissible under the Company’s health benefits policies (not to exceed 60 days) and the Company further agrees to pay Employee’s COBRA premiums for a period of the lesser of (A) 6 months thereafter and (B) the remainder of the Term, with such premiums to provide for coverage at the same level and subject to the same terms and conditions  as in effect for Employee at the time of termination.

 (i)           Involuntary Termination Without Cause.  The Company may terminate Employee’s employment, other than on account of death, Total Disability or for Cause, on 30 days written notice (“Termination Without Cause”), in which case Employee will have no rights or claims against the Company under this Agreement except as follows:

(i)           Employee (or his estate or representative, as applicable) shall be paid (A) any unpaid portion of his Base Salary computed on a pro rata basis through the date of his termination, and (B) any unreimbursed expenses properly incurred;

(ii)           All other of Employee’s accrued but unpaid rights shall be as determined under any incentive compensation, stock option, retirement, employee welfare or other employee benefits plan and program of the Company in which Employee is then participating at the time of his termination;

(iii)           Subject to Employee’s execution of a release satisfactory to the Company, Employee shall receive severance payments in the form of monthly payments of Employee’s Base Salary (as in effect immediately prior to such termination)for a period of  6 months following the effective date of such termination or  the remainder of the Term (such period of time, the “Severance Period”), not exceed 6 months; and,

(iv)           Subject to Employee’s execution of a release satisfactory to the Company, the Company shall continue Employee’s medical benefits coverage existing at the time of his termination for as long as permissible under the Company’s health benefits policies (not to exceed 60 days) and the Company further agrees to pay Employee’s COBRA premiums for a period of time equal to the Severance Period, with such premiums to provide for coverage at the same level and subject to the same terms and conditions as in effect for Employee at the time of termination.

For the avoidance of doubt, upon any Termination Without Cause, Employee will immediately be paid all accrued salary, all incentive compensation to the extent earned, severance compensation as provided above, vested deferred compensation (other than pension plan or profit sharing plan benefits, which will be paid in accordance  with the applicable plan), and accrued vacation pay, all to the date of termination.

(j)           Voluntary Termination For Good Reason.  Employee may terminate his employment for good reason (“Termination For Good Reason”) upon 30 days written notice.  In the event of Termination For Good Reason, Employee shall be entitled to receive the payments and other rights provided in Section 6(i) hereof, subject to the same conditions stated therein.  For purposes of this Agreement, Termination For Good Reason shall mean voluntary termination by Employee of his employment as a direct result of a breach by the Company of any of its material obligations under this Agreement; provided, however, that Employee shall not have the right to terminate his employment for Good Reason unless (a) Employee shall have given the Company written notice setting forth in reasonable detail (i) the circumstances deemed to constitute “Good Reason,” (ii) reasonable action that would remedy such circumstances and (iii) a reasonable time (not less than 30 business days) within which the Company may take such remedial action, and (b) the Company shall not have taken such specified remedial action within such specified reasonable time.

(k)           Voluntary Termination.  Employee may otherwise terminate his employment without Good Reason upon 30 days written notice, in which case Employee (or his estate or representative, as applicable) shall be paid (A) any unpaid portion of his Base Salary on a pro rata basis through the date of the termination, and (B) any unreimbursed expenses properly incurred.

(l)           Voluntary Termination Due to Change in Control.  In the event that Employee’s employment is terminated because of a change in control (as defined herein) of the Company prior to the Termination Date, Employee will be paid as severance pay: (i) all accrued salary, incentive compensation to the extent earned, vested deferred compensation pension plan and profit sharing plan benefits, which will be paid in accordance with the applicable plan, and accrued vacation pay, all to the date of termination; and, (ii) Employee's Base Salary for the period commencing on the date that Employee's employment is terminated and ending on the date which is six months thereafter.  For purposes of this Agreement, a “change in control” shall be defined as the sale of more than fifty (50%) of the Company’s outstanding capital stock, other than in connection with an underwritten public offering of the Company’s securities or a merger (or similar transaction) in which the Company is not the surviving entity or following which the Company’s shareholders immediately prior to such transaction no longer control a majority of the Company’s voting stock.

7.           Non-Solicitation. You agree to the non-solicitation terms set forth in the Non-Disclosure Agreement.

8.           Arbitration. This Agreement is to be governed by and construed in accordance with the laws of the State of Texas applicable to contracts entered into and wholly to be performed within the State of Texas by Texas residents.  Any controversy or claim arising out of or relating to this Agreement, or breach of this Agreement (except for any controversy or claim with respect to Section 6 or Section 7, which may be submitted, at the option of the Company, to any court of competent jurisdiction located within Texas) is to be settled by arbitration in Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction.  There must be three arbitrators, one to be chosen directly by each party at will, and the third arbitrator to be selected by the two arbitrators so chosen.  Each party will pay the fees of the arbitrator he or she selects and his or her own attorneys, and the expenses of his or her witnesses and all other expenses connected with presenting his or her case.  Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, administrative fees, the fee of the third arbitrator, and all other fees and costs, will be borne equally by the parties. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph, without breach of this arbitration provision. The provisions of this Section 8 shall specifically survive the termination of this Agreement.

9.           Miscellaneous. This Employment Agreement, together with the Non-Disclosure Agreement, sets forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral. This Employment Agreement may not be modified, amended and no provision may be waived, except by a written agreement, signed by the Company and by you. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will be lessened or reduced to the extent possible or will be severed and will not affect any other provision and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. This Agreement will be governed by Texas law without reference to rules of conflicts of law. The waiver of any breach of any provision of this Employment Agreement will not operate or be construed as a waiver of any subsequent breach of the same or other provision of this Employment Agreement.  This Agreement will be binding on, and inure to the benefit of, the executors, administrators, heirs, successors, and assigns of the parties; provided, however, that except as expressly provided in this Agreement, this Agreement may not be assigned either by Company or by Employee.  This Agreement may be executed in several original or facsimile copy counterparts and all so executed and transmitted will constitute one Agreement, binding on all the parties hereto even though all the parties are not signatories to the original or the same counterpart. Facsimile transmitted signatures will be deemed valid as though they were originals and the parties may perform any and all obligations and duties in reliance on the facsimile copies.

10.           No Inconsistent Obligations.  Employee is aware of no obligations, legal or otherwise, inconsistent with the terms of this Agreement or with his undertaking employment with the Company.  The Employee represents and warrants that the execution of this Agreement by him and his performance of his obligations hereunder will not conflict with, result in the breach of any provision of or the termination of or constitute a default under any agreement to which the Employee is a party or by which the Employee is or may be bound.  Employee will not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others.  Employee represents and warrants that he has returned all property and confidential information belonging to all prior employers.

11.           Survival.  The provisions of this Agreement containing express survival clauses as well as the provisions of this Agreement which are intended to apply, operate or have effect after the expiration or termination of the term of this Agreement, or at a time when the term of this Agreement may have expired or terminated, shall survive the expiration or termination of the term of this Agreement for any reason.

12.           Attorneys’ Fees.  Should either party hereto, or any heir, personal representative, successor or assign of either party hereto, resort to legal proceedings in connection with this Agreement or Employee’s employment with the Company, the party or parties prevailing in such legal proceedings shall be entitled, in addition to such other relief as may be granted, to recover its or their reasonable attorneys’ fees and costs in such legal proceedings from the non-prevailing party or parties.

13.           Assistance in Litigation.  Employee shall, during and after termination of employment, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become a party; provided, however, that such assistance following termination shall be furnished at mutually agreeable times and for mutually agreeable compensation.

14.           Notices.  All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, (iii) three (3) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing, (iv) upon confirmation of facsimile transfer, if sent by facsimile or (v) upon confirmation of delivery when directed to the electronic mail address set forth below, if sent by electronic mail:

If to the Company:               STW Water Process and Technologies

Stanley T. Weiner

4324 South County Road 1192

Midland, Texas 79706

Email: stw@stwresources.com

Facsimile:

If to you:

Alan P. Murphy

15.           Section 409A.  It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, any future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject Employee to payment of interest or any additional tax under Section 409A.  The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly.  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  In addition, to the extent that any Internal Revenue Service guidance issued under Section 409A would result in Employee being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by the Company and Employee.

A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

 [SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

EMPLOYEE	STW WATER PROCESS AND TECHNOLOGIES
_______________________________	By:______________________________
Name: Alan Murphy	CEO: Stanley T. Weiner
	[  ]

Schedule A

Current Projects

EXHIBIT A

NON-DISCLOSURE, NON-SOLICITATION

AND NON-COMPETE AGREEMENT

This Non-Disclosure, Non-Solicitation and Non-Compete Agreement (this “Agreement”), dated as of ____________________, 2014, is made by and between STW Water Process and Technologies, a Nevada corporation (the “Company”) whose mailing address is [  ] and Alan Murphy (“Employee” or “you”), residing at ______________________________________________________________________.

RECITALS

WHEREAS, Employee is commencing employment with the Company pursuant to that certain Employment Agreement executed by and between the Company and Employee on the date thereof (the “Employment Agreement”).  Any terms not otherwise defined herein, shall have the meaning set forth in the Employment Agreement;

WHEREAS, the Company wishes to enter into this Non-Disclosure, Non-Solicitation and Non-Compete Agreement (this “Agreement”) with Employee to protect the Company’s competitive position and to ensure the continued ownership and protection of the confidential and proprietary information of the Company and others with whom the Company does business and to avoid the solicitation by Employee of the Company’s customers, collaborators and other employees;

WHEREAS, Employee recognizes the Company’s need for this Agreement to protect the Company’s competitive position and to ensure the continued ownership and protection of the confidential and proprietary information of the Company, its Affiliates (as such term is defined below) and third parties;

WHEREAS, prior to the Cut-Off Date, the terms of this Agreement shall not apply to the Current Projects set forth on Schedule A to the Employment Agreement; and

WHEREAS, as a condition of the Employment Agreement, Employee has agreed to the terms and conditions hereof and has agreed to enter into this Agreement.

NOW, THEREFORE, in consideration for the Company’s execution of the Employment Agreement and to provide Employee with Confidential Information (as such term is defined below), as well as other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.            Scope. Any references in this Agreement regarding Employee’s duties and obligations to the Company (including, but not limited to, obligations related to confidentiality, work product, non-solicitation and non-competition) include Employee’s obligation to the Company’s affiliated entities, which includes the Company’s parent and subsidiary corporations and business entities, if any, and any corporation or other business entity owned or controlled by the Company or under common ownership or control with the Company (each an “Affiliate” and collectively, the “Affiliates”). Employee also understands that if he is assigned to perform any work or duties with or for the Affiliates, this Agreement shall apply. The word “cessation” in this Agreement refers to the ending of Employee’s employment with the Company for any reason or for no reason at all, including but not limited to resignation, termination for cause, termination without cause and termination for good reason.

2.           Protection of Confidential Information.

(a)           “Confidential Information” means information disclosed to Employee or known by Employee (including information conceived, originated, discovered, or developed in whole or in part by Employee), about the Company and/or the Company’s business, products, processes, and services, including but not limited to information relating to research, development, data, experimental work, innovations, ideas, improvements, concepts, inventions, computer programs, designs, engineering data, formulas, systems, intellectual property, sketches, blueprints, flow charts, technology, routines, algorithms, source and object codes, know-how, products and services under development, pricing and pricing strategies, business plans, marketing and selling strategies, servicing, purchasing, accounting, engineering, cost and costing strategies, sources of supply, information about customers and/or suppliers, info1mation related to contracts, customer lists, customer requirements, techniques, business methods or practices, operations, financial information, business forecasts, information related to computer hardware, software, operating systems or the like, training and training programs, prospective business opportunities, and any other information the Company is under an obligation to keep confidential. The parties agree that the following shall not be considered Confidential Information subject to this Agreement: (i) information which prior to the time of disclosure by Company is in the public domain; (ii) information that, after disclosure by Company, becomes part of the public domain by publication or otherwise, provided that such publication is not in violation of this Agreement or any other confidentiality agreement; or (iii) information Employee is compelled to disclose by a court or other tribunal of competent jurisdiction, provided however, that in such case Employee shall immediately give notice to the Company to enable the Company to exercise its legal rights to prevent and/or limit such disclosure. In any event, Employee shall disclose only that portion of the Confidential Information that, in the opinion of the Company’s legal counsel, is legally required to be disclosed and will exercise reasonable efforts to ensure that any such information so disclosed will be accorded confidential treatment by said court or tribunal.

(b)           Employee acknowledges that all Confidential Information is, and for all times after the cessation of Employee’s employment shall remain, the property of the Company. Employee agrees that he shall not directly or indirectly use, disseminate or disclose any Confidential Information without having first obtained prior written permission from the Company and to obtain such prior written permission whether during Employee’s employment or after termination of such employment, except as shall be necessary in the ordinary course of performing his duties as an employee of the Company in accordance with the Employment Agreement.

(c)           Employee shall comply with any additional policies, rules and procedures established by the Company from time to time for the protection of any Confidential Information.

3.           Conflicts. Employee represents and warrants that his employment or engagement by the Company and the execution and delivery of this Agreement and compliance with all the terms of this Agreement do not and will not breach any written or oral agreement Employee has entered into relating to intellectual property, noncompetition or otherwise. Employee shall not enter into any written or oral agreement in conflict with this Agreement. Moreover, without limiting the generality of the provisions of the Employment Agreement requiring him to devote full-time efforts to his duties under such Employment Agreement, during the period of Employee’s employment by the Company, Employee shall not, without the Company’s prior written consent, directly or indirectly, engage in any employment, consulting or activity (other than Employee’s employment with the Company) relating to any line of business in which the Company is now engaged, is engaged at such time or is considering, expects or plans to be engaged or which would otherwise conflict with his employment obligations to the Company. Further, Employee shall abide by any policy concerning conflicts of interest that the Company may from time to time have in effect.

In keeping with Employee’s fiduciary duties to the Company, Employee agrees that while employed by the Company he shall not, acting alone or in conjunction with others, directly or indirectly, become involved in a conflict of interest or, upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that he shall immediately disclose to the Company any facts which might involve any reasonable possibility of a conflict of interest. It is agreed that any direct or indirect interest, connection with, or benefit from any outside activities, where such interest might in any way adversely affect the Company, involves a possible conflict of interest. Circumstances in which a conflict of interest on the part of Employee might arise, and which must be reported immediately by Employee to the Company, include, but are not limited to, the following:

•   ownership of a material interest in any supplier, contractor, subcontractor, customer, or other entity with which the Company does business;

•   acting in any capacity, including director, officer, partner, consultant, employee, distributor, agent, or the like for a supplier, contractor, subcontractor, customer, or other entity with which the Company does business;

•   accepting, directly or indirectly, payment, service, or loans from a supplier, contractor, subcontractor, customer, or other entity with which the Employee does business, including, but not limited to, gifts, trips, entertainment, or other favors of more than a nominal value;

•   misuse of the Company’s information or facilities to which Employee has access in a manner that will be detrimental to the Employee’s interest, such as utilization for Employee’s own benefit of know-how, inventions, or information developed through the Employee’s business activities;

•   disclosure or other misuse of information of any kind obtained through Employee’s connection with the Company;

•   appropriation by Employee or the diversion to others, directly or indirectly, of any business opportunity in which it is known or could reasonably be anticipated that the Company would be interested; and

•   the ownership, directly or indirectly, of a material interest in an enterprise in competition with the Company, or acting as an owner, director, principal, officer, partner, consultant, employee, agent, servant, or otherwise of any enterprise which is in competition with the Company.

4.           Non-Solicitation of Customers and Suppliers.  During the period of Employee’s employment with the Company and for three (3) years after cessation of his employment with the Company (the “Non-Solicit Period”), Employee shall not, directly or indirectly, alone or as a founder, partner, officer, director, employee, consultant, joint venturer, lender, stockholder or investor of any entity, divert or attempt to divert any person, concern or entity, which is furnished services by or furnishes services to the Company, from doing business with the Company or otherwise to change its relationship with the Company, or induce or attempt to induce any customer or supplier of, or joint venturer with, the Company to cease being a customer or supplier of, or joint venturer with, the Company or otherwise to change its relationship with the Company.

5.           Non-Competition After Employment.  Employee recognizes the Company’s legitimate business interests and investment in research and development in the oil and gas sectors and acknowledges that certain restrictions applicable to Employee upon termination of employment are reasonable in order to protect the Company’s business interests. The Company similarly recognizes that a substantial portion of the Employee’s professional career has been devoted to research and development in the oil and gas sectors and water sectors, and that Employees’ future financial and professional advancement opportunities are closely linked to his ability to continue such research and development. Therefore, Company and Employee agree that for a period of three (3) years following the termination of the Agreement for any reason, Employee shall not serve, directly or indirectly, in any country, as a founder, partner, officer, director, employee, consultant, joint venturer, lender, or greater than one percent (1%) stockholder or investor of or in any entity or business or accept employment or other engagement with any entity or business that is a client, affiliated with, or a competitor of the Company. The Company and Employee further agree that, if requested by the Company, for a period of up to one (1) year following the termination of the Employment Agreement for any reason except termination without Cause, Employee shall not serve, anywhere in North America, as a founder, co-founder, partner, officer, director, employee, consultant, joint venturer, lender, stockholder or investor of any entity or business that operates in the oil and/or gas sectors; however, that if the Company so requests, it shall provide to Employee financial compensation for a period equal to the period of Non-compete requested by the Company for up to one year, equal to two (2) times his salary from the Company during the preceding twelve (12) months, in addition to any other financial compensation due to Employee as part of Employee’s severance, if any.

6.           Non-Solicitation and Non-Hire of Employees.  During Employee’s employment with the Company and for two (2) years after cessation of his employment with the Company, Employee shall not, directly or indirectly, alone or as a founder, partner, officer, director, employee, consultant, joint venturer, lender, stockholder or investor of any entity, solicit or induce any employee or consultant of the Company to leave his or her service with the Company, or assist in any manner in the recruitment or hiring of any such person.

7.           Non-Disparagement. Employee agrees that he shall not, at any time, whether during or after cessation of Employee’s employment with the Company, make or publish any statement (orally or in writing) that libels, slanders, disparages or otherwise defaces the goodwill or reputation (whether or not such disparagement legally constitutes libel or slander) of the Company (or any of its Affiliates, or its other officers, managers, directors, partners or investment professionals).

8.           Competitive Protection.  Employee fully understands and realizes that the confidentiality, assignment and non-solicitation, and other terms and conditions of this Agreement shall bind and obligate Employee as described in this Agreement.

9.           Return of Materials.  All documents and other tangible objects containing or representing Confidential Information and all copies thereof which are in the possession of Employee shall be and remain the property of Company and shall be promptly returned to Company or destroyed by Employee upon the Employee’s termination and/or upon Company’s request.

10.           Severability. Each Section and the subparts of each Section herein shall be treated as separate and independent clauses, and the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses of this Agreement. Moreover, if one or more of the clauses contained in this Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable at law, such clause or clauses shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be coextensive with the maximum restrictions enforceable by the applicable law as it shall then appear. The language of all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either of the parties.

11.           Survival.  All obligations, duties, rights, remedies, express representations or other provisions required to give force and effect to this Agreement, or made in or given in this Agreement, which have accrued prior to cessation of Employee’s employment with the Company, shall survive the cessation of Employee’s employment with the Company and shall continue and remain in full force and effect in accordance with their respective terms, except where limited to the duration expressly stated therein.

12.           Binding Agreement; Entire Agreement; Assignment.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors, heirs (in the case of the Employee) and assigns of the parties hereto. This Agreement, along with the Employment Agreement between the Company and Employee expresses the entire agreement between the Company and Employee with respect to the subject matter hereof and supersedes any and all prior agreements, letters of intent and understandings between the parties, and any and all promises, statements, and representations made by either party to the other concerning the subject matter hereof and the terms applicable hereto, except for any existing confidentiality agreement between the parties. No rights or obligations of Employee under this Agreement may be assigned or transferred by Employee without the prior written consent of the Company, and any attempted assignment without such consent shall be null and void.

13.           Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Texas, without regard to the principles of conflict of laws thereof.

14.           Notices.  Any notice a party is required or may desire to give pursuant to this Agreement shall be given in writing in accordance with the requirements of Section 14 of the Employment Agreement.

15.           Waiver.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by Employee and the Company.

16.           Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.

17.           Amendments and Modifications.  This Agreement may not be amended or modified other than by an agreement in writing signed by both of the parties.

28.           Headings.  The headings of the sections of this Agreement are used for convenience only and shall not be deemed to constitute a part or to affect the meaning of this Agreement.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Non-Disclosure, Non-Solicitation and Non-Compete Agreement as of the date first written above.

EMPLOYEE	STW WATER PROCESS AND TECHNOLOGIES
_______________________________	By:______________________________
Name: Alan Murphy	CEO: Stanley T. Weiner

EX-10.48

Exhibit 10.48

STW RESOURCES HOLDING CORP

EMPLOYMENT AGREEMENT

INCORPORATED TERMS

Date of Agreement: February 1, 2015 (the “Effective Date”),

Name of Employee: Stanley T. Weiner (the “Employee”).

Employer:  STW Resources Holding Corp, located at 3424 S. County Road 1192, Midland, TX 79706 (the “Company” or “Employer”).

Employee’s Position:  Chief Executive Officer and President

Term of Employment Agreement: 3 years

Description of Position Duties:  Operate and manage the Company. Employee agrees to perform such other duties as shall be determined by the Company and communicated to Employee by and through the Board of Directors and notwithstanding any such changes, the employment of Employee shall be construed as continuing under this Agreement, as modified. This position reports directly to the Board of Directors of Company.

Compensation.  In consideration of the services to be rendered hereunder, the Company hereby agrees to pay Employee the compensation as set forth herein.  Employee stock options and stock grants will be adjusted on the same basis as all other shareholders to account for any stock split, stock dividend, combination or recapitalization.

A.   Monthly Base Salary:  The first year the Company shall pay Employee $15,000.00 per month, (effective annual salary $180,000.00), less ordinary withholding deductions. The second year the company will pay Employee $17,500.00 per month, (effective annual salary $210,000.00) less ordinary withholding deductions. The third year the company will pay Employee $17,500.00 per month, (effective annual salary $210,000.00) less ordinary withholding deductions.

B.   Salary Bonus:  Employee will receive a bonus to be paid semi-annually up to 100% of the base salary for the previous six-month period. This bonus is 100% management discretion.

RECITALS

WHEREAS, it is the desire of the Company to assure itself of the services of the Employee by engaging the Employee to perform services under and pursuant to the terms of this STW Resources Holding Corp. Employment Agreement (the “Agreement”) hereof; and

WHEREAS, the Employee desires to provide such services to the Company on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows.

AGREEMENT

Section 1.Certain Definitions.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such first Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act.

“Agreement” shall have the meaning set forth in the Preamble hereto.

“ Monthly Base Salary” shall have the meaning set forth in the Incorporated Terms and Section 3(a).

“Benefits” shall have the meaning set forth in Section 3(c).

“Board” shall mean the Board of Directors of the Company.

“Business” shall have the meaning set forth in Section 6(a).

“Cause” The Company shall have “Cause” to terminate the Employee’s employment hereunder upon:

(i) The Employee’s willful failure to substantially perform the duties set forth in this Agreement (other than any such failure resulting from the Employee’s Disability);

(ii) The Employee’s willful failure to carry out, observe, or comply with, in any material respect any lawful and reasonable directive of the Company in accordance with and commensurate with Employee’s duties, or the material policies of the Company (of which he has been made aware) not inconsistent with the terms of this Agreement;

(iii) The Employee’s conviction, plea of no contest, or imposition of unadjudicated probation for any felony or crime involving moral turpitude;

(iv) The Employee’s unauthorized or unlawful use (including being under the influence) or possession of alcohol or illegal drugs while performing the Employee’s duties and responsibilities under this Agreement;

(v) The Employee’s commission at any time of any act of fraud, embezzlement, misappropriation, dishonesty, or breach of fiduciary duty against the Company or any of its Affiliates (or any predecessor thereto or successor thereof);

(vi) Any action or failure to act constituting gross negligence or willful misconduct of the Employee in the performance of his duties hereunder; or

(vii) Any other material breach of this Agreement by the Employee, which breach is not remedied within 30 days after receipt of written notice from the Company specifying such breach, and which notice is provided not later than the 30th day following the occurrence of the event constituting such cause.

“Change of Control” shall mean any changes in control of the Company, as defined in the   Change of Control Agreement.

“Change of Control Agreement” shall mean the “Executive Officer Change of Control Termination Agreement,” executed concurrently with this Agreement, and attached to and incorporated into this Agreement, with any terms set forth in the Change of Control Agreement which are inconsistent with or differing from the terms of this Agreement, taking control and precedence over the terms of this Agreement.

“Company” shall have the meaning set forth in the Preamble hereto.

“Date of Termination” shall mean (i) if the Employee’s employment is terminated by his death, the date of his death; or (ii) if the Employee’s employment is terminated pursuant to Section 4(a)(ii)-(iv) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier.

“Disability” shall have occurred when the Employee has been incapable or unable to substantially perform his duties for the Company because of physical or mental incapacity (assuming such incapacity was not caused by any activity on the part of the Employee of the type described in clauses (iii) or (iv) under the definition of “Cause” set forth herein) for a period of at least 90 consecutive days as determined by an independent medical doctor mutually agreed-upon by the Board and Employee.

“Effective Date” shall have the meaning set forth in the Preamble hereto.

“Employee” shall have the meaning set forth in the Preamble hereto.

“Incorporated Terms” means those terms set forth at the top of page 1 of this Agreement, entitled “Incorporated Terms.”

“Intellectual Property” shall have the meaning set forth in Section 6(d).

“Notice of Termination” shall have the meaning set forth in Section 4(b).

“Person” shall mean an individual, partnership, corporation, Limited Liability Company, business trust, joint stock company, trust, unincorporated association or organization, joint venture, governmental authority or political subdivision thereof or any other entity of whatever nature.

“Proprietary Information” In addition to the specific items set forth in Section 6(a), shall mean information that is not generally known to the public or the Company’s competitors and that is used, developed or obtained by the Company in connection with its business, including (i) the Company’s products and services, (ii) accounting, financing, and business methods and practices, (iii) marketing methods for the Company’s services and products, (iv) fees, costs and pricing structures, (v) designs, (vi) analyses undertaken, (vii) drawings, photographs and reports, (viii) computer software, including operating systems, applications and program listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi) inventions, devices, new developments, methods, protocols, and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) copyrightable works, (xiii) all technology and trade secrets, (xiv) confidential terms of sales agreements, contractual relationships, employee and independent contractor agreements, and customer and supplier relationships or arrangements, and (xv) all similar and related information in whatever form.

 “Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.  For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries.

Section 2.Employment for a Term/ Duties.

(a)Generally.  The Company shall employ the Employee and the Employee shall enter the employ of the Company as an employee for an initial term of three (3) years, with the understanding that after the initial three year employment term period, if the employment for a term of years is not extended in writing, that thereafter, the Employee may be terminated at the sole discretion or “will” of the Company for any reason whatsoever.  After the initial three year employment term period, the fact that Employee’s salary is described as a “Monthly Base Salary” does not imply by Company, nor should it be inferred by Employee to alter or extend the “at will” employment relationship.  Similarly, Employee may terminate employment with the Company at the sole discretion or “will” of the Employee for any reason whatsoever.

Notwithstanding the initial term of employment of three years, should there be a Change of Control of the Company, the terms of the Change of Control Agreement shall take precedence thereafter over this Agreement.

Notwithstanding Employee’s future “at will” employment status, Employee understands and agrees that in exchange for the execution of the nondisclosure agreement set forth herein at Section 7, and non-competition and non-solicitation agreements set forth herein at Section 6, Employer unconditionally promises to give Employee substantial, valuable consideration including, without limitation:

(i) "confidential information" and "trade secrets" as defined in Section 6      a herein;

(ii) personal specialized training and materials; and

(b)           Position and Duties.

(i) Employee is being employed in Employee’s Position to perform the Duties of the Position on a full-time basis for a workweek of at least forty (40) hours.  Employee will perform other duties as may be assigned by the Company. Employee will perform other duties related to the Company’s water drilling, reclamation processing activities as may be assigned by the Company, for which Employee is compensated outside of this Agreement by way of a pre-existing “STW Resources Holding Corp. Water-related Revenue Royalty Authorization Agreement”.  Also, Employee is compensated as a Director of the Company outside of this Agreement, by a Director’s Appointment Agreement, with a current compensation of $75,000 per year.  Except upon the prior written consent of the Company, Employee will not, during the Term, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Employee's duties and responsibilities hereunder or create a conflict of interest with the Company.  During the Term, Employee shall devote substantially all of his business time and attention to the Company. Employee may pursue outside investment activities on his own during the Term of this agreement.

(ii) All agreements with Company’s clients must be entered into by an authorized Company representative, and Employee specifically is authorized or permitted to enter into any written or verbal agreements on behalf of the Company.  Employee has the authority to vary the terms of any written agreements for the Company’s products or services with the Company’s clients, nor shall Employee make any oral representations contrary to the Company’s printed contracts and marketing materials. Employee also will be subject to termination for cause, without severance, for violation of the provisions in this Section.

(iii) The Company agrees to defend and indemnify Employee against any liability that Employee incurs within the scope of his employment with the Company to fullest extent permitted by the Company's certificate of formation and bylaws and Texas’ corporation law.

(iv) The Employee’s place of employment shall be the Company’s offices located in the Midland/Odessa, Texas Metropolitan Area, or as otherwise mutually agreed between the Employee and the Company.

Section 3.Compensation and Related Matters.

(a)Monthly Base Salary.  Commencing on the “Effective Date” the Employee shall receive the monthly salary set forth in the Incorporated Terms, less ordinary payroll deductions, which salary shall be paid in accordance with the customary payroll practices of the Company, and which salary may be increased at the discretion of the Company (the “Monthly Base Salary”).

(b)Signing Bonus. The Employee shall receive 300,000 restricted common shares of STW Holding Resources Corp. and 300,000  options to purchase common shares at $0.65 per share, exercisable within three years from the effective date of this Agreement. (Option Price/Period).

(c)options to purchase common shares. (Option Price/Period)

(d)Stock Bonus. The Employee shall receive a quarterly stock grant of 50,000 (fifty thousand) shares of restricted common stock at a cost basis of $0.65 while employed by STW.

(e)Severance. After the initial three year period of employment, except for termination related to a Change in Control, should Employee be terminated by the company without case, Employee shall be entitled to a 12-month base salary as severance from the date of termination without cause.

(f)Moving Allowance.  The Employee shall receive an amount to be determined as allowance for moving expenses to be paid on an as needed basis.

(g)Vehicle or Vehicle Allowance.  The Company shall provide the Employee at Company expense with a Company owned/leased/maintained vehicle or a monthly allowance of $900 a month, along with an allowance for fuel or the use of a Company fuel credit card.  Employee’s taxable compensation shall include a reasonable allowance for non-business, personal use of the vehicle.  Upon termination of Employee’s employment for any reason, Company shall assign and deliver vehicle to Employee with a free and clear title..

(h)Miscellaneous.  During the Term of employment, the Company shall also provide Employee a cellphone for use in conducting business for or on behalf of the Company or an allowance for the Employee’s use of his or her personal cellphone for Company business. Additionally the company will provide a desktop and/or laptop (s) computers. Upon termination of Employees employment for any reason, ownership of the cellphone and computers shall be transferred to the employee.

(f)  Fair Consideration for Restrictive Covenants.  Employee understands and agrees that the Company’s agreement to pay Employee a Monthly Base Salary and to provide Employee with the Company’s Proprietary Information, constitute fair and adequate consideration for the execution of the non-disclosure agreement set forth in Section 7 below.  Employee promises, warrants and represents that the restrictive covenants in Sections 7 of this Agreement do not unreasonably limit Employee's ability to earn a living.

(g) Benefit Plan – Health Insurance, Retirement and Stock Option Plan. The Company will provide Employee with the opportunity to participate in the standard benefits plans currently available to other similarly situated employees and their dependents, for whom the costs will be covered by Employee. The Company reserves the right to cancel and/or change the benefits plans it offers to its employees at any time, subject to applicable law.

(h) Stock Options.  Employee will be entitled to receive stock options under the Parent Company’s Employee Stock Option Plan (“ESOP”) when established, as set forth in the ESOP documents. Employee shall participate in Category “B” of the ESOP plan. All options are granted and vested in accordance with the ESOP plan.

(i)  Vacation and Sick Days.  During the Employee’s employment, Employee shall be entitled to twenty (20) days paid combined vacation and sick leave annually (adjusted pro rata for any partial period) in accordance with vacation and sick leave policies applicable to employees of the Company and as determined by the Company’s Board.

(j)  Business Expenses.  During the Term, the Company shall reimburse the Employee for all reasonable travel, entertainment and other business expenses incurred by him in the performance of his duties hereunder in accordance with the Company’s expense reimbursement policy and its annual operating budget approved by the Company.  In addition, Employee will be provided with a cell phone or Company reimbursement for reasonable commercial use of Employees personal cell phone.

(I)  Interim Housing and Travel Expenses. N/A

Section 4.Termination.  The Employee’s employment hereunder may be terminated by the Company or the Employee, as applicable, only under the following circumstances:

(a)Circumstances.

(i)  Death.  The Employee’s employment hereunder shall terminate upon his death;

(ii)  Disability.  If the Employee has incurred a Disability, the Company may give the Employee written notice of its intention to terminate the Employee’s employment; provided, however, that such notice shall not be effective prior to the expiration of any short-term disability benefits pursuant to any applicable benefit plan.  In that event, the Employee’s employment shall terminate effective on the 30th day after the receipt of such notice by the Employee, provided that prior to the effective date of such termination, the Employee shall not have returned to full-time performance of his duties;

(iii) Termination for Cause.  The Company may terminate the Employee’s employment for Cause;

(iv) Termination for Change in Control.  Should Employee be terminated under circumstances constituting a Change in Control, then the Change of Control Termination Agreement shall control, in lieu of the terms of this Section 4 Termination.

(b)Notice of Termination.  Any termination of the Employee’s employment by the Company or by the Employee under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other parties hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated, and specifying a Date of Termination which, if submitted by the Employee, shall be at least 30 days following the date of such notice (a “Notice of Termination”); provided, however, that the Company may, in its sole discretion, change the Date of Termination to any date following receipt of the Notice of Termination that is within such 30 day period.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Employee receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion within a 30-day period from such notice.  The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Employee or the Company hereunder or preclude the Employee or the Company from asserting such fact or circumstance in enforcing the Employee’s or the Company’s rights hereunder.

Section 5.Company Obligations upon any Termination (including due to death or Disability).  Except as provided by Sections 6 and 7, upon termination of the Employee’s employment (including due to Employee’s death or Disability), the Employee (or the Employee’s estate) shall be entitled to receive (i) except in the event of the Employee’s Disability to the extent of Employee’s receipt of Disability benefits, any amount of the Employee’s Annual Base Salary and Commissions on Commissionable Sales Amounts through the Date of Termination not theretofore paid, (ii) any expenses owed but not yet paid to the Employee under Section 3(e) through the Date of Termination, and (iii) any amount arising from the Employee’s participation in, or benefits under any employee benefit plans, programs or arrangements under Section 3(c), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits.  In the event of the Employee’s Disability, termination, and/or death, Company shall pay Employee or Employee’s successors and/or heirs the following: two (2) million shares of Company stock at a cost basis of $.65 per share and two (2) years of base salary if the Employee cannot continue in his/her position or employment by the Company.

Section 6.Nondisclosure of Proprietary Information; Intellectual Property.

(a)           Employee understands and agrees that Employer's customer lists, customer goodwill, services, processes, techniques and products were developed at considerable effort and expense to Employer and is for Employer's sole and exclusive use. Employee understands and agrees that if said trade secrets or confidential information were used by Employer's competitors, it would give them an unfair business advantage and otherwise cause Employer substantial and irreparable harm.  Employee agrees that Employer's Proprietary Information and Intellectual Property include, but are not limited to, the following:

(i) the identity of Company's customers and customer prospects;

(ii) customer profiles and the special needs of Company's customers;

(iii) customer goodwill;

(iv) customer databases;

(v) employee profiles, including terms of their employment;

(vi) vendor profiles, including terms of their service;

(vii) market studies and strategies;

(viii) marketing presentation database;

(ix) pricing studies, information, and analyses;

(x)  competitor information generated by the Company;

(xi) business projections;

(xii) accounting and financial information;

(xiii) Company transfer pricing information among its related companies;

(xiv) Company’s corporate structural information;

(xv) Project Information Forms;

(xvi) credit assignment lists;

(xvii) special, confidential and proprietary business methods, processes, procedures,and services of the Company;

(xviii) employee manuals;

(xix) Company's contracts and fee arrangements;

(xx) Confidential project communications, documents, files and databases;

(xxi) correspondence and/or communications with customers and prospective

 customers;

(xxii) Company's reference materials; and

(xxiii) the specialized personal training and materials referenced in Section 2(a)(ii)of this Agreement.

(b)           Except as required in the faithful performance of the Employee’s duties hereunder or pursuant to following Section 6(c), the Employee shall, during the Term of Employee’s employment and for a period of three (3) years after the Date of Termination of Employee’s employment, maintain in confidence and shall not directly or indirectly, disseminate, disclose or publish, or use the benefit of any other Person any Proprietary Information of or relating to the Company, or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information.  The Employee’s obligation to maintain and not disseminate, disclose or publish, or use for the benefit of any Person, any Proprietary Information after the Date of Termination will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and available for use in the public domain (other than by means of the Employee’s direct or indirect disclosure of such Proprietary Information) and is continued to be maintained as Proprietary Information by the Company, and Employee shall take all appropriate steps to safeguard Proprietary Information and to protect it against disclosure, misuse, espionage, loss and theft.  The Employee acknowledges that the Proprietary Information obtained by him during the course of his employment hereunder is the property of the Company.  The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee thereof).

( c )           Upon termination of the Employee’s employment hereunder for any reason, the Employee will, upon request by the Company, promptly deliver to the Company all copies or embodiments of Proprietary Information or Intellectual Property (as hereinafter defined), in whatever form, in his possession or control, including correspondence, drawings, manuals, letters, written materials, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning clients, business plans, marketing strategies, products or processes of the Company, irrespective of location or form.  Notwithstanding the foregoing, the Employee may retain documents relating to his personal compensation and entitlements, provided that such documents are retained solely for personal use and are not disclosed to anyone other than the Employee.

(d)           Notwithstanding Sections 6(a) – (c), the Employee may respond to a lawful and valid subpoena or other legal process with respect to the disclosure of any Proprietary Information, but shall give the Company the earliest possible notice thereof and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process; and shall cooperate with the Company and its counsel in attempting to obtain a protective order or to otherwise restrict such disclosure.

(e)           The restrictions set forth in Sections 6(a)-(c) are enforceable, separate and apart from the remaining employment terms of this Agreement, and shall be enforceable by Company following the Employee's termination of employment, whether or not the Employer has or is alleged to have breached any of its material obligations to the Employee hereunder outside of the terms set forth in Section 7 of this Agreement,

(e)           Inventions and “Work for Hire.  In the event that Employee as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Proprietary Information), any copyrightable work (whether or not comprising Proprietary Information) or any other form of Proprietary Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “Intellectual Property”), Employee acknowledges that such Intellectual Property is the exclusive property of the Company but Employee retains the right to utilize the Intellectual Property if his employment is terminated for any reason. Any copyrightable work prepared in whole or in part by Employee will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised in the copyright therein.  Employee shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by any of the Company, whether such requests occur prior to or after termination of Employee’s employment).

Section 7.Non-Disparagement.  The Employee and the Company agree that, during and following the Termination of Employment, Employee or it will not (and the Company agrees to instruct the members of its Board not to) disparage or denigrate, whether orally or in writing, to any Person any aspect of his or its past or then current relationship with the other, nor the character of the other or that of the other’s directors, officers, equity holders, Affiliates, partners, agents, representatives, business, or operating methods, whether past, present, or future.

Section 8.Remedies; Injunctive Relief.  It is recognized and acknowledged by the Employee that a breach of the covenants contained in Sections 6 and 7 will cause irreparable damage to the Company and the goodwill of the Company, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Employee agrees that in the event of a breach of any of the covenants contained in Sections 6 and 7, in addition to any other remedy, which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

Section 9.Insider Trading.  Employee recognizes that the Parent Company is a publicly traded company (currently OTCQB:”STWS”), and that due to Employee’s managerial position and ownership of Parent Company’s stock, Employee could be deemed an “insider” for purposes of “insider trading” restrictions imposed by the United States Securities and Exchange Act.  Accordingly, Employee has been provided with a copy of the Parent Company’s current written Insider Trading Policy, attached as Exhibit “A” to this Agreement, for which Employer understands and agrees he is subject to its requirement and shall sign and return a copy of the Insider Trading Policy to the Company as a pre-condition to entering into the employment of Company.

Section 10.Assignment; Successors; Third Parties.  The Company may assign its rights and obligations under this Agreement to any Person that acquires, directly or indirectly, all or substantially all of its equity interests or assets, regardless of the form of such transaction.  The Employee may not assign his rights or obligations under this Agreement to any Person.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  This Agreement shall not confer any rights or remedies upon any Person other than the parties hereto except as otherwise specifically provided herein. Any payments subject to the terms of Section 5 shall be paid to Employee’s Successors and/or Heirs. This Agreement shall survive any sale of the Company or change in the control of the Company.

Section 11.Indemnification and Insurance; Legal Expenses.  During the Term and so long as the Employee has not breached any of his obligations set forth in Sections 6and 7, the Company shall indemnify the Employee to the full extent permitted by law and, during the Term, the Employee shall be entitled to the protection of any insurance policies the Company shall elect to maintain generally for the benefit of its employees (Errors and Omissions Insurance and Comprehensive General Liability Coverage) against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been an employee of the Company or his serving or having served any other enterprise as an employee at the request of the Company (other than any dispute, claim or controversy arising under or relating to this Agreement).  The rights of indemnification granted pursuant to this Section 12 shall inure to the benefit of the Employee’s heirs and legal representatives.

a.           Employee Indemnification of Company.  Regarding the Company’s Business, as defined in foregoing Section 6(a), Employee affirmatively represents and warrants to Company that by entering into this Agreement and by working for Company, Employee is not in violation on any pre-existing, unexpired, and/or unreleased covenants not to compete or confidentiality agreements with any other person or entity. Should Employee be in breach of this representation and warranty and the Company has not otherwise waived such breach or otherwise agreed to assume such legal risk, Employee agrees to indemnify, defend, and hold harmless Company for any claims and causes of action brought against it by parties seeking to enforce such outside noncompetition or confidentiality agreements.

Section 12.Governing Law; Venue.  (a)  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the state of Texas, without reference to the principles of conflicts of law of Texas or any other jurisdiction, and where applicable, the laws of the United States.

(b)  Each party hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Texas state courts situated in Midland County, Texas and any appellate court from any such court, in any suit, action, or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment resulting from any such suit, action, or proceeding, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action, or proceeding shall be heard and determined only in state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division).

(c)  It shall be a condition precedent to each party’s right to bring any suit, action, or proceeding arising out of or relating to this Agreement that such suit, action, or proceeding, in the first instance, be brought in a state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division) (unless such suit, action, or proceeding is brought solely to obtain discovery or to enforce a judgment), and if each of the state courts in the State of Texas and such federal court refuses to accept jurisdiction with respect thereto, such suit, action, or proceeding may be brought in any other court with jurisdiction.  No party may move to (i) transfer any such suit, action, or proceeding from a state court in the State of Texas or such federal court to another jurisdiction, (ii) consolidate any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court with a suit, action, or proceeding in another jurisdiction, or (iii) dismiss any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court for the purpose of bringing the same in another jurisdiction.

(d)  Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, (i) any objection that it may now or hereafter have to the laying of venue of any suit, action, or proceeding arising out of or relating to this Agreement in a Midland County, Texas state court or the U.S. District Court for the Western District of Texas (Midland Division), (ii) the defense of an inconvenient forum to the maintenance of such suit, action, or proceeding in any such court, and (iii) the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party.  Nothing in this Section 14 shall affect the right of any party to serve process in any other manner permitted by law.

Section 13.Notices.  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telecopy, reputable overnight courier service, facsimile, or certified or registered mail, postage prepaid to the addresses noted on the Incorporated Terms Section of this Agreement, or such other addresses or to the attention of such other Person as the recipient party will have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered, faxed, or sent or, if mailed, five days after deposit in the U.S. mail.

Section 14.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

Section 15.Entire Agreement.  The terms of this Agreement and the other agreements and instruments contemplated hereby or referred to herein (collectively the “Related Agreements”) are intended by the parties to be the final expression of their agreement with respect to the employment of the Employee, and supersede any prior understandings or agreements, written or oral, and may not be contradicted by evidence of any prior or contemporaneous agreement (including without limitation any term sheet or similar agreement entered into by and among the parties hereto or any other parties with respect to the subject matter hereof).  The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.

Section 16.Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Employee and an officer of the Company duly authorized by the Board, which instrument expressly identifies the amended provision of this Agreement.  By an instrument in writing similarly executed and similarly identifying the waived compliance, the Employee or a duly authorized officer of the other parties hereto may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

Section 17.No Inconsistent Actions.  The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

Section 18.Construction.  This Agreement shall be deemed drafted equally by all the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (c) ”includes” and “including” or words of similar import shall be deemed to be followed in each instance by the phrase “without limitation”; (d) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (e) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Persons referred to may require.  Accounting terms that are not otherwise defined in this Agreement shall have the meanings given to them under GAAP, applied on a basis consistent with those applied by the Company (only to the extent such principles and applications are consistent with GAAP).  To the extent that the definition of an accounting term that is defined in this Agreement is inconsistent with the meaning of such term under GAAP, the definition set forth in this Agreement will control.

Section 19.Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable.  This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

Section 20.Withholding; Tax Statement Matters.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

Section 409A.  It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, any future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject Employee to payment of interest or any additional tax under Section 409A.  The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly.  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  In addition, to the extent that any Internal Revenue Service guidance issued under Section 409A would result in Employee being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by the Company and Employee.

A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

Section 21.Employee Acknowledgement.  The Employee acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

Section 22.Designation of Beneficiaries.  The Employee shall be entitled to elect beneficiaries with respect to any applicable benefits or payments provided or referenced hereunder pursuant to the beneficiary designation form for the applicable company and customarily applicable to any such benefits or payments.

Employee’s Representations.  The Employee hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he is bound; (b) Employee is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other Person; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

STW RESOURCES HOLDING CORP

By:                                                                

Name: Manfred E. Birnbaum

Title: Director and                                   Member of Compensation Committee

EMPLOYEE

Stanley T. Weiner

Addendum to Employment Agreement

Executive Officer Change of Control Termination Agreement

This Executive Officer Change of Control Termination Agreement (the “Agreement”) is entered into as of February 01, 2015 by and between STW Resources Holding Corp., a Nevada corporation (the “Corporation”) and its Executive Officer (Chief Executive Officer and President) Stanley T. Weiner  (“Executive Officer”), as an Addendum to Section 2 and 4 of the Employment Agreement of February 01, 2015 between the Corporation and Executive Officer (the “Employment Agreement”).

Recitals

A.           The Corporation considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

B.           The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation.

C.           In order to induce you to remain in the employ of the Corporation and in consideration of your agreement set forth below, the Corporation agrees that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Corporation is terminated subsequent to a “change in control of the Corporation” (as defined in Section 2 below) under the circumstances described below. This Agreement is meant to supersede any other specific written agreements which may have been entered into between yourself and the Corporation concerning termination of employment, including, but not limited to any termination or severance provisions of the Employment Agreement.

Therefore, in consideration of your continued employment and the parties agreement to be bound by the terms contained in this Agreement, the parties agree as follows:

1.           Term of Agreement. This Agreement shall commence on this date and shall continue in effect through December 31, 2017; provided, however, that commencing on December 31, 2015 and each December 31 afterwards, the term of this Agreement shall automatically be extended for one additional year unless, no later than the preceding November 1, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, if a change in control of the Corporation shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of 12 months beyond the month in which such change in control occurred.

Notwithstanding the foregoing, and provided no change of control shall have occurred prior to an event of termination (other than change of control) under the Employment Agreement, this Agreement shall automatically terminate upon the earlier to occur of (i) your termination of employment with the Corporation under the Employment Agreement, or (ii) the Corporation’s furnishing you with notice of termination for “cause” under the Employment Agreement, irrespective of the effective date of such termination.

2.           Change in Control. No benefits shall be payable under this Agreement unless there shall have been a change in control of the Corporation, as set forth below. For purposes of this Agreement, a “change in control of the Corporation” shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Corporation is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if:

A.           Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation’s then outstanding securities; or

B.           During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (D) of this Section) whose election by the Board or nomination for election by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority; or

C.           The Corporation enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Corporation; or

D.           The stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 30% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation’s assets.

3.           Termination Following Change in Control. If any of the events described in Section 2 above constituting a change in control of the Corporation shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) below upon the subsequent termination of your employment during the term of this Agreement.

A.           You shall not be entitled to the benefits provided in Subsection 4(A) – (C) below upon the subsequent termination of your employment during the term of this Agreement if your termination is for the following:

(1)           Because of your death, Disability or Retirement;

(2) By the Corporation for Cause; or

(3) By you other than for Good Reason.

B.           The following definitions apply to this Section 3:

(1)           Disability; Retirement. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six consecutive months, and within 30 days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for “Disability.” Termination by the Corporation or you of your employment based on “Retirement” shall mean termination in accordance with the Corporation’s retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you.

(2)           Cause. Termination by the Corporation of your employment for “Cause” shall mean termination upon:

(A)           The willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance by you of a Notice of Termination for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or

(B)           The willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation.

(C)            Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars in detail.

(3)           Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraph (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections (2)(A) and (B), respectively, given in respect of them:

(A)           The assignment to you of any duties inconsistent with your status and position as it exists immediately prior to the change in control of the Corporation or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Corporation;

(B)           A reduction by the Corporation in your annual base salary as in effect on this date or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all key employees of the Corporation and all key employees of any person in control of the Corporation;

(C)           Your relocation to a location not within 25 miles of your present office or job location, except for required travel on the Corporation’s business to an extent substantially consistent with your present business travel obligations;

(D)           The failure by the Corporation, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation, within seven days of the date such compensation is due;

(E)           The failure by the Corporation to continue in effect any bonus to which you were entitled, or any compensation plan in which you participate immediately prior to the change in control of the Corporation which is material to your total compensation, including but not limited to the Corporation’s Stock Option Plans, 401(k) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or any substitute plans adopted prior to the change of control in the Corporation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation in it (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control;

(F)           the failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporation’s life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control of the Corporation, the failure to continue to provide you with a Corporation automobile or allowance in lieu of it, if you were provided with such an automobile or allowance in lieu of it at the time of the change of control of the corporation, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Corporation, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation’s normal vacation policy in effect at the time of the change in control of the Corporation;

(G)           The failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 of this Agreement; or

(H)           Any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (4) below (and, if applicable, the requirements of Subsection (2) above); for purposes of this Agreement, no such purported termination shall be effective.

Your rights to terminate your employment pursuant to this Subsection 3 (A)-(F) shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason under this Agreement. In the event you deliver Notice of Termination based upon circumstances set forth in Paragraph (A), (E), (F), (G) or (H) above, which are fully corrected prior to the Date of Termination set forth in your Notice of Termination, such Notice of Termination shall be deemed withdrawn and of no further force or effect.

(4)           Notice of Termination. Any purported termination of your employment by the Corporation or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 of this Agreement. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

(5)           Date of Termination, Etc. “Date of Termination” shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period), and (B) if your employment is terminated pursuant to Subsection 3A(2) or (3) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection 3A(2) above shall not be less than 30 days, and in the case of a termination pursuant to Subsection 3A(3) above shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given); provided that if within 15 days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement except to the extent otherwise provided in subsection 4D.

4.           Compensation Upon Termination or During Disability. Following a change in control of the Corporation, as defined by Section 2, upon termination of your employment or during a period of disability you shall be entitled to the following benefits:

A.           During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all amounts payable to you under any compensation plan of the Corporation during such period, until this Agreement is terminated pursuant to Section 3 above. Thereafter, or in the event your employment shall be terminated by the Corporation or by you for Retirement, or by reason of your death, your benefits shall be determined under the Corporation’s retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs.

B.           If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, Disability, death or Retirement, the Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.

C.           If your employment by the Corporation shall be terminated (i) by the Corporation other than for Cause, Retirement or Disability or (ii) by you for Good Reason, then you shall be entitled to the benefits provided below:

(1)           The Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation, at the time such payments are due, except as otherwise provided below.

(2)           In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs C and D, below, the “Severance Payments”) equal to two times the sum of your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect of them, plus 2,000,000 shares of the Corporation’s common stock (as adjusted for any subsequent stock splits or recapitalization of the shares).

(3)           The Corporation shall pay to you any deferred compensation, including, but not limited to deferred bonuses, allocated or credited to you or your account as of the Date of Termination.

(4)           In lieu of shares of common stock of the Corporation (the “Corporation’s Shares”) issuable upon exercise of outstanding options (“Options”), if any, granted to you under the Corporation’s Stock Option Plans (which Options shall be cancelled upon the making of the payment referred to below) you shall receive an amount in cash equal to the product of (i) the excess of the closing price of the Corporation’s Shares as reported on the NASDAQ-NMS Automatic Quotation System on or nearest the Date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the Date of Termination), over the per share exercise price of each Option held by you (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Corporation’s Shares covered by each such Option.

(5)           The Corporation shall also pay to you all legal fees and expenses incurred by you as a result of such termination including all such fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) to any payment or benefit provided under this Agreement)).

(6)           The payments provided for in subparagraphs (B), (C), and (D) above, shall be made no later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount can be determined but in no event later than the 30th day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

D.           In the event that you are a “disqualified individual” within the meaning of Section 280G of the Code, the parties expressly agree that the payments described in this Section 4 and all other payments to you under any other agreements or arrangements with any persons which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively subject to an overall maximum limit. Such maximum limit shall be $1 less than the aggregate amount which would otherwise cause any such payments to be considered a “parachute payment” within the meaning of Section 280G of the Code, as determined by the Corporation. Accordingly, to the extent that such payments would be considered a “parachute payment” with respect to you, then the portions of such payments shall be reduced or eliminated in the following order until the remaining change of control termination payments with respect to you is within the maximum described in this subsection (iv):

(1)           First, any cash payment to you;

(2)           Second, any change of control termination payments not described herein; and

(3)           Third, any forgiveness of indebtedness of yours to the Corporation.

You expressly and irrevocably waive any and all rights to receive any change of control termination payments, which exceed the maximum limit described in this subsection D.

E.           You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise except as specifically provided in this Section 4.

F.           In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under the Corporation’s 401(k) Pre-Tax Retirement Savings Plan and any other plan or agreement relating to retirement benefits.

6.           Successors; Binding Agreement.

A.           The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled to under this Agreement if you terminate your employment for Good Reason following a change in control of the Corporation, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Corporation” shall mean the Corporation as defined above and any successor to its business and/or assets as which assumes and agrees to perform this Agreement by operation of law, or otherwise.

B.           This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, heirs, distributees, and legatees. If you should die while any amount would still be payable to you if you had continued to live, all such amounts, unless otherwise provided in this Agreement, shall be paid in accordance with the terms of this Agreement to your legatee or other designee or, if there is no such designee, to your estate.

6.           Notice. For the purpose of this Agreement, all notices and other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the signature page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance with this Agreement, except that notice of change of address shall be effective only upon receipt.

7.           No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party to this Agreement at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for shall be paid net of any applicable withholding or deduction required under federal, state or local law. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement.

8.           Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

9.           Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

10.           Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in the State of Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

11.           Entire Agreement. This Agreement sets forth the entire understanding of the parties with respect to its subject matter and supersedes all prior written or oral agreements or understandings with respect to such subject matter.

If this letter sets forth our agreement on its subject matter, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

STW RESOURCES HOLDING CORP.

X______________________________________

By:           Manfred E. Birnbaum, Director and Member of Compensation Committee

Agreed to effective February 01, 2015

X ___________________________

Stanley T. Weiner

EX-10.49

Exhibit 10.49

STW RESOURCES HOLDING CORP

EMPLOYMENT AGREEMENT

INCORPORATED TERMS

Date of Agreement: February 1, 2015 (the “Effective Date”),

Name of Employee: Paul C. DiFrancesco (the “Employee”).

Employer:  STW Resources Holding Corp, located at 3424 S. County Road 1192, Midland, TX 79706 (the “Company” or “Employer”).

Employee’s Position:  Head of Finance

Term of Employment Agreement: 3 years

Description of Position Duties:  Capital structure and introduction for all facets of the Company’s business.  Business consultation CEO and other members of management of the Company.  Employee agrees to perform such other duties as shall be determined by the Company and communicated to Employee by and through the Board of Directors and notwithstanding any such changes, the employment of Employee shall be construed as continuing under this Agreement, as modified. This position reports directly to the Board of Directors of Company.

Compensation.  In consideration of the services to be rendered hereunder, the Company hereby agrees to pay Employee the compensation as set forth herein.  Employee stock options and stock grants will be adjusted on the same basis as all other shareholders to account for any stock split, stock dividend, combination or recapitalization.

A.   Monthly Base Salary:  The first year the Company shall pay Employee $12,000.00 per month, (effective annual salary $144,000.00), less ordinary withholding deductions. The second year the company will pay Employee $16,000.00 per month, (effective annual salary $192,000.00) less ordinary withholding deductions. The third year the company will pay Employee $16,000.00 per month, (effective annual salary $192,000.00) less ordinary withholding deductions.

B.   Salary Bonus:  Employee will receive a bonus to be paid semi-annually up to 100% of the base salary for the previous six-month period. This bonus is 100% management discretion.

RECITALS

WHEREAS, it is the desire of the Company to assure itself of the services of the Employee by engaging the Employee to perform services under and pursuant to the terms of this STW Resources Holding Corp. Employment Agreement (the “Agreement”) hereof; and

WHEREAS, the Employee desires to provide such services to the Company on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows.

AGREEMENT

Section 1.Certain Definitions.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such first Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act.

“Agreement” shall have the meaning set forth in the Preamble hereto.

“ Monthly Base Salary” shall have the meaning set forth in the Incorporated Terms and Section 3(a).

“Benefits” shall have the meaning set forth in Section 3(c).

“Board” shall mean the Board of Directors of the Company.

“Business” shall have the meaning set forth in Section 6(a).

“Cause” The Company shall have “Cause” to terminate the Employee’s employment hereunder upon:

(i) The Employee’s willful failure to substantially perform the duties set forth in this Agreement (other than any such failure resulting from the Employee’s Disability);

(ii) The Employee’s willful failure to carry out, observe, or comply with, in any material respect any lawful and reasonable directive of the Company in accordance with and commensurate with Employee’s duties, or the material policies of the Company (of which he has been made aware) not inconsistent with the terms of this Agreement;

(iii) The Employee’s conviction, plea of no contest, or imposition of unadjudicated probation for any felony or crime involving moral turpitude;

(iv) The Employee’s unauthorized or unlawful use (including being under the influence) or possession of alcohol or illegal drugs while performing the Employee’s duties and responsibilities under this Agreement;

(v) The Employee’s commission at any time of any act of fraud, embezzlement, misappropriation, dishonesty, or breach of fiduciary duty against the Company or any of its Affiliates (or any predecessor thereto or successor thereof);

(vi) Any action or failure to act constituting gross negligence or willful misconduct of the Employee in the performance of his duties hereunder; or

(vii) Any other material breach of this Agreement by the Employee, which breach is not remedied within 30 days after receipt of written notice from the Company specifying such breach, and which notice is provided not later than the 30th day following the occurrence of the event constituting such cause.

“Change of Control” shall mean any changes in control of the Company, as defined in the   Change of Control Agreement.

“Change of Control Agreement” shall mean the “Executive Officer Change of Control Termination Agreement,” executed concurrently with this Agreement, and attached to and incorporated into this Agreement, with any terms set forth in the Change of Control Agreement which are inconsistent with or differing from the terms of this Agreement, taking control and precedence over the terms of this Agreement.

“Company” shall have the meaning set forth in the Preamble hereto.

“Date of Termination” shall mean (i) if the Employee’s employment is terminated by his death, the date of his death; or (ii) if the Employee’s employment is terminated pursuant to Section 4(a)(ii)-(iv) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier.

“Disability” shall have occurred when the Employee has been incapable or unable to substantially perform his duties for the Company because of physical or mental incapacity (assuming such incapacity was not caused by any activity on the part of the Employee of the type described in clauses (iii) or (iv) under the definition of “Cause” set forth herein) for a period of at least 90 consecutive days as determined by an independent medical doctor mutually agreed-upon by the Board and Employee.

“Effective Date” shall have the meaning set forth in the Preamble hereto.

“Employee” shall have the meaning set forth in the Preamble hereto.

“Incorporated Terms” means those terms set forth at the top of page 1 of this Agreement, entitled “Incorporated Terms.”

“Intellectual Property” shall have the meaning set forth in Section 6(d).

“Notice of Termination” shall have the meaning set forth in Section 4(b).

“Person” shall mean an individual, partnership, corporation, Limited Liability Company, business trust, joint stock company, trust, unincorporated association or organization, joint venture, governmental authority or political subdivision thereof or any other entity of whatever nature.

“Proprietary Information” In addition to the specific items set forth in Section 6(a), shall mean information that is not generally known to the public or the Company’s competitors and that is used, developed or obtained by the Company in connection with its business, including (i) the Company’s products and services, (ii) accounting, financing, and business methods and practices, (iii) marketing methods for the Company’s services and products, (iv) fees, costs and pricing structures, (v) designs, (vi) analyses undertaken, (vii) drawings, photographs and reports, (viii) computer software, including operating systems, applications and program listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi) inventions, devices, new developments, methods, protocols, and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) copyrightable works, (xiii) all technology and trade secrets, (xiv) confidential terms of sales agreements, contractual relationships, employee and independent contractor agreements, and customer and supplier relationships or arrangements, and (xv) all similar and related information in whatever form.

"Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.  For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries.

Section 2.Employment for a Term/ Duties.

(a)Generally.  The Company shall employ the Employee and the Employee shall enter the employ of the Company as an employee for an initial term of three (3) years, with the understanding that after the initial three year employment term period, if the employment for a term of years is not extended in writing, that thereafter, the Employee may be terminated at the sole discretion or “will” of the Company for any reason whatsoever.  After the initial three year employment term period, the fact that Employee’s salary is described as a “Monthly Base Salary” does not imply by Company, nor should it be inferred by Employee to alter or extend the “at will” employment relationship.  Similarly, Employee may terminate employment with the Company at the sole discretion or “will” of the Employee for any reason whatsoever.

Notwithstanding the initial term of employment of three years, should there be a Change of Control of the Company, the terms of the Change of Control Agreement shall take precedence thereafter over this Agreement.

Notwithstanding Employee’s future “at will” employment status, Employee understands and agrees that in exchange for the execution of the nondisclosure agreement set forth herein at Section 7, and non-competition and non-solicitation agreements set forth herein at Section 6, Employer unconditionally promises to give Employee substantial, valuable consideration including, without limitation:

(i) "confidential information" and "trade secrets" as defined in Section 6a herein;

(ii) personal specialized training and materials; and

(b)           Position and Duties.

(i) Employee is being employed in Employee’s Position to perform the Duties of the Position on a full-time basis for a workweek of at least forty (40) hours.  Employee will perform other duties as may be assigned by the Company.  Employee will perform other duties related to the Company’s water drilling, reclamation processing activities as may be assigned by the Company, for which Employee is compensated outside of this Agreement by way of a pre-existing “STW Resources Holding Corp. Water-related Revenue Royalty Authorization Agreement”.  Also, Employee is compensated as a Director of the Company outside of this Agreement, by a Director’s Appointment Agreement, with a current compensation of $75,000 per year. Except upon the prior written consent of the Company, Employee will not, during the Term, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Employee's duties and responsibilities hereunder or create a conflict of interest with the Company.  During the Term, Employee shall devote substantially all of his business time and attention to the Company. Employee may pursue outside investment activities on his own during the Term of this agreement.

(ii) All agreements with Company’s clients must be entered into by an authorized Company representative, and Employee specifically is authorized or permitted to enter into any written or verbal agreements on behalf of the Company.  Employee has the authority to vary the terms of any written agreements for the Company’s products or services with the Company’s clients, nor shall Employee make any oral representations contrary to the Company’s printed contracts and marketing materials. Employee also will be subject to termination for cause, without severance, for violation of the provisions in this Section.

(iii)  The Company agrees to defend and indemnify Employee against any liability that Employee incurs within the scope of his employment with the Company to fullest extent permitted by the Company's certificate of formation and bylaws and Texas’ corporation law.

(iv) The Employee’s place of employment shall be the Company’s offices located in the Midland/Odessa, Texas Metropolitan Area, or as otherwise mutually agreed between the Employee and the Company.

Section 3.Compensation and Related Matters.

(a)Monthly Base Salary.  Commencing on the “Effective Date” the Employee shall receive the monthly salary set forth in the Incorporated Terms, less ordinary payroll deductions, which salary shall be paid in accordance with the customary payroll practices of the Company, and which salary may be increased at the discretion of the Company (the “Monthly Base Salary”).

(b)Signing Bonus. The Employee shall receive 300,000 restricted common shares of STW and 300,000 options to purchase common shares at $0.65 per share, exercisable within three years from the effective date of this Agreement. (Option Price/Period).

(c)Stock Bonus. The Employee shall receive a quarterly stock grant of 50,000 (fifty thousand) shares of the Company’s restricted common stock at a cost basis of $0.65 while employed by STW.

(d)Severance. After the initial three year period of employment, except for termination related to a Change in Control, should Employee be terminated by the company without case, Employee shall be entitled to a 12-month base salary as severance from the date of termination without cause.

(e)Moving Allowance.  The Employee shall receive an amount to be determined as allowance for moving expenses to be paid on an as needed basis.

(f)Vehicle or Vehicle Allowance.  The Company shall provide the Employee at Company expense with a Company owned/leased/maintained vehicle or a monthly allowance of $900 a month, along with an allowance for fuel or the use of a Company fuel credit card.  Employee’s taxable compensation shall include a reasonable allowance for non-business, personal use of the vehicle.  Upon termination of Employee’s employment for any reason, Company shall assign and deliver vehicle to Employee with a free and clear title..

(g)Miscellaneous.  During the Term of employment, the Company shall also provide Employee a cellphone for use in conducting business for or on behalf of the Company or an allowance for the Employee’s use of his or her personal cellphone for Company business. Additionally the company will provide a desktop and/or laptop (s) computers. Upon termination of Employees employment for any reason, ownership of the cellphone and computers shall be transferred to the employee.

(f)           Fair Consideration for Restrictive Covenants.  Employee understands and agrees that the Company’s agreement to pay Employee a Monthly Base Salary and to provide Employee with the Company’s Proprietary Information, constitute fair and adequate consideration for the execution of the non-disclosure agreement set forth in Section 7 below.  Employee promises, warrants and represents that the restrictive covenants in Sections 7 of this Agreement do not unreasonably limit Employee's ability to earn a living.

(g)           Benefit Plan – Health Insurance, Retirement and Stock Option Plan. The Company will provide Employee with the opportunity to participate in the standard benefits plans currently available to other similarly situated employees and their dependents, for whom the costs will be covered by Employee. The Company reserves the right to cancel and/or change the benefits plans it offers to its employees at any time, subject to applicable law.

(h)          Stock Options.  Employee will be entitled to receive stock options under the Parent Company’s Employee Stock Option Plan (“ESOP”) when established, as set forth in the ESOP documents. Employee shall participate in Category “B” of the ESOP plan. All options are granted and vested in accordance with the ESOP plan.

(i)           Vacation and Sick Days.  During the Employee’s employment, Employee shall be entitled to twenty (20) days paid combined vacation and sick leave annually (adjusted pro rata for any partial period) in accordance with vacation and sick leave policies applicable to employees of the Company and as determined by the Company’s Board.

(j)           Business Expenses.  During the Term, the Company shall reimburse the Employee for all reasonable travel, entertainment and other business expenses incurred by him in the performance of his duties hereunder in accordance with the Company’s expense reimbursement policy and its annual operating budget approved by the Company.  In addition, Employee will be provided with a cell phone or Company reimbursement for reasonable commercial use of Employees personal cell phone.

(I)           Interim Housing and Travel Expenses. N/A

Section 4.Termination.  The Employee’s employment hereunder may be terminated by the Company or the Employee, as applicable, only under the following circumstances:

(a)Circumstances.

(i) Death.  The Employee’s employment hereunder shall terminate upon his death;

(ii) Disability.  If the Employee has incurred a Disability, the Company may give the Employee written notice of its intention to terminate the Employee’s employment; provided, however, that such notice shall not be effective prior to the expiration of any short-term disability benefits pursuant to any applicable benefit plan.  In that event, the Employee’s employment shall terminate effective on the 30th day after the receipt of such notice by the Employee, provided that prior to the effective date of such termination, the Employee shall not have returned to full-time performance of his duties;

(iii) Termination for Cause.  The Company may terminate the Employee’s employment for Cause;

(iv) Termination for Change in Control.  Should Employee be terminated under circumstances constituting a Change in Control, then the Change of Control Termination Agreement shall control, in lieu of the terms of this Section 4 Termination.

(b)Notice of Termination.  Any termination of the Employee’s employment by the Company or by the Employee under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other parties hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated, and specifying a Date of Termination which, if submitted by the Employee, shall be at least 30 days following the date of such notice (a “Notice of Termination”); provided, however, that the Company may, in its sole discretion, change the Date of Termination to any date following receipt of the Notice of Termination that is within such 30 day period.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Employee receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion within a 30-day period from such notice.  The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Employee or the Company hereunder or preclude the Employee or the Company from asserting such fact or circumstance in enforcing the Employee’s or the Company’s rights hereunder.

Section 5.Company Obligations upon any Termination (including due to death or Disability).  Except as provided by Sections 6 and 7, upon termination of the Employee’s employment (including due to Employee’s death or Disability), the Employee (or the Employee’s estate) shall be entitled to receive (i) except in the event of the Employee’s Disability to the extent of Employee’s receipt of Disability benefits, any amount of the Employee’s Annual Base Salary and Commissions on Commissionable Sales Amounts through the Date of Termination not theretofore paid, (ii) any expenses owed but not yet paid to the Employee under Section 3(e) through the Date of Termination, and (iii) any amount arising from the Employee’s participation in, or benefits under any employee benefit plans, programs or arrangements under Section 3(c), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits.  In the event of the Employee’s Disability, termination, and/or death, Company shall pay Employee or Employee’s successors and/or heirs the following: two (2) million shares of Company stock at a cost basis of $.65 per share and two (2) years of base salary if the Employee cannot continue in his/her position or employment by the Company.

Section 6.Nondisclosure of Proprietary Information; Intellectual Property.

(a)           Employee understands and agrees that Employer's customer lists, customer goodwill, services, processes, techniques and products were developed at considerable effort and expense to Employer and is for Employer's sole and exclusive use. Employee understands and agrees that if said trade secrets or confidential information were used by Employer's competitors, it would give them an unfair business advantage and otherwise cause Employer substantial and irreparable harm.  Employee agrees that Employer's Proprietary Information and Intellectual Property include, but are not limited to, the following:

(i) the identity of Company's customers and customer prospects;

(ii) customer profiles and the special needs of Company's customers;

(iii) customer goodwill;

(iv) customer databases;

(v) employee profiles, including terms of their employment;

(vi) vendor profiles, including terms of their service;

(vii) market studies and strategies;

(viii) marketing presentation database;

(ix) pricing studies, information, and analyses;

(x)  competitor information generated by the Company;

(xi) business projections;

(xii) accounting and financial information;

(xiii) Company transfer pricing information among its related companies;

(xiv) Company’s corporate structural information;

(xv) Project Information Forms;

(xvi) credit assignment lists;

(xvii) special, confidential and proprietary business methods, processes, procedures,and services of the Company;

(xviii) employee manuals;

(xix) Company's contracts and fee arrangements;

(xx) Confidential project communications, documents, files and databases;

(xxi) correspondence and/or communications with customers and prospective

 customers;

(xxii) Company's reference materials; and

(xxiii) the specialized personal training and materials referenced in Section 2(a)(ii)of this Agreement.

(b)           Except as required in the faithful performance of the Employee’s duties hereunder or pursuant to following Section 6(c), the Employee shall, during the Term of Employee’s employment and for a period of three (3) years after the Date of Termination of Employee’s employment, maintain in confidence and shall not directly or indirectly, disseminate, disclose or publish, or use the benefit of any other Person any Proprietary Information of or relating to the Company, or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information.  The Employee’s obligation to maintain and not disseminate, disclose or publish, or use for the benefit of any Person, any Proprietary Information after the Date of Termination will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and available for use in the public domain (other than by means of the Employee’s direct or indirect disclosure of such Proprietary Information) and is continued to be maintained as Proprietary Information by the Company, and Employee shall take all appropriate steps to safeguard Proprietary Information and to protect it against disclosure, misuse, espionage, loss and theft.  The Employee acknowledges that the Proprietary Information obtained by him during the course of his employment hereunder is the property of the Company.  The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee thereof).

( c )           Upon termination of the Employee’s employment hereunder for any reason, the Employee will, upon request by the Company, promptly deliver to the Company all copies or embodiments of Proprietary Information or Intellectual Property (as hereinafter defined), in whatever form, in his possession or control, including correspondence, drawings, manuals, letters, written materials, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning clients, business plans, marketing strategies, products or processes of the Company, irrespective of location or form.  Notwithstanding the foregoing, the Employee may retain documents relating to his personal compensation and entitlements, provided that such documents are retained solely for personal use and are not disclosed to anyone other than the Employee.

(d)           Notwithstanding Sections 6(a) – (c), the Employee may respond to a lawful and valid subpoena or other legal process with respect to the disclosure of any Proprietary Information, but shall give the Company the earliest possible notice thereof and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process; and shall cooperate with the Company and its counsel in attempting to obtain a protective order or to otherwise restrict such disclosure.

(e)           The restrictions set forth in Sections 6(a)-(c) are enforceable, separate and apart from the remaining employment terms of this Agreement, and shall be enforceable by Company following the Employee's termination of employment, whether or not the Employer has or is alleged to have breached any of its material obligations to the Employee hereunder outside of the terms set forth in Section 7 of this Agreement,

(e)           Inventions and “Work for Hire.  In the event that Employee as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Proprietary Information), any copyrightable work (whether or not comprising Proprietary Information) or any other form of Proprietary Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “Intellectual Property”), Employee acknowledges that such Intellectual Property is the exclusive property of the Company but Employee retains the right to utilize the Intellectual Property if his employment is terminated for any reason. Any copyrightable work prepared in whole or in part by Employee will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised in the copyright therein.  Employee shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by any of the Company, whether such requests occur prior to or after termination of Employee’s employment).

Section 7.Non-Disparagement.  The Employee and the Company agree that, during and following the Termination of Employment, Employee or it will not (and the Company agrees to instruct the members of its Board not to) disparage or denigrate, whether orally or in writing, to any Person any aspect of his or its past or then current relationship with the other, nor the character of the other or that of the other’s directors, officers, equity holders, Affiliates, partners, agents, representatives, business, or operating methods, whether past, present, or future.

Section 8.Remedies; Injunctive Relief.  It is recognized and acknowledged by the Employee that a breach of the covenants contained in Sections 6 and 7 will cause irreparable damage to the Company and the goodwill of the Company, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Employee agrees that in the event of a breach of any of the covenants contained in Sections 6 and 7, in addition to any other remedy, which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

Section 9.Insider Trading.  Employee recognizes that the Parent Company is a publicly traded company (currently OTCQB:”STWS”), and that due to Employee’s managerial position and ownership of Parent Company’s stock, Employee could be deemed an “insider” for purposes of “insider trading” restrictions imposed by the United States Securities and Exchange Act.  Accordingly, Employee has been provided with a copy of the Parent Company’s current written Insider Trading Policy, attached as Exhibit “A” to this Agreement, for which Employer understands and agrees he is subject to its requirement and shall sign and return a copy of the Insider Trading Policy to the Company as a pre-condition to entering into the employment of Company.

Section 10.Assignment; Successors; Third Parties.  The Company may assign its rights and obligations under this Agreement to any Person that acquires, directly or indirectly, all or substantially all of its equity interests or assets, regardless of the form of such transaction.  The Employee may not assign his rights or obligations under this Agreement to any Person.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  This Agreement shall not confer any rights or remedies upon any Person other than the parties hereto except as otherwise specifically provided herein. Any payments subject to the terms of Section 5 shall be paid to Employee’s Successors and/or Heirs. This Agreement shall survive any sale of the Company or change in the control of the Company.

Section 11.Indemnification and Insurance; Legal Expenses.  During the Term and so long as the Employee has not breached any of his obligations set forth in Sections 6and 7, the Company shall indemnify the Employee to the full extent permitted by law and, during the Term, the Employee shall be entitled to the protection of any insurance policies the Company shall elect to maintain generally for the benefit of its employees (Errors and Omissions Insurance and Comprehensive General Liability Coverage) against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been an employee of the Company or his serving or having served any other enterprise as an employee at the request of the Company (other than any dispute, claim or controversy arising under or relating to this Agreement).  The rights of indemnification granted pursuant to this Section 12 shall inure to the benefit of the Employee’s heirs and legal representatives.

a.           Employee Indemnification of Company.  Regarding the Company’s Business, as defined in foregoing Section 6(a), Employee affirmatively represents and warrants to Company that by entering into this Agreement and by working for Company, Employee is not in violation on any pre-existing, unexpired, and/or unreleased covenants not to compete or confidentiality agreements with any other person or entity. Should Employee be in breach of this representation and warranty and the Company has not otherwise waived such breach or otherwise agreed to assume such legal risk, Employee agrees to indemnify, defend, and hold harmless Company for any claims and causes of action brought against it by parties seeking to enforce such outside noncompetition or confidentiality agreements.

Section 12.Governing Law; Venue.  (a)  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the state of Texas, without reference to the principles of conflicts of law of Texas or any other jurisdiction, and where applicable, the laws of the United States.

(b)  Each party hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Texas state courts situated in Midland County, Texas and any appellate court from any such court, in any suit, action, or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment resulting from any such suit, action, or proceeding, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action, or proceeding shall be heard and determined only in state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division).

(c)  It shall be a condition precedent to each party’s right to bring any suit, action, or proceeding arising out of or relating to this Agreement that such suit, action, or proceeding, in the first instance, be brought in a state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division) (unless such suit, action, or proceeding is brought solely to obtain discovery or to enforce a judgment), and if each of the state courts in the State of Texas and such federal court refuses to accept jurisdiction with respect thereto, such suit, action, or proceeding may be brought in any other court with jurisdiction.  No party may move to (i) transfer any such suit, action, or proceeding from a state court in the State of Texas or such federal court to another jurisdiction, (ii) consolidate any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court with a suit, action, or proceeding in another jurisdiction, or (iii) dismiss any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court for the purpose of bringing the same in another jurisdiction.

(d)  Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, (i) any objection that it may now or hereafter have to the laying of venue of any suit, action, or proceeding arising out of or relating to this Agreement in a Midland County, Texas state court or the U.S. District Court for the Western District of Texas (Midland Division), (ii) the defense of an inconvenient forum to the maintenance of such suit, action, or proceeding in any such court, and (iii) the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party.  Nothing in this Section 14 shall affect the right of any party to serve process in any other manner permitted by law.

Section 13.Notices.  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telecopy, reputable overnight courier service, facsimile, or certified or registered mail, postage prepaid to the addresses noted on the Incorporated Terms Section of this Agreement, or such other addresses or to the attention of such other Person as the recipient party will have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered, faxed, or sent or, if mailed, five days after deposit in the U.S. mail.

Section 14.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

Section 15.Entire Agreement.  The terms of this Agreement and the other agreements and instruments contemplated hereby or referred to herein (collectively the “Related Agreements”) are intended by the parties to be the final expression of their agreement with respect to the employment of the Employee, and supersede any prior understandings or agreements, written or oral, and may not be contradicted by evidence of any prior or contemporaneous agreement (including without limitation any term sheet or similar agreement entered into by and among the parties hereto or any other parties with respect to the subject matter hereof).  The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.

Section 16.Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Employee and an officer of the Company duly authorized by the Board, which instrument expressly identifies the amended provision of this Agreement.  By an instrument in writing similarly executed and similarly identifying the waived compliance, the Employee or a duly authorized officer of the other parties hereto may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

Section 17.No Inconsistent Actions.  The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

Section 18.Construction.  This Agreement shall be deemed drafted equally by all the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (c) ”includes” and “including” or words of similar import shall be deemed to be followed in each instance by the phrase “without limitation”; (d) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (e) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Persons referred to may require.  Accounting terms that are not otherwise defined in this Agreement shall have the meanings given to them under GAAP, applied on a basis consistent with those applied by the Company (only to the extent such principles and applications are consistent with GAAP).  To the extent that the definition of an accounting term that is defined in this Agreement is inconsistent with the meaning of such term under GAAP, the definition set forth in this Agreement will control.

Section 19.Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable.  This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

Section 20.Withholding; Tax Statement Matters.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

Section 409A.  It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, any future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject Employee to payment of interest or any additional tax under Section 409A.  The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly.  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  In addition, to the extent that any Internal Revenue Service guidance issued under Section 409A would result in Employee being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by the Company and Employee.

A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

Section 21.Employee Acknowledgement.  The Employee acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

Section 22.Designation of Beneficiaries.  The Employee shall be entitled to elect beneficiaries with respect to any applicable benefits or payments provided or referenced hereunder pursuant to the beneficiary designation form for the applicable company and customarily applicable to any such benefits or payments.

Employee’s Representations.  The Employee hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he is bound; (b) Employee is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other Person; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

STW RESOURCES HOLDING CORP

By:                                                                

Name: Stanley T. Weiner

Title: CEO

EMPLOYEE

Paul C. DiFranesco

Addendum to Employment Agreement

Executive Officer Change of Control Termination Agreement

This Executive Officer Change of Control Termination Agreement (the “Agreement”) is entered into as of February 01, 2015 by and between STW Resources Holding Corp., a Nevada corporation (the “Corporation”) and its Executive Officer (Head of Finance) Paul DiFrancesco (“Executive Officer”), as an Addendum to Section 2 and 4 of the Employment Agreement of February 01, 2015 between the Corporation and Executive Officer (the “Employment Agreement”).

Recitals

A.           The Corporation considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

B.           The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation.

C.           In order to induce you to remain in the employ of the Corporation and in consideration of your agreement set forth below, the Corporation agrees that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Corporation is terminated subsequent to a “change in control of the Corporation” (as defined in Section 2 below) under the circumstances described below. This Agreement is meant to supersede any other specific written agreements which may have been entered into between yourself and the Corporation concerning termination of employment, including, but not limited to any termination or severance provisions of the Employment Agreement.

Therefore, in consideration of your continued employment and the parties agreement to be bound by the terms contained in this Agreement, the parties agree as follows:

1.           Term of Agreement. This Agreement shall commence on this date and shall continue in effect through December 31, 2017; provided, however, that commencing on December 31, 2015 and each December 31 afterwards, the term of this Agreement shall automatically be extended for one additional year unless, no later than the preceding November 1, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, if a change in control of the Corporation shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of 12 months beyond the month in which such change in control occurred.

Notwithstanding the foregoing, and provided no change of control shall have occurred prior to an event of termination (other than change of control) under the Employment Agreement, this Agreement shall automatically terminate upon the earlier to occur of (i) your termination of employment with the Corporation under the Employment Agreement, or (ii) the Corporation’s furnishing you with notice of termination for “cause” under the Employment Agreement, irrespective of the effective date of such termination.

2.           Change in Control. No benefits shall be payable under this Agreement unless there shall have been a change in control of the Corporation, as set forth below. For purposes of this Agreement, a “change in control of the Corporation” shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Corporation is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if:

A.           Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation’s then outstanding securities; or

B.           During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (D) of this Section) whose election by the Board or nomination for election by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority; or

C.           The Corporation enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Corporation; or

D.           The stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 30% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation’s assets.

3.           Termination Following Change in Control. If any of the events described in Section 2 above constituting a change in control of the Corporation shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) below upon the subsequent termination of your employment during the term of this Agreement.

A.           You shall not be entitled to the benefits provided in Subsection 4(A) – (C) below upon the subsequent termination of your employment during the term of this Agreement if your termination is for the following:

(1)           Because of your death, Disability or Retirement;

(2) By the Corporation for Cause; or

(3) By you other than for Good Reason.

B.           The following definitions apply to this Section 3:

(1)           Disability; Retirement. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six consecutive months, and within 30 days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for “Disability.” Termination by the Corporation or you of your employment based on “Retirement” shall mean termination in accordance with the Corporation’s retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you.

(2)           Cause. Termination by the Corporation of your employment for “Cause” shall mean termination upon:

(A)           The willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance by you of a Notice of Termination for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or

(B)           The willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation.

(C)            Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars in detail.

(3)           Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraph (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections (2)(A) and (B), respectively, given in respect of them:

(A)           The assignment to you of any duties inconsistent with your status and position as it exists immediately prior to the change in control of the Corporation or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Corporation;

(B)           A reduction by the Corporation in your annual base salary as in effect on this date or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all key employees of the Corporation and all key employees of any person in control of the Corporation;

(C)           Your relocation to a location not within 25 miles of your present office or job location, except for required travel on the Corporation’s business to an extent substantially consistent with your present business travel obligations;

(D)           The failure by the Corporation, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation, within seven days of the date such compensation is due;

(E)           The failure by the Corporation to continue in effect any bonus to which you were entitled, or any compensation plan in which you participate immediately prior to the change in control of the Corporation which is material to your total compensation, including but not limited to the Corporation’s Stock Option Plans, 401(k) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or any substitute plans adopted prior to the change of control in the Corporation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation in it (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control;

(F)           the failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporation’s life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control of the Corporation, the failure to continue to provide you with a Corporation automobile or allowance in lieu of it, if you were provided with such an automobile or allowance in lieu of it at the time of the change of control of the corporation, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Corporation, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation’s normal vacation policy in effect at the time of the change in control of the Corporation;

(G)           The failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 of this Agreement; or

(H)           Any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (4) below (and, if applicable, the requirements of Subsection (2) above); for purposes of this Agreement, no such purported termination shall be effective.

Your rights to terminate your employment pursuant to this Subsection 3 (A)-(F) shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason under this Agreement. In the event you deliver Notice of Termination based upon circumstances set forth in Paragraph (A), (E), (F), (G) or (H) above, which are fully corrected prior to the Date of Termination set forth in your Notice of Termination, such Notice of Termination shall be deemed withdrawn and of no further force or effect.

                      (4)           Notice of Termination. Any purported termination of your employment by the Corporation or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 of this Agreement. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

(5) Date of Termination, Etc. “Date of Termination” shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period), and (B) if your employment is terminated pursuant to Subsection 3A(2) or (3) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection 3A(2) above shall not be less than 30 days, and in the case of a termination pursuant to Subsection 3A(3) above shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given); provided that if within 15 days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement except to the extent otherwise provided in subsection 4D.

4.           Compensation Upon Termination or During Disability. Following a change in control of the Corporation, as defined by Section 2, upon termination of your employment or during a period of disability you shall be entitled to the following benefits:

A.           During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all amounts payable to you under any compensation plan of the Corporation during such period, until this Agreement is terminated pursuant to Section 3 above. Thereafter, or in the event your employment shall be terminated by the Corporation or by you for Retirement, or by reason of your death, your benefits shall be determined under the Corporation’s retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs.

B.           If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, Disability, death or Retirement, the Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.

C.           If your employment by the Corporation shall be terminated (i) by the Corporation other than for Cause, Retirement or Disability or (ii) by you for Good Reason, then you shall be entitled to the benefits provided below:

(1)           The Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation, at the time such payments are due, except as otherwise provided below.

(2)           In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs C and D, below, the “Severance Payments”) equal to two times the sum of your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect of them, plus 2,000,000 shares of the Corporation’s common stock (as adjusted for any subsequent stock splits or recapitalization of the shares).

(3)           The Corporation shall pay to you any deferred compensation, including, but not limited to deferred bonuses, allocated or credited to you or your account as of the Date of Termination.

(4)           In lieu of shares of common stock of the Corporation (the “Corporation’s Shares”) issuable upon exercise of outstanding options (“Options”), if any, granted to you under the Corporation’s Stock Option Plans (which Options shall be cancelled upon the making of the payment referred to below) you shall receive an amount in cash equal to the product of (i) the excess of the closing price of the Corporation’s Shares as reported on the NASDAQ-NMS Automatic Quotation System on or nearest the Date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the Date of Termination), over the per share exercise price of each Option held by you (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Corporation’s Shares covered by each such Option.

(5)           The Corporation shall also pay to you all legal fees and expenses incurred by you as a result of such termination including all such fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) to any payment or benefit provided under this Agreement)).

(6)           The payments provided for in subparagraphs (B), (C), and (D) above, shall be made no later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount can be determined but in no event later than the 30th day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

D.           In the event that you are a “disqualified individual” within the meaning of Section 280G of the Code, the parties expressly agree that the payments described in this Section 4 and all other payments to you under any other agreements or arrangements with any persons which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively subject to an overall maximum limit. Such maximum limit shall be $1 less than the aggregate amount which would otherwise cause any such payments to be considered a “parachute payment” within the meaning of Section 280G of the Code, as determined by the Corporation. Accordingly, to the extent that such payments would be considered a “parachute payment” with respect to you, then the portions of such payments shall be reduced or eliminated in the following order until the remaining change of control termination payments with respect to you is within the maximum described in this subsection (iv):

(1)           First, any cash payment to you;

(2)           Second, any change of control termination payments not described herein; and

(3)           Third, any forgiveness of indebtedness of yours to the Corporation.

You expressly and irrevocably waive any and all rights to receive any change of control termination payments, which exceed the maximum limit described in this subsection D.

E.           You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise except as specifically provided in this Section 4.

F.           In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under the Corporation’s 401(k) Pre-Tax Retirement Savings Plan and any other plan or agreement relating to retirement benefits.

6.           Successors; Binding Agreement.

A.           The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled to under this Agreement if you terminate your employment for Good Reason following a change in control of the Corporation, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Corporation” shall mean the Corporation as defined above and any successor to its business and/or assets as which assumes and agrees to perform this Agreement by operation of law, or otherwise.

B.           This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, heirs, distributees, and legatees. If you should die while any amount would still be payable to you if you had continued to live, all such amounts, unless otherwise provided in this Agreement, shall be paid in accordance with the terms of this Agreement to your legatee or other designee or, if there is no such designee, to your estate.

6.           Notice. For the purpose of this Agreement, all notices and other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the signature page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance with this Agreement, except that notice of change of address shall be effective only upon receipt.

7.           No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party to this Agreement at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for shall be paid net of any applicable withholding or deduction required under federal, state or local law. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement.

8.           Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

9.           Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

10.           Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in the State of Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

11.           Entire Agreement. This Agreement sets forth the entire understanding of the parties with respect to its subject matter and supersedes all prior written or oral agreements or understandings with respect to such subject matter.

If this letter sets forth our agreement on its subject matter, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

STW RESOURCES HOLDING CORP.

X______________________________________

By:           Manfred E. Birnbaum, Director and Member of Compensation Committee

Agreed to effective February 01, 2015

X ___________________________

Paul C. DiFrancesco

EX-10.50

Exhibit 10.50

STW RESOURCES HOLDING CORP

INDEPENDENT CONTRACTOR AGREEMENT

INCORPORATED TERMS

Date of Agreement: February 1, 2015 (the “Effective Date”),

Name of Independent Contractor: D. Grant Seabolt, Jr. (the “Contractor”).

Employer:  STW Resources Holding Corp, located at 3424 S. County Road 1192, Midland, TX 79706 (the “Company” or “Employer”).

Contractor’s Position:  General Counsel and Corporate Secretary

Term of Independent Contractor Agreement: 3 years

Description of Position Duties:  Serve as the Company’s General Counsel, Corporate Secretary, and as its chief legal officer as well as the General Counsel, Corporate Secretary and chief legal officer for the Company’s subsidiaries; coordinate the provision of legal services by all outside law firms; and oversee contracting and employment practices.  Contractor agrees to perform such other duties as shall be determined by the Company and communicated to Contractor by and through the Board of Directors and notwithstanding any such changes, the utilization of Contractor shall be construed as continuing under this Agreement, as modified. This position reports directly to the Board of Directors of Company.

Compensation.  In consideration of the services to be rendered hereunder, the Company hereby agrees to pay Contractor the compensation as set forth herein.  Contractor stock options and stock grants will be adjusted on the same basis as all other shareholders to account for any stock split, stock dividend, combination or recapitalization.

A.   Monthly Base Payment:  The first year the Company shall pay Contractor $8,000.00 per month, (effective annual payment $96,000.00), with no withholding deductions (for which Contractor will be responsible for paying Contractor’s income taxes on Contractor’s payments). The second year the company will pay Contractor $9,500.00 per month, (effective annual payment $114,000.00). The third year the company will pay Contractor $9,500.00 per month, (effective annual payment $114,000.00).

B.   Payment Bonus:  Contractor will receive a bonus to be paid semi-annually up to 100% of the base payment for the previous six-month period. This bonus is 100% management discretion.

RECITALS

WHEREAS, it is the desire of the Company to assure itself of the services of the Contractor by engaging the Contractor to perform services under and pursuant to the terms of this STW Resources Holding Corp. Independent contractor services Agreement (the “Agreement”) hereof; and

WHEREAS, the Contractor desires to provide such services to the Company on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows.

AGREEMENT

Section 1.Certain Definitions.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such first Person where “control” shall have the meaning given such term under Rule 405 of the Securities Act.

“Agreement” shall have the meaning set forth in the Preamble hereto.

“Monthly Base Payment” shall have the meaning set forth in the Incorporated Terms and Section 3(a).

“Benefits” shall have the meaning set forth in Section 3(c).

“Board” shall mean the Board of Directors of the Company.

“Business” shall have the meaning set forth in Section 6(a).

 “Cause” The Company shall have “Cause” to terminate the Contractor’s independent contractor services hereunder upon:

(i)   The Contractor’s willful failure to substantially perform the duties set forth in this Agreement (other than any such failure resulting from the Contractor’s Disability);

(ii)   The Contractor’s willful failure to carry out, observe, or comply with, in any material respect any lawful and reasonable directive of the Company in accordance with and commensurate with Contractor’s duties, or the material policies of the Company (of which he has been made aware) not inconsistent with the terms of this Agreement;

(iii)   The Contractor’s conviction, plea of no contest, or imposition of unadjudicated probation for any felony or crime involving moral turpitude;

(iv)   The Contractor’s unauthorized or unlawful use (including being under the influence) or possession of alcohol or illegal drugs while performing the Contractor’s duties and responsibilities under this Agreement;

(v)   The Contractor’s commission at any time of any act of fraud, embezzlement, misappropriation, dishonesty, or breach of fiduciary duty against the Company or any of its Affiliates (or any predecessor thereto or successor thereof);

(vi)   Any action or failure to act constituting gross negligence or willful misconduct of the Contractor in the performance of his duties hereunder; or

(vii)   Any other material breach of this Agreement by the Contractor, which breach is not remedied within 30 days after receipt of written notice from the Company specifying such breach, and which notice is provided not later than the 30th day following the occurrence of the event constituting such cause.

(viii)   The Contractor’s suspension or disbarment from the practice of law by the State Bar of Texas or the Alabama Bar Association.

 “Change of Control” shall mean any changes in control of the Company, as defined in the   Change of Control Agreement.

 “Change of Control Agreement” shall mean the “Executive Officer Change of Control Termination Agreement,” executed concurrently with this Agreement, and attached to and incorporated into this Agreement, with any terms set forth in the Change of Control Agreement which are inconsistent with or differing from the terms of this Agreement, taking control and precedence over the terms of this Agreement.

“Company” shall have the meaning set forth in the Preamble hereto.

 “Date of Termination” shall mean (i) if the Contractor’s independent contractor services is terminated by his death, on the date of his death; or (ii) if the Contractor’s independent contractor services is terminated pursuant to Section 4(a)(ii)-(iv) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier.

“Disability” shall have occurred when the Contractor has been incapable or unable to substantially perform his duties for the Company because of physical or mental incapacity (assuming such incapacity was not caused by any activity on the part of the Contractor of the type described in clauses (iii) or (iv) under the definition of “Cause” set forth herein) for a period of at least 90 consecutive days as determined by an independent medical doctor mutually agreed-upon by the Board and Contractor.

“Effective Date” shall have the meaning set forth in the Preamble hereto.

 “Contractor” shall have the meaning set forth in the Preamble hereto.

 “Incorporated Terms” means those terms set forth at the top of page 1 of this Agreement, entitled “Incorporated Terms.”

“Intellectual Property” shall have the meaning set forth in Section 6(d).

“Notice of Termination” shall have the meaning set forth in Section 4(b).

 “Person” shall mean an individual, partnership, corporation, Limited Liability Company, business trust, joint stock company, trust, unincorporated association or organization, joint venture, governmental authority or political subdivision thereof or any other entity of whatever nature.

 “Proprietary Information” In addition to the specific items set forth in Section 6(a), shall mean information that is not generally known to the public or the Company’s competitors and that is used, developed or obtained by the Company in connection with its business, including (i) the Company’s products and services, (ii) accounting, financing, and business methods and practices, (iii) marketing methods for the Company’s services and products, (iv) fees, costs and pricing structures, (v) designs, (vi) analyses undertaken, (vii) drawings, photographs and reports, (viii) computer software, including operating systems, applications and program listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi) inventions, devices, new developments, methods, protocols, and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) copyrightable works, (xiii) all technology and trade secrets, (xiv) confidential terms of sales agreements, contractual relationships, employee and independent contractor agreements, and customer and supplier relationships or arrangements, and (xv) all similar and related information in whatever form.

“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.  For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries.

Section 2.Contract for a Term/ Duties.

(a)Generally.  The Company shall employ the Contractor and the Contractor shall enter the employ of the Company as an independent contractor for an initial term of three (3) years, with the understanding that after the initial three year independent contractor services term period, if the independent contractor services for a term of years is not extended in writing, that thereafter, the Contractor may be terminated at the sole discretion or “will” of the Company for any reason whatsoever.  After the initial three year independent contractor services term period, the fact that Contractor’s payment is described as a “Monthly Base Payment” does not imply by Company, nor should it be inferred by Contractor to alter or extend the “at will” independent contractor services relationship.  Similarly, Contractor may terminate independent contractor services with the Company at the sole discretion or “will” of the Contractor for any reason whatsoever.

Notwithstanding the initial term of independent contractor services of three years, should there be a Change of Control of the Company, the terms of the Change of Control Agreement shall take precedence thereafter over this Agreement.

Notwithstanding Contractor’s future “at will” independent contractor status, Contractor understands and agrees that in exchange for the execution of the nondisclosure agreement set forth herein at Section 7, and non-competition and non-solicitation agreements set forth herein at Section 6, Employer unconditionally promises to give Contractor substantial, valuable consideration including, without limitation:

(i) "confidential information" and "trade secrets" as defined in Section 6(a) herein;

(ii) personal specialized training and materials; and

(b)           Position and Duties.

(i)Contractor is being employed in an Independent Contractor’s Position to perform the Duties of the Position on an “as needed” basis for a minimum monthly availability of at least twenty-two percent (22%) of Contractor’s monthly available billable time (120 hours) (computed at $300.00 per hour, which is 75% of Contractor’s standard billing rate of $400.00 per hour).  Contractor is not required to, nor will Contractor provide the Company with detailed billing records, and it shall be sufficient for a monthly bill to be issued for “Corporate Legal Services” for the Monthly Base Payment.  Contractor will also provide a separate invoice for any out-of-pocket expenses to the Company and/or utilize a Company provided credit card for such Company-related expenses.  Contractor will perform other duties related to the Company’s water drilling, reclamation processing activities as may be assigned by the Company, for which Contractor is compensated outside of this Agreement by way of a pre-existing “STW Resources Holding Corp. Water-related Revenue Royalty Authorization Agreement”.  Also, Contractor is compensated as a Director of the Company outside of this Agreement, by a Director’s Appointment Agreement, with a current compensation of $75,000 per year.  Except upon the prior written consent of the Company, Contractor will not, during the Term, accept any other legal clients that engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Contractor's duties and responsibilities hereunder or create a conflict of interest with the Company.  The Company understands that Contractor has independent legal ethical standards to be followed which take precedence over any duties requested by the Company which violate or are likely to violate such ethical standards.

(ii).           All agreements with Company’s clients must be entered into by an authorized Company representative, and Contractor specifically is authorized or permitted to enter into any written or verbal agreements on behalf of the Company to the extent that a corporate secretary and general counsel may do so, including any “by direction” authority granted by Company executive officers to sign on their behalf.  Contractor does not have the authority to vary the terms of any written agreements for the Company’s products or services with the Company’s clients, except as may be authorized by the Company’s CEO and President or by custom and practice over time.  Contractor shall not make any oral representations contrary to the Company’s printed contracts and marketing materials. Contractor also will be subject to termination for cause, without severance, for violation of the provisions in this Section.

(iii).           The Company agrees to defend and indemnify Contractor against any liability that Contractor incurs within the scope of his independent contractor services with the Company to fullest extent permitted by the Company's certificate of formation and bylaws and Texas’ corporation law.

(iv).           The Contractor’s place of independent contractor services shall be the Contractor’s offices located in the Dallas/Ft. Worth, Texas Metropolitan Area, or as otherwise mutually agreed between the Contractor and the Company.

Section 3.Compensation and Related Matters.

(a)Monthly Base Payment.  Commencing on the “Effective Date” the Contractor shall receive the Monthly Base Payment set forth in the Incorporated Terms, without payroll deductions, which Monthly Base Payment shall be paid in accordance with the customary payroll practices of the Company by including Contractor’s Monthly Base Payment in the Company’s monthly payroll (or ½ of the Base Monthly Payment if a bi-monthly payroll), and which payment may be increased at the discretion of the Company (the “Monthly Base Payment”).

(b)Signing Bonus. The Contractor shall receive 100,000 common shares of STW Holding Resources Corp. and 100,000 options to purchase common shares at $0.65 per share, exercisable within three years from the effective date of this Agreement. (Option Price/Period)

(c)Stock Bonus. The Contractor shall receive a quarterly stock grant of 25,000 (fifty thousand) at a cost basis of $0.65 while employed by STW.

(d)Severance. After the initial three year period of independent contractor services, except for termination related to a Change in Control, should Contractor be terminated by the company without case and not related to a Change in Control of the Company, Contractor shall be entitled to 12 months of the Monthly Base Payment as severance from the date of termination without cause.

(e)Moving Allowance.  N/A.

(f)Vehicle or Vehicle Allowance.  N/A.

(g)Miscellaneous.  (Re cell phone and laptop computer). N/A.

(f)Fair Consideration for Restrictive Covenants.  Contractor understands and agrees that the Company’s agreement to pay Contractor a Monthly Base Payment and to provide Contractor with the Company’s Proprietary Information, constitute fair and adequate consideration for the execution of the non-disclosure agreement set forth in Section 7 below.  Contractor promises, warrants and represents that the restrictive covenants in Sections 7 of this Agreement do not unreasonably limit Contractor's ability to earn a living, nor do they constitute an unreasonable restriction on the practice of law.

(g)           Benefit Plan – Health Insurance, Retirement and Stock Option Plan. The Company will provide Contractor with the opportunity to participate in the standard benefits plans currently available to other similarly situated independent contractors and their dependents, for whom the dependents’ costs will be covered by Contractor. The Company reserves the right to cancel and/or change the benefits plans it offers to its employees at any time, subject to applicable law.

(h)Stock Options.  Contractor will be entitled to receive stock options under the Parent Company’s Contractor Stock Option Plan (“ESOP”) when established, as set forth in the ESOP documents. Contractor shall participate in Category “B” of the ESOP plan. All options are granted and vested in accordance with the ESOP plan.

(i)           Vacation and Sick Days.  N/A.

(j)           Business Expenses.  During the Term, the Company shall reimburse the Contractor for all reasonable travel, entertainment and other business expenses incurred by him in the performance of his duties hereunder in accordance with the Company’s expense reimbursement policy and its annual operating budget approved by the Company.

(I)           Interim Housing and Travel Expenses. N/A

Section 4.Termination.  The Contractor’s independent contractor services hereunder may be terminated by the Company or the Contractor, as applicable, only under the following circumstances:

(a)Circumstances.

(i)   Death.  The Contractor’s independent contractor services hereunder shall terminate upon his death;

(ii)   Disability.  If the Contractor has incurred a Disability, the Company may give the Contractor written notice of its intention to terminate the Contractor’s independent contractor services; provided, however, that such notice shall not be effective prior to the expiration of any short-term disability benefits pursuant to any applicable benefit plan.  In that event, the Contractor’s independent contractor services shall terminate effective on the 30th day after the receipt of such notice by the Contractor, provided that prior to the effective date of such termination, the Contractor shall not have returned to full-time performance of his duties;

(iii)   Termination for Cause.  The Company may terminate the Contractor’s independent contractor services for Cause;

(iv)   Termination for Change in Control.  Should Contractor be terminated under circumstances constituting a Change in Control, then the Change of Control Termination Agreement shall control, in lieu of the terms of this Section 4 Termination.

(b)Notice of Termination.  Any termination of the Contractor’s independent contractor services by the Company or by the Contractor under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other parties hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Contractor’s independent contractor services under the provision so indicated, and specifying a Date of Termination which, if submitted by the Contractor, shall be at least 30 days following the date of such notice (a “Notice of Termination”); provided, however, that the Company may, in its sole discretion, change the Date of Termination to any date following receipt of the Notice of Termination that is within such 30 day period.  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Contractor receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion within a 30-day period from such notice.  The failure by the Contractor or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Contractor or the Company hereunder or preclude the Contractor or the Company from asserting such fact or circumstance in enforcing the Contractor’s or the Company’s rights hereunder.

(c)

Section 5.Company Obligations upon any Termination (including due to death or Disability).  Except as provided by Sections 6 and 7, upon termination of the Contractor’s independent contractor services (including due to Contractor’s death or Disability), the Contractor (or the Contractor’s estate) shall be entitled to receive (i) except in the event of the Contractor’s Disability to the extent of Contractor’s receipt of Disability benefits, any amount of the Contractor’s Annual Base Payment through the Date of Termination not theretofore paid, (ii) any expenses owed but not yet paid to the Contractor under Section 3(e) through the Date of Termination, and (iii) any amount arising from the Contractor’s participation in, or benefits under any employee benefit plans, programs or arrangements under Section 3(c), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits.  In the event of the Contractor’s Disability, termination, and/or death, Company shall pay Contractor or Contractor’s successors and/or heirs the following: five hundred thousand (500,000) shares of Company stock at a cost basis of $.65 per share and two (2) years of Monthly Base Payments if the Contractor cannot continue in his/her position or independent contractor services by the Company.

Section 6.Nondisclosure of Proprietary Information; Intellectual Property.

(a)           Contractor understands and agrees that Employer's customer lists, customer goodwill, services, processes, techniques and products were developed at considerable effort and expense to Employer and is for Employer's sole and exclusive use. Contractor understands and agrees that if said trade secrets or confidential information were used by Employer's competitors, it would give them an unfair business advantage and otherwise cause Employer substantial and irreparable harm.  Contractor agrees that Employer's Proprietary Information and Intellectual Property include, but are not limited to, the following:

(i) the identity of Company's customers and customer prospects;

(ii) customer profiles and the special needs of Company's customers;

(iii) customer goodwill;

(iv) customer databases;

(v) employee profiles, including terms of their employment;

(vi) vendor profiles, including terms of their service;

(vii) market studies and strategies;

(viii) marketing presentation database;

(ix) pricing studies, information, and analyses;

(x)  competitor information generated by the Company;

(xi) business projections;

(xii) accounting and financial information;

(xiii) Company transfer pricing information among its related companies;

(xiv) Company’s corporate structural information;

(xv) Project Information Forms;

(xvi) credit assignment lists;

(xvii) special, confidential and proprietary business methods, processes, procedures,and services of the Company;

(xviii) employee manuals;

(xix) Company's contracts and fee arrangements;

(xx) Confidential project communications, documents, files and databases;

(xxi) correspondence and/or communications with customers and prospective

 customers;

(xxii) Company's reference materials; and

(xxiii) the specialized personal training and materials referenced in Section 2(a)(ii) of this Agreement.

(b)           Except as required in the faithful performance of the Contractor’s duties hereunder or pursuant to following Section 6(c), the Contractor shall, during the Term of Contractor’s independent contractor services and for a period of three (3) years after the Date of Termination of Contractor’s independent contractor services, maintain in confidence and shall not directly or indirectly, disseminate, disclose or publish, or use the benefit of any other Person any Proprietary Information of or relating to the Company, or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information.  The Contractor’s obligation to maintain and not disseminate, disclose or publish, or use for the benefit of any Person, any Proprietary Information after the Date of Termination will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and available for use in the public domain (other than by means of the Contractor’s direct or indirect disclosure of such Proprietary Information) and is continued to be maintained as Proprietary Information by the Company, and Contractor shall take all appropriate steps to safeguard Proprietary Information and to protect it against disclosure, misuse, espionage, loss and theft.  The Contractor acknowledges that the Proprietary Information obtained by him during the course of his independent contractor services hereunder is the property of the Company.  The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee thereof).

( c )           Upon termination of the Contractor’s independent contractor services hereunder for any reason, the Contractor will, upon request by the Company, promptly deliver to the Company all copies or embodiments of Proprietary Information or Intellectual Property (as hereinafter defined), in whatever form, in his possession or control, including correspondence, drawings, manuals, letters, written materials, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning clients, business plans, marketing strategies, products or processes of the Company, irrespective of location or form.  Notwithstanding the foregoing, the Contractor may retain documents relating to his personal compensation and entitlements, provided that such documents are retained solely for personal use and are not disclosed to anyone other than the Contractor.

(d)           Notwithstanding Sections 6(a) – (c), the Contractor may respond to a lawful and valid subpoena or other legal process with respect to the disclosure of any Proprietary Information, but shall give the Company the earliest possible notice thereof and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process; and shall cooperate with the Company and its counsel in attempting to obtain a protective order or to otherwise restrict such disclosure.

(e)           The restrictions set forth in Sections 6(a)-(c) are enforceable, separate and apart from the remaining independent contractor services terms of this Agreement, and shall be enforceable by Company following the Contractor's termination of independent contractor services, whether or not the Employer has or is alleged to have breached any of its material obligations to the Contractor hereunder outside of the terms set forth in Section 7 of this Agreement,

(e)           Inventions and “Work for Hire.  In the event that Contractor as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Proprietary Information), any copyrightable work (whether or not comprising Proprietary Information) or any other form of Proprietary Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “Intellectual Property”), Contractor acknowledges that such Intellectual Property is the exclusive property of the Company but Contractor retains the right to utilize the Intellectual Property if his independent contractor services is terminated for any reason. Any copyrightable work prepared in whole or in part by Contractor will be deemed “a work made for hire” under Section 201(b) of the 1976 Copyright Act, and the Company shall own all of the rights comprised in the copyright therein.  Contractor shall promptly and fully disclose all Intellectual Property to the Company and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by any of the Company, whether such requests occur prior to or after termination of Contractor’s independent contractor services).

Section 7.Non-Disparagement.  The Contractor and the Company agree that, during and following the Termination of Independent contractor services, Contractor or it will not (and the Company agrees to instruct the members of its Board not to) disparage or denigrate, whether orally or in writing, to any Person any aspect of his or its past or then current relationship with the other, nor the character of the other or that of the other’s directors, officers, equity holders, Affiliates, partners, agents, representatives, business, or operating methods, whether past, present, or future.

Section 8.Remedies; Injunctive Relief.  It is recognized and acknowledged by the Contractor that a breach of the covenants contained in Sections 6 and 7 will cause irreparable damage to the Company and the goodwill of the Company, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Contractor agrees that in the event of a breach of any of the covenants contained in Sections 6 and 7, in addition to any other remedy, which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

Section 9.

Section 10.Insider Trading.  Contractor recognizes that the Parent Company is a publicly traded company (currently OTCQB:”STWS”), and that due to Contractor’s managerial position and ownership of Parent Company’s stock, Contractor could be deemed an “insider” for purposes of “insider trading” restrictions imposed by the United States Securities and Exchange Act.  Accordingly, Contractor has been provided with a copy of the Parent Company’s current written Insider Trading Policy, attached as Exhibit “A” to this Agreement, for which Employer understands and agrees he is subject to its requirement and shall sign and return a copy of the Insider Trading Policy to the Company as a pre-condition to entering into the independent contractor services of Company.

Section 11.Assignment; Successors; Third Parties.  The Company may assign its rights and obligations under this Agreement to any Person that acquires, directly or indirectly, all or substantially all of its equity interests or assets, regardless of the form of such transaction.  The Contractor may not assign his rights or obligations under this Agreement to any Person.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.  This Agreement shall not confer any rights or remedies upon any Person other than the parties hereto except as otherwise specifically provided herein. Any payments subject to the terms of Section 5 shall be paid to Contractor’s Successors and/or Heirs. This Agreement shall survive any sale of the Company or change in the control of the Company.

Section 12.Indemnification and Insurance; Legal Expenses.  During the Term and so long as the Contractor has not breached any of his obligations set forth in Sections 6and 7, the Company shall indemnify the Contractor to the full extent permitted by law and, during the Term, the Contractor shall be entitled to the protection of any insurance policies the Company shall elect to maintain generally for the benefit of its employees (Errors and Omissions Insurance and Comprehensive General Liability Coverage) against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been an independent contractor of the Company or his serving or having served any other enterprise as an independent contractor at the request of the Company (other than any dispute, claim or controversy arising under or relating to this Agreement).  The rights of indemnification granted pursuant to this Section 12 shall inure to the benefit of the Contractor’s heirs and legal representatives.

a.           Contractor Indemnification of Company.  Regarding the Company’s Business, as defined in foregoing Section 6(a), Contractor affirmatively represents and warrants to Company that by entering into this Agreement and by working for Company, Contractor is not in violation on any pre-existing, unexpired, and/or unreleased covenants not to compete or confidentiality agreements with any other person or entity. Should Contractor be in breach of this representation and warranty and the Company has not otherwise waived such breach or otherwise agreed to assume such legal risk, Contractor agrees to indemnify, defend, and hold harmless Company for any claims and causes of action brought against it by parties seeking to enforce such outside noncompetition or confidentiality agreements.

Section 13.Governing Law; Venue.  (a)  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the state of Texas, without reference to the principles of conflicts of law of Texas or any other jurisdiction, and where applicable, the laws of the United States.

Section 14.

(b)  Each party hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Texas state courts situated in Midland County, Texas and any appellate court from any such court, in any suit, action, or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment resulting from any such suit, action, or proceeding, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action, or proceeding shall be heard and determined only in state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division).

(c)  It shall be a condition precedent to each party’s right to bring any suit, action, or proceeding arising out of or relating to this Agreement that such suit, action, or proceeding, in the first instance, be brought in a state court sitting in Midland County, Texas or, to the extent permitted by law, by removal or otherwise, in the U.S. District Court for the Western District of Texas (Midland Division) (unless such suit, action, or proceeding is brought solely to obtain discovery or to enforce a judgment), and if each of the state courts in the State of Texas and such federal court refuses to accept jurisdiction with respect thereto, such suit, action, or proceeding may be brought in any other court with jurisdiction.  No party may move to (i) transfer any such suit, action, or proceeding from a state court in the State of Texas or such federal court to another jurisdiction, (ii) consolidate any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court with a suit, action, or proceeding in another jurisdiction, or (iii) dismiss any such suit, action, or proceeding brought in a state court in the State of Texas or such federal court for the purpose of bringing the same in another jurisdiction.

(d)  Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, (i) any objection that it may now or hereafter have to the laying of venue of any suit, action, or proceeding arising out of or relating to this Agreement in a Midland County, Texas state court or the U.S. District Court for the Western District of Texas (Midland Division), (ii) the defense of an inconvenient forum to the maintenance of such suit, action, or proceeding in any such court, and (iii) the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party.  Nothing in this Section 14 shall affect the right of any party to serve process in any other manner permitted by law.

Section 15.Notices.  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telecopy, reputable overnight courier service, facsimile, or certified or registered mail, postage prepaid to the addresses noted on the Incorporated Terms Section of this Agreement, or such other addresses or to the attention of such other Person as the recipient party will have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered, faxed, or sent or, if mailed, five days after deposit in the U.S. mail.

Section 16.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

Section 17.Entire Agreement.  The terms of this Agreement and the other agreements and instruments contemplated hereby or referred to herein (collectively the “Related Agreements”) are intended by the parties to be the final expression of their agreement with respect to the independent contractor services of the Contractor, and supersede any prior understandings or agreements, written or oral, and may not be contradicted by evidence of any prior or contemporaneous agreement (including without limitation any term sheet or similar agreement entered into by and among the parties hereto or any other parties with respect to the subject matter hereof).  The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.

Section 18.Amendments; Waivers.  This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Contractor and an officer of the Company duly authorized by the Board, which instrument expressly identifies the amended provision of this Agreement.  By an instrument in writing similarly executed and similarly identifying the waived compliance, the Contractor or a duly authorized officer of the other parties hereto may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

Section 19.No Inconsistent Actions.  The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

Section 20.Construction.  This Agreement shall be deemed drafted equally by all the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (c) ”includes” and “including” or words of similar import shall be deemed to be followed in each instance by the phrase “without limitation”; (d) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (e) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Persons referred to may require.  Accounting terms that are not otherwise defined in this Agreement shall have the meanings given to them under GAAP, applied on a basis consistent with those applied by the Company (only to the extent such principles and applications are consistent with GAAP).  To the extent that the definition of an accounting term that is defined in this Agreement is inconsistent with the meaning of such term under GAAP, the definition set forth in this Agreement will control.

Section 21.Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable.  This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  In lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

Section 22.Withholding; Tax Statement Matters.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

Section 409A.  It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, any future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject Contractor to payment of interest or any additional tax under Section 409A.  The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly.  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  In addition, to the extent that any Internal Revenue Service guidance issued under Section 409A would result in Contractor being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by the Company and Contractor.

A termination of independent contractor services shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of independent contractor services unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of independent contractor services” or like terms shall mean “separation from service.”

Section 23.Contractor Acknowledgement.  The Contractor acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

Section 24.Designation of Beneficiaries.  The Contractor shall be entitled to elect beneficiaries with respect to any applicable benefits or payments provided or referenced hereunder pursuant to the beneficiary designation form for the applicable company and customarily applicable to any such benefits or payments.

Contractor’s Representations.  The Contractor hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Contractor do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Contractor is a party or by which he is bound; (b) Contractor is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other Person; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Contractor, enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

STW RESOURCES HOLDING CORP

By:                                                                

Name:

Title:

CONTRACTOR

D. Grant Seabolt, Jr.

Addendum to Independent Contractor Agreement

Executive Officer Change of Control Termination Agreement

This Executive Officer Change of Control Termination Agreement (the “Agreement”) is entered into as of February 01, 2015 by and between STW Resources Holding Corp., a Nevada corporation (the “Corporation”) and its Executive Officer (General Counsel, Chief Legal Officer and Corporate Secretary) D. Grant Seabolt, Jr. (“Executive Officer”), as an Addendum to Section 2 and 4 of the Independent Contractor Agreement of February 01, 2015 between the Corporation and Executive Officer (the “Independent Contractor Agreement”).

Recitals

A.           The Corporation considers it essential to the best interests of its stockholders to foster the continuous contracted services of key management personnel. In this connection, the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

B.           The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation.

C.           In order to induce you to remain in contract with the Corporation and in consideration of your agreement set forth below, the Corporation agrees that you shall receive the severance benefits set forth in this Agreement in the event your contract with the Corporation is terminated subsequent to a “change in control of the Corporation” (as defined in Section 2 below) under the circumstances described below. This Agreement is meant to supersede any other specific written agreements which may have been entered into between yourself and the Corporation concerning termination of contracted services, including, but not limited to any termination or severance provisions of the Independent Contractor Agreement.

Therefore, in consideration of your continued contracted services and the parties’ agreement to be bound by the terms contained in this Agreement, the parties agree as follows:

1.           Term of Agreement. This Agreement shall commence on this date and shall continue in effect through December 31, 2017; provided, however, that commencing on December 31, 2015 and each December 31 afterwards, the term of this Agreement shall automatically be extended for one additional year unless, no later than the preceding November 1, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, if a change in control of the Corporation shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of 12 months beyond the month in which such change in control occurred.

Notwithstanding the foregoing, and provided no change of control shall have occurred prior to an event of termination (other than change of control) under the Independent Contractor Agreement, this Agreement shall automatically terminate upon the earlier to occur of (i) your termination of contracting with the Corporation under the Independent Contractor Agreement, or (ii) the Corporation’s furnishing you with notice of termination for “cause” under the Independent Contractor Agreement, irrespective of the effective date of such termination.

2.           Change in Control. No benefits shall be payable under this Agreement unless there shall have been a change in control of the Corporation, as set forth below. For purposes of this Agreement, a “change in control of the Corporation” shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Corporation is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if:

A.           Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation’s then outstanding securities; or

B.           During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (D) of this Section) whose election by the Board or nomination for election by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority; or

C.           The Corporation enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Corporation; or

D.           The stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 30% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation’s assets.

3.           Termination Following Change in Control. If any of the events described in Section 2 above constituting a change in control of the Corporation shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) below upon the subsequent termination of your contracted services during the term of this Agreement.

A.           You shall not be entitled to the benefits provided in Subsection 4(A) – (C) below upon the subsequent termination of your contracted services during the term of this Agreement if your termination is for the following:

(1)           Because of your death, Disability or Retirement;

(2) By the Corporation for Cause; or

(3) By you other than for Good Reason.

B.           The following definitions apply to this Section 3:

(1)           Disability; Retirement. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six consecutive months, and within 30 days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your contracted services may be terminated for “Disability.” Termination by the Corporation or you of your contracted services based on “Retirement” shall mean termination in accordance with the Corporation’s retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you.

(2)           Cause. Termination by the Corporation of your contracted services for “Cause” shall mean termination upon:

(A)           The willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance by you of a Notice of Termination for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or

(B)           The willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation.

(C)            Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars in detail.

(3)           Good Reason. You shall be entitled to terminate your contracted services for Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraph (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections (2)(A) and (B), respectively, given in respect of them:

(A)           The assignment to you of any duties inconsistent with your status and position as it exists immediately prior to the change in control of the Corporation or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Corporation;

(B)           A reduction by the Corporation in your annual base payment as in effect on this date or as the same may be increased from time to time except for across-the-board payment and base payment reductions similarly affecting all key employees of the Corporation and all key employees of any person in control of the Corporation;

(C)           Your relocation to a location not within 25 miles of your present office or job location, except for required travel on the Corporation’s business to an extent substantially consistent with your present business travel obligations;

(D)           The failure by the Corporation, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation, within seven days of the date such compensation is due;

(E)           The failure by the Corporation to continue in effect any bonus to which you were entitled, or any compensation plan in which you participate immediately prior to the change in control of the Corporation which is material to your total compensation, including but not limited to the Corporation’s Stock Option Plans, 401(k) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or any substitute plans adopted prior to the change of control in the Corporation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation in it (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control;

(F)           [Only if applicable] the failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporation’s life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control of the Corporation, the failure to continue to provide you with a Corporation automobile or allowance in lieu of it, if you were provided with such an automobile or allowance in lieu of it at the time of the change of control of the corporation, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Corporation, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation’s normal vacation policy in effect at the time of the change in control of the Corporation;

(G)           The failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 of this Agreement; or

(H)           Any purported termination of your contracted services which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (4) below (and, if applicable, the requirements of Subsection (2) above); for purposes of this Agreement, no such purported termination shall be effective.

(I)Any demand by the Corporation for you to pursue a course of action or conduct, which would expose you to possible sanctions by the State Bar or Texas or the Alabama State Bar for violation(s) of their Codes of Professional Conduct (Ethics).

Your rights to terminate your contracted services pursuant to this Subsection 3 (A)-(F) shall not be affected by your incapacity due to physical or mental illness. Your continued contracted services shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason under this Agreement. In the event you deliver Notice of Termination based upon circumstances set forth in Paragraph (A), (E), (F), (G) or (H) above, which are fully corrected prior to the Date of Termination set forth in your Notice of Termination, such Notice of Termination shall be deemed withdrawn and of no further force or effect.

(4)           Notice of Termination. Any purported termination of your contracted services by the Corporation or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 of this Agreement. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your contracted services under the provision so indicated.

(5) Date of Termination, Etc. “Date of Termination” shall mean (A) if your contracted services is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period), and (B) if your contracted services is terminated pursuant to Subsection 3A(2) or (3) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection 3A(2) above shall not be less than 30 days, and in the case of a termination pursuant to Subsection 3A(3) above shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given); provided that if within 15 days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base payment) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement except to the extent otherwise provided in subsection 4D.

4.           Compensation Upon Termination or During Disability. Following a change in control of the Corporation, as defined by Section 2, upon termination of your contracted services or during a period of disability you shall be entitled to the following benefits:

A.           During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, you shall continue to receive your base payment at the rate in effect at the commencement of any such period, together with all amounts payable to you under any compensation plan of the Corporation during such period, until this Agreement is terminated pursuant to Section 3 above. Thereafter, or in the event your contracted services shall be terminated by the Corporation or by you for Retirement, or by reason of your death, your benefits shall be determined under the Corporation’s retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs.

B.           If your contracted services shall be terminated by the Corporation for Cause or by you other than for Good Reason, Disability, death or Retirement, the Corporation shall pay you your full base payment through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.

C.           If your contracted services by the Corporation shall be terminated (i) by the Corporation other than for Cause, Retirement or Disability or (ii) by you for Good Reason, then you shall be entitled to the benefits provided below:

(1)           The Corporation shall pay you your full base payment through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts and benefits to which you are entitled under any compensation plan of the Corporation, at the time such payments are due, except as otherwise provided below.

(2)           In lieu of any further payment payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs C and D, below, the “Severance Payments”) equal to two times the sum of your annual base payment in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect of them, plus 1,500,000 shares of the Corporation’s common stock (as adjusted for any subsequent stock splits or recapitalization of the shares).

(3)           The Corporation shall pay to you any deferred compensation, including, but not limited to deferred bonuses, allocated or credited to you or your account as of the Date of Termination.

(4)           In lieu of shares of common stock of the Corporation (the “Corporation’s Shares”) issuable upon exercise of outstanding options (“Options”), if any, granted to you under the Corporation’s Stock Option Plans (which Options shall be cancelled upon the making of the payment referred to below) you shall receive an amount in cash equal to the product of (i) the excess of the closing price of the Corporation’s Shares as reported on the NASDAQ-NMS Automatic Quotation System on or nearest the Date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the Date of Termination), over the per share exercise price of each Option held by you (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Corporation’s Shares covered by each such Option.

(5)           The Corporation shall also pay to you all legal fees and expenses incurred by you as a result of such termination including all such fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) to any payment or benefit provided under this Agreement)).

(6)           The payments provided for in subparagraphs (B), (C), and (D) above, shall be made no later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount can be determined but in no event later than the 30th day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

D.           In the event that you are a “disqualified individual” within the meaning of Section 280G of the Code, the parties expressly agree that the payments described in this Section 4 and all other payments to you under any other agreements or arrangements with any persons which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively subject to an overall maximum limit. Such maximum limit shall be $1 less than the aggregate amount which would otherwise cause any such payments to be considered a “parachute payment” within the meaning of Section 280G of the Code, as determined by the Corporation. Accordingly, to the extent that such payments would be considered a “parachute payment” with respect to you, then the portions of such payments shall be reduced or eliminated in the following order until the remaining change of control termination payments with respect to you is within the maximum described in this subsection (iv):

(1)           First, any cash payment to you;

(2)           Second, any change of control termination payments not described herein; and

(3)           Third, any forgiveness of indebtedness of yours to the Corporation.

You expressly and irrevocably waive any and all rights to receive any change of control termination payments, which exceed the maximum limit described in this subsection D.

E.           You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other contracted services or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of contracted services by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise except as specifically provided in this Section 4.

F.           In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under the Corporation’s 401(k) Pre-Tax Retirement Savings Plan and any other plan or agreement relating to retirement benefits.

6.           Successors; Binding Agreement.

A.           The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled to under this Agreement if you terminate your contracted services for Good Reason following a change in control of the Corporation, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Corporation” shall mean the Corporation as defined above and any successor to its business and/or assets as which assumes and agrees to perform this Agreement by operation of law, or otherwise.

B.           This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, heirs, distributees, and legatees. If you should die while any amount would still be payable to you if you had continued to live, all such amounts, unless otherwise provided in this Agreement, shall be paid in accordance with the terms of this Agreement to your legatee or other designee or, if there is no such designee, to your estate.

6.           Notice. For the purpose of this Agreement, all notices and other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the signature page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance with this Agreement, except that notice of change of address shall be effective only upon receipt.

7.           No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party to this Agreement at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for shall be paid net of any applicable withholding or deduction required under federal, state or local law. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement.

8.           Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

9.           Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

10.           Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in the State of Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

11.           Entire Agreement. This Agreement sets forth the entire understanding of the parties with respect to its subject matter and supersedes all prior written or oral agreements or understandings with respect to such subject matter.

If this letter sets forth our agreement on its subject matter, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

STW RESOURCES HOLDING CORP.

X______________________________________

By:           Manfred E. Birnbaum, Director and Member of Compensation Committee

Agreed to effective February 01, 2015

X ___________________________

D. Grant Seabolt, Jr.

EX-21.1

Exhibit 21.1

List of Subsidiaries

1.   STW Energy Services, LLC

2.   STW Oilfield Construction, LLC

3.   STW Pipeline Maintenance & Construction, LLC

4.   STW Water Process & Technologies, LLC

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stanley Weiner, certify that:

(1)           I have reviewed this annual report on Form 10-K of STW Resources Holding Corp., (Registrant).

(2)           Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)           Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b)  evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)           The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrants auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     (a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

     (b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: April 2, 2015

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

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Miranda, certify that:

(1)           I have reviewed this annual report on Form 10-K of STW Resources Holding Corp., (Registrant).

(2)           Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)           Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b)  evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)           The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrants auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     (a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

     (b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: April 2, 2015

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

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18U.S.C.,SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, Stanley Weiner, the undersigned President and Chief Executive Officer of STW Resources Holding Corp., (the “Company”), herby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2014 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 2, 2015
	By:  /s/ Stanley Weiner
	Stanley Weiner
	President and CEO

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18U.S.C.,SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, Robert J. Miranda, the undersigned Chief Financial Officer of STW Resources Holding Corp., (the “Company”), herby certify that, to the best of my knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2014 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 2, 2015
	By:  /s/ Robert J. Miranda
	Robert J. Miranda
	CFO

XML

Related Party Transactions (Details) (Joshua Brooks, former Chief Operating Officer [Member], USD $)	12 Months Ended
	Dec. 31, 2014
Joshua Brooks, former Chief Operating Officer [Member]
Date of Agreement	Sep. 24, 2013
Amount of Personal Guaranty	$ 45,800
Guaranty Shares	63,667

XML

Income Taxes (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Taxes Details Narrative
Net Loss	$ 14,756,828	$ 7,032,955
Federal income tax net operating loss	$ 6,000,000

XML

Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Taxes Details
Income tax benefit at the U.S. statutory income tax	$ (5,017,321)	$ (2,391,205)
Change in fair value of derivative liability	32,603	871,052
Non-controlling interest in loss of subsidiary	30,677	16,464
Non-deductible penalties and other expenses	472,619	290,420
Valuation allowance	4,463,972	1,213,269
Total

XML

Notes Payable (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Unamortized debt discount	$ (20,362)	$ (107,221)
Total Debt	8,715,709	7,291,501
Less: Current Portion	(5,890,414)	(4,668,492)
Total Long Term Debt	2,825,295	2,623,009
CNotes 14% [Member]
Total Debt	2,296,342	2,904,736
CNotes 12% [Member]
Total Debt	100,000
Other Debt [Member]
Total Debt	43,280
GE Ionics [Member]
Total Debt	2,100,000	2,100,000
Deferred Compensation Notes [Member]
Total Debt	279,095	279,095
Revenue Participation Notes [Member]
Total Debt	2,337,500	852,702
Crown Financial Notes
Total Debt	702,697	683,036
DufraneNuclearShielding [Member]
Total Debt	725,000
Equipment contract [Member]
Total Debt	110,000	137,573
Capital Lease Obligations [Member]
Total Debt	$ 30,437	$ 23,300

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Taxes Tables

Reconciliation of tax on the Company's loss

	Years Ended December 31,
	2014			2013
Income tax benefit at the U.S. statutory income tax	$	(5,017,321	)	$	(2,391,205	)
Change in fair value of derivative liability		32,603			871,052
Non-controlling interest in loss of subsidiary		48,127			16,464
Non-deductible penalties and other expenses		472,619			290,420
Changes in Valuation allowance		4,463,972			1,213,269
Total	$	—		$	—

Net deferred tax assets recognized

	December 31, 2014			December 31, 2013
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,036,123		$	1,481,871
Accrual to Cash conversion		3,991,660			1,480,682
Stock based compensation		1,361,342			--
Depreciation		(38,995	)		(38,995	)
Charitable Contributions		37,400			18,768
Valuation allowance		(7,387,530	)		(2,942,326	)
Total	$	—		$	—

XML

Commitments and Contingencies (Details 1) (Joshua Brooks [Member], USD $)	Dec. 31, 2013
Joshua Brooks [Member]
2015	$ 324,000
2016	240,000
2017	240,000
2018	240,000
2019	120,000
Total minimum royalty payments	$ 1,164,000

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Stockholders’ Deficit (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2014
Number of Underlying Common Shares	17,058,466
Warrant 9 [Member]
Expire year	2015
Warrant 1 [Member]
Expire year	2014
Warrant 2 [Member]
Expire year	2014
Warrant 3 [Member]
Expire year	2014
Warrant 4 [Member]
Expire year	2014-2015
Warrant 5 [Member]
Expire year	2014
Warrant 6 [Member]
Expire year	2014
Warrant 7 [Member]
Expire year	2014
Warrant 8 [Member]
Expire year	2014
Warrant 10 [Member]
Expire year	2016
Warrant 11 [Member]
Expire year	2015
Warrant 12 [Member]
Expire year	2015
Notes 1 [Member]
Expire year	2014
Notes 2 [Member]
Expire year	2015
Notes 3 [Member]
Expire year	2014-2015
Notes 4 [Member]
Expire year	2015
Notes 5 [Member]
Expire year	2014
Notes 6 [Member]
Expire year	2014
Notes 7 [Member]
Expire year	2015
Maximum [Member] | Warrant 9 [Member]
Number of Underlying Common Shares	185,038
Exercise price	1.80
Warrant 1 [Member]
Number of Underlying Common Shares	250,000
Exercise price	24
Warrant 2 [Member]
Number of Underlying Common Shares	80,000
Exercise price	18
Warrant 3 [Member]
Number of Underlying Common Shares	250,000
Exercise price	48
Warrant 4 [Member]
Number of Underlying Common Shares	273,583
Exercise price	0.12
Warrant 5 [Member]
Number of Underlying Common Shares	30,250
Exercise price	1.2
Warrant 6 [Member]
Number of Underlying Common Shares	87,500
Exercise price	1.2
Warrant 7 [Member]
Number of Underlying Common Shares	91,667
Exercise price	1.2
Warrant 8 [Member]
Number of Underlying Common Shares	462,917
Exercise price	1.2
Warrant 9 [Member] | Minimum [Member]
Exercise price	1.20
Warrant 10 [Member]
Number of Underlying Common Shares	666,667
Exercise price	1.2
Warrant 11 [Member]
Number of Underlying Common Shares	33,333
Exercise price	1.2
Warrant 12 [Member]
Number of Underlying Common Shares	645,833
Exercise price	1.2
Warrant Total [Member]
Number of Underlying Common Shares	3,056,788
Notes 1 [Member]
Number of Underlying Common Shares	4,627,570
Exercise price	0.02
Notes 2 [Member]
Number of Underlying Common Shares	287,660
Exercise price	0.12
Notes 3 [Member]
Number of Underlying Common Shares	86,186
Exercise price	0.02
Notes 4 [Member]
Number of Underlying Common Shares	7,685,772
Exercise price	0.08
Notes 5 [Member]
Number of Underlying Common Shares	33,050
Exercise price	0.08
Notes 6 [Member]
Number of Underlying Common Shares	27,328
Exercise price	0.08
Notes 7 [Member]
Number of Underlying Common Shares	645,833
Exercise price	0.08
Common Stock Payable [Member]
Number of Underlying Common Shares	608,279

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Derivative Liability (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Derivative Liabilities Details 1
Beginning Balance	$ 1,630,985	$ 1,046,439
Value of derivative liability associated with JMJ note payable	42,592
Value of derivative liability attributable to conversion of notes payable and accrued interest	(694,149)
Change in derivative liability associated with conversion of notes payable and accrued interest	(272,980)
Reclassification of derivative liability due to increased share authorization		(1,977,372)
Change in fair value	(95,892)	(2,561,918)
Ending Balance	$ 802,340	$ 1,630,985

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Commitments and Contingencies (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Commitments And Contingencies Details Narrative
Operating leases	$ 4,041,793	$ 78,558
Principal balance on capital lease	30,438	14,292
Equipment rental used on projects	3,600,000
Related party rental expense	$ 472,450	$ 14,292

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Income Taxes (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Deferred noncurrent tax asset:
Net operating loss carry-forward	$ 2,036,123	$ 1,481,871
Accrual to Cash conversion	3,991,660	1,480,682
Stock based compensation	1,361,342
Depreciation	(38,995)	(38,995)
Charitable contributions	3,740	18,768
Valuation allowance	(7,387,530)	(2,942,326)
Total

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Investment in Black Wolf, LLC

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Investment in Black Wolf, LLC

On January 8, 2013, the Company and Black Pearl Energy, LLC ("BPE"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, and one of our directors: Grant Seabolt, entered into an equity exchange agreement (the “Exchange Agreement”) pursuant to which BPE transferred 10% of the outstanding membership interests of Black Wolf Enterprises, LLC, (“Black Wolf”) to the Company in exchange for 7,000,000 shares of the Company’s common stock (the "Pearl Shares"). The Pearl Shares, although supposed to be issued after we amended our articles of incorporation to increase our authorized share capital, were never issued. Other than the Pearl Shares, the Exchange Agreement did not obligate STW to provide any other assets or commitments in consideration of the transaction contemplated thereby. The transaction contemplated by the Agreement - the transfer of ownership in Black Wolf - closed on January 28, 2013. At the time of the Exchange Agreement, Black Wolf commercialized the expertise and services of Lone Wolf Resources, LLC, an environmental and civil construction company operating in the oil and gas industry (“Lone Wolf”). Lone Wolf has worked with the Department of Transportation and the Texas Commission on environmental quality to shape the standards for processing hydrocarbon-impacted soils to a reusable road base. Lone Wolf has completed projects internationally and throughout the United States, including the world's largest in-situ thermal remediation project. BPE is an oilfield service company that has developed an evaporation cover that is conservation friendly, economical and can be floated on to existing ponds or installed during construction for the elimination of evaporation on frac ponds used throughout the oilfield. BPE also provides high quality liners with fusion-welded seams, quality control testing including air tests of seams and destruction testing in West Texas and Eastern New Mexico, and intends to expand into South Texas during the first quarter of next year. Black Wolf combines Lone Wolf’s and BPE’s services and constructs drill sites, reserve pits, frac ponds, roads, pit closings, liners, leak detection systems, evaporation covers, and provides associated maintenance.

Black Wolf also offers turnkey services for H-11 permitted ponds, including surveys, engineering and design, and permitting for storage of produced and brine waters as well as utilizes proprietary technologies employed by Lone Wolf in the reclamation of hydrocarbon-impacted soils. Black Wolf is currently negotiating on a number of multi-well packages with many of the largest oil and gas producers in West Texas. After 4 months of operations, Lone Wolf initiated their termination clause with Black Pearl and Black Wolf. As a result, Black Wolf was dissolved and we sought to terminate the Exchange Agreement since our investment would no longer be of any value. On October 14, 2013, we entered into a Rescission Agreement with BPE, pursuant to which BPE has agreed to cancel the Exchange Agreement and unwind the transaction in its entirety; as part of the cancellation, we are not required to issue the Pearl Shares and BPE agreed to indemnify the Company from any and all potential liabilities associated with or arising out of the Black Pearl's business.

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Stockholders’ Deficit (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2014
Number of Underlying Common Shares	17,058,466
Holder [Member]
Number of Underlying Common Shares	14,442,977
Warrant 1 [Member]
Expire year	2014
Warrant 1 [Member] | Holder [Member]
Number of Underlying Common Shares	66,667
Exercise price	0.012
Expire year	2015
Warrant 2 [Member]
Expire year	2014
Warrant 2 [Member] | Holder [Member]
Number of Underlying Common Shares	185,038
Expire year	2015
Warrant 2 [Member] | Holder [Member] | Minimum [Member]
Exercise price	1.20
Warrant 2 [Member] | Holder [Member] | Maximum [Member]
Exercise price	1.80
Warrant 3 [Member]
Expire year	2014
Warrant 3 [Member] | Holder [Member]
Number of Underlying Common Shares	666,667
Exercise price	1.2
Expire year	2016
Warrant 4 [Member]
Expire year	2014-2015
Warrant 4 [Member] | Holder [Member]
Number of Underlying Common Shares	33,333
Exercise price	1.2
Expire year	2015
Warrant 5 [Member]
Expire year	2014
Warrant 5 [Member] | Holder [Member] | Minimum [Member]
Exercise price	1.20
Expire year	2015
Warrant 5 [Member] | Holder [Member] | Maximum [Member]
Number of Underlying Common Shares	2,682,645
Exercise price	1.50
Expire year	2016
Warrant Total [Member] | Holder [Member]
Number of Underlying Common Shares	3,634,350
Notes 1 [Member]
Expire year	2014
Notes 1 [Member] | Holder [Member]
Number of Underlying Common Shares	1,391,553
Exercise price	0.12
Notes 2 [Member]
Expire year	2015
Notes 2 [Member] | Holder [Member]
Number of Underlying Common Shares	164,513
Exercise price	0.72
Notes 3 [Member]
Expire year	2014-2015
Notes 3 [Member] | Holder [Member]
Number of Underlying Common Shares	5,854,260
Exercise price	0.48
Notes 4 [Member]
Expire year	2015
Notes 4 [Member] | Holder [Member]
Number of Underlying Common Shares	41,539
Exercise price	0.48
Common Stock Payable [Member] | Holder [Member]
Number of Underlying Common Shares	3,356,762

XML

Nature of Business and Significant Accounting Policies (Details 1)	12 Months Ended
	Dec. 31, 2014
Computer Equipment [Member]
Useful lives of Property, Plant and Equipment	3 years
Furniture and Fixtures [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Minimum [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Useful lives of Property, Plant and Equipment	5 years

XML

Nature of Business and Significant Accounting Policies (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Fair Value of Derivative Liability	$ 802,340	$ 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	$ 802,340	$ 1,630,985

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Stockholders’ Deficit (Details 3) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Number of Shares Under Warrants
Warrants outstanding at beginning of period	3,056,788	5,401,239
Warrants Issued	2,349,312	1,552,807
Warrants Exercised
Warrants Forfeited
Warrants Cancelled	(312,500)
Warrants Expired	(1,459,250)	(3,897,258)
Warrants outstanding at end of period	3,634,350	3,056,788
Warrants exercisable at end of period	3,634,350	3,056,788
Weighted Average Exercise Price
Warrants outstanding at beginning of period	$ 1.26	$ 5.16
Warrants Issued	$ 1.27	$ 1.26
Warrants Expired	$ 13.89	$ 1.92
Warrants outstanding at end of period	$ 1.27	$ 1.26
Warrants exercisable at end of period	$ 1.27	$ 1.26
Remaining Contractual Life (Years)
Warrants outstanding at beginning of period	1 year 26 days	1 year 22 days
Warrants Issued	1 year 5 months 16 days	2 years
Warrants outstanding at end of period	1 year 2 months 5 days	1 year 26 days
Warrants exercisable at end of period	1 year 2 months 5 days	1 year 26 days
Aggregate Intrinsic Value
Warrants outstanding at beginning of period	$ 131,320	$ 32,830
Warrants outstanding at end of period	851,313	131,320
Warrants exercisable at end of period	$ 851,313	$ 131,320

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Nature of Business and Significant Accounting Policies (Details Narrative) (USD $)	12 Months Ended		83 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014
Accumulated Deficit	$ (39,112,171)	$ (24,355,343)	$ (39,112,171)
Accrued sales and payroll taxes	2,594,128		2,594,128
Notes payable in default	3,192,305		3,192,305
Raised net equity and debt financing			18,000,000
Cash on hand	123,629	17,301	123,629
Total revenues including service contracts	18,608,028	1,945,631
Common Stock equivalents outstanding	14,442,977	14,442,977	14,442,977
Proceeds from stock subscriptions and unit offering	27,000	310,000	27,000
Stock subscription and unit offering, shares	2,353,414	645,833	2,353,414
Stock subscriptions payable cancelled	150,000
stock subscriptions payable cancelled, shares	312,500
stock subscriptions payable remained	27,000		27,000
stock subscriptions payable remained, shares	41,539		41,539
Shares issued for consulting fees, value	788,625	434,000
Consulting [Member]
Total revenues including service contracts		534,000
Shares issued for consulting fees, commitment	4,813,465	12,449,673
Shares issued for consulting fees, value, commitment	4,517,379	826,897
Shares issued for consulting fees	2,061,985	1,466,667
Shares issued for consulting fees, value	1,965,566	595,000
Shares issuable under commitment	3,359,762	608,279	3,359,762
Shares issuable under commitment, value	2,783,711	231,897	2,783,711
Oil & Gas Services [Member]
Total revenues including service contracts	18,227,371	1,408,996
Revenue from related parties	2,079,269	347,550
Water Reclamation [Member]
Total revenues including service contracts	$ 380,657	$ 2,735
Three Vendors [Member]
Percent of accounts payable	20.00%	69.00%	20.00%
Two Vendors [Member]
Concentration risk	64.00%	28.00%
Customer One [Member]
Percent of accounts receivable	43.00%	42.00%	43.00%
Percent of revenues	39.00%	27.00%
Customer Two [Member]
Percent of accounts receivable	11.00%	17.00%	11.00%
Percent of revenues	11.00%	22.00%
Customer Three [Member]
Percent of accounts receivable	3.00%	17.00%	3.00%
Percent of revenues	7.00%	17.00%

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Property and Equipment (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Property And Equipment Details
Office furniture and equipment	$ 21,806	$ 16,838
Tools and yard equipment	7,661	2,302
Vehicles and construction equipment	1,231,742	798,273
Leasehold improvements	15,933
Water wells under development	341,359
Total, cost	1,618,501	817,413
Accumulated Depreciation and Amortization	(180,502)	(70,775)
Total Property and Equipment	$ 1,437,999	$ 746,638

XML

Property and Equipment

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Property and Equipment

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

	December 31, 2014			December 31, 2013
Office furniture and equipment	$	21,806		$	16,838
Tools and yard equipment		7,661			2,302
Vehicles and construction equipment		1,231,742			798,273
Leasehold improvements		15,933			--
Water wells under development		341,359			--
Total, cost		1,618,501			817,413
Accumulated Depreciation and Amortization		(180,502	)		(70,775	)
Total Property and Equipment	$	1,437,999		$	746,638

Depreciation expense for the years ended December 31, 2014 and 2013 was $237,915 and $60,380, respectively.

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Property and Equipment (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Notes to Financial Statements
Depreciation Expense	$ 237,915	$ 60,380

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Related Party Transactions (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accrued commissions payable	$ 1,335,378	$ 976,613
Common stock value, related party	28,197	18,543
Notes Payable	3,192,305
Weiner [Member]
Consulting fees incurred	150,000	150,000
Salary and consulting fees payable	413,083	263,083
Maddox [Member]
Consulting fees incurred	75,000	150,000
Salary and consulting fees payable	220,500	170,500
Seabolt [Member]
Consulting fees incurred	90,000	90,000
Salary and consulting fees payable	179,797	121,083
Miranda & Associates [Member]
Services expense	449,496	63,107
Advance paid to related parties	182,110
Common stock paid to related parties	120,292
Common stock value	72,175
Accrued professional fees	219,271	24,060
Due to related parties	64,271
Related party payable, cash	155,000
Related party payable, common stock	206,667
Dufrane [Member]
Consulting fees incurred		180,000
Initial grant		60,000
Accrued professional fees		150,000
Due to related parties		132,490
Related party payable, cash		593,358
Stock Subscription payable		150,000
Notes Payable		725,000
Joshua Brooks [Member]
Consulting fees incurred	90,000	30,000
Common stock value	120,000
Due to related parties		30,000
Related party payable, cash	333,333
President [Member]
Consulting fees incurred	180,000	18,461
Services expense	107,692
STW Pipeline Maintenance & Construction/Adam Jennings [Member]
Due to related parties	121,000	27,000
Related party payable, common stock	142,000
Related party sales	48,328
Signing bonuses	266,667
Alan Murphy [Member]
Due to related parties	333,333
Related party payable, cash	200,000
DiFrancesco [Member]
Salary and consulting fees payable	75,000
Related party payable, cash	282,500
Related party payable, common stock	538,870
Common stock value, related party	277,500
Board of Directors [Member]
Salary and consulting fees payable	562,500	602,849
Due to related parties	496,067	491,924
Related party payable, cash		43,500
Related party payable, common stock	930,261	840,625
Common stock value, related party	558,157	302,625
Black Pearl Energy, LLC [Member]
Due to related parties	1,371,305	139,763
Related party sales	2,079,269	347,550
Due from related party	519,789
Crown Financial [Member]
Due to related parties	$ 2,035,495

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Segment Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Segment Operations
Revenues	$ 18,608,028	$ 1,945,631
Cost of revenues	17,553,588	1,675,314
Operating expenses	13,816,743	3,584,440
Other income (expense)	(2,136,075)	(3,767,256)
Segment income (loss)	(14,898,378)	(7,081,379)
Segment Assets
Current Assets	5,178,123	583,581
Fixed assets	1,437,999	746,638
Other assets	97,121	185,428
Segment Assets	6,713,243	1,515,647
Water Reclamation [Member]
Segment Operations
Revenues	380,657	2,735
Cost of revenues	312,277	472,978
Operating expenses	1,283,862	102,210
Other income (expense)
Segment income (loss)	(1,215,482)	(38,453)
Segment Assets
Current Assets	1,369,434	1,369,434
Fixed assets	837,602	837,602
Other assets
Segment Assets	2,207,036	2,207,036
Oil & Gas Services [Member]
Segment Operations
Revenues	18,227,371	1,408,996
Cost of revenues	17,241,311	1,202,336
Operating expenses	3,468,949	763,900
Other income (expense)		(3,160,713)
Segment income (loss)	(2,482,889)	2,603,374
Segment Assets
Current Assets	3,561,024	579,541
Fixed assets	524,219	694,219
Other assets
Segment Assets	4,085,243	1,273,760
Corporate Operations [Member]
Segment Operations
Revenues
Cost of revenues
Operating expenses	9,063,932	2,718,330
Other income (expense)	(2,136,075)	(3,767,256)
Segment income (loss)	(11,200,007)	(6,485,586)
Segment Assets
Current Assets	247,665	4,040
Fixed assets	76,178	52,419
Other assets	97,121	185,428
Segment Assets	$ 420,964	$ 241,887

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Condensed Consolidated Balance Sheets (USD $)	Dec. 31, 2014	Dec. 31, 2013
Current assets
Cash	$ 123,629	$ 17,301
Accounts receivable	3,710,180	532,910
Accounts receivable from related parties	519,789
Deferred Project Costs	480,000
Prepaid expenses and other current assets	344,525	33,370
Total current assets	5,178,123	583,581
Property and equipment, net	1,437,999	746,638
Other Assets
Deferred loan costs, net	97,121	185,428
TOTAL ASSETS	6,713,243	1,515,647
Current liabilities
Bank overdraft		30,468
Accounts payable	4,523,265	1,256,043
Payable to related parties:
Black Pearl Energy, LLC	1,371,305	139,763
Crown Financial, LLC	2,035,495
Dufrane Nuclear, Inc.		132,490
Accrued compensation - officers	873,380	584,666
Current portion of notes payable, net of discounts, $1,700,394 and $854,928 payable to related parties	5,890,414	4,668,492
Sales and payroll taxes payable	2,671,843	350,074
Insurance premium finance contract payable	208,271
Accrued expenses and interest	1,769,117	1,839,439
Deferred Revenue	680,000
Accrued compensation	643,777	285,190
Accrued board compensation	496,067	491,724
Fees payable in common stock, including $1,173,500 payable to related parties	2,783,711	231,897
Stock subscriptions payable	27,000	310,000
Derivative liability	802,340	1,630,985
Total current liabilities	24,775,985	11,951,231
Notes payable, net of discount and current portion, related parties	2,825,295	2,623,009
Total liabilities	27,601,280	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 December 31, 2014 and December 31, 2013
Common stock $0.001 par value 191,666,667 shares authorized, 28,194,953 and 18,542,642 shares issued and outstanding as of December 31, 2014 and 2013, respectively	28,197	18,543
Additional paid-in capital	18,383,411	11,324,131
Accumulated deficit	(39,112,171)	(24,355,343)
Total Stockholders' Deficit of STW Resources	(20,700,563)	(13,012,669)
Non-controlling interest in subsidiary	(187,474)	(45,924)
Total Stockholders' Deficit	(20,888,037)	(13,058,593)
Total Liabilities and Stockholders' Deficit	$ 6,713,243	$ 1,515,647

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Stockholders’ Deficit (Details Narrative) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Stockholders Equity Details Narrative
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized shares	10,000,000	10,000,000
Common stock, par value	$ 0.0001	$ 0.001
Common stock, authorized shares	191,666,667	41,666,667

XML

Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net Loss	$ (14,898,378)	$ (7,081,379)
Adjustments to reconcile net loss of STW Resources to net cash used in operations operating activities:
Depreciation	237,915	60,380
Change in fair value of derivative liability	95,892	2,561,918
Loss on disposition of property and equipment	44,820
Financing costs of notes payable	69,299
Change in fair value of debt instruments converted to equity	(272,980)
Amortization of discount and debt issuance costs	230,723	164,549
Share-based compensation	5,079,879	826,897
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable	(3,177,270)	(527,870)
(Increase) Decrease in deferred project costs	(480,000)
(Increase) Decrease in prepaid expense	(311,155)	55,567
Increase (Decrease) in accounts payable	3,267,222	459,649
Increase (Decrease) in sales and payroll taxes payable	2,321,769	350,074
Increase (Decrease) in insurance premium contract payable	208,271
Increase (Decrease) in deferred revenue	680,000	(97,346)
Increase (Decrease) in accrued compensation	358,587	157,525
Increase (Decrease) in accrued expenses and interest	1,335,378	976,613
Increase (Decrease) in accrued board compensation		559,349
Net cash used in operating activities	(5,210,028)	(1,534,074)
Cash flows used in investing activities
Purchases of vehicles and equipment	(927,180)	(608,372)
Net cash used in investing activities	(927,180)	(608,372)
Cash flows provided from financing activities
Bank overdraft (repayment)	(30,468)	30,468
Stock subscriptions payable	27,000	310,000
Related party accounts receivables	(435,759)
Related party accounts payables, credit facilities, notes, and advances	3,998,260	568,985
Proceeds from notes payable	1,812,137	1,320,611
Principal payments on notes payable	(349,134)	(97,662)
Proceeds from issuance of common stock	1,221,500
Non-controlling interest contributions		2,500
Debt issuance costs		(35,025)
Net cash provided from financing activities	6,243,536	2,099,877
Net increase (decrease) in cash	106,328	(42,569)
Cash at beginning of year	17,301	59,870
Cash at end of year	123,629	17,301
Supplemental cash flow information:
Cash paid for interest	29,397	10,413
Non-cash investing and financing activities:
Value of warrants issued as debt issuance costs	26,710	171,996
Value of common shares issued from stock subscriptions payable	160,000
Value of common shares issued as a charitable contribution	110,000
Value of warrants issued with revenue participation notes payable		65,555
Value of common shares issued to board and advisory board for accrued fees	558,157	302,625
Value of common shares issued to consultants	775,575	434,000
Value of common shares issued to employees as compensation	1,011,375	161,000
Value of property, plant & equipment acquired with long term debt		247,004
Value of common shares issued as consideration for extension of notes payable term	68,616
Reclassification of derivative liability due to increased share authorization		1,977,372
Notes and interest settled in stock		66,209
Value of shares issued upon conversion of notes payable and accrued interest	1,852,076
Value of beneficial conversion feature of note payable	50,000
Value of derivative associated with converted notes payable	694,149
Value of common shares issued in payment of accrued PIK interest	$ 540,777

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Notes Payable (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2011
Warrants issued	32,407,434	3,056,788	29,803,434
Annual dividend yield	0.00%	0.00%
Expected volatility	735.00%	623.00%
Common stock, authorized shares	191,666,667	41,666,667
Total Debt	$ 8,715,709	$ 7,291,501
note payable to an accredited investor, amount	349,134	97,662
STW original debt with GE, amount	1,573,000
Revenue Participation Notes balance	2,337,500
Interest expense, notes payable	655,371	1,205,338
Amortization of debt discount and debt issuance costs	44,675	164,549
Net deferred loan costs	(47,167)	(185,428)
Unamortized debt discount	80,735	107,221
Monthly lease payment		593
Capital lease obligation
Lease interest rate		10.00%
Minimum [Member]
Expected life (years)	5 months 19 days	5 months 19 days
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)	7 months 6 days	7 months 6 days
Risk-free interest rate	0.25%	0.25%
Maximum [Member] | Machinery and Equipment [Member]
interest rate of debt	8.00%
Capital Lease Obligations [Member]
Total Debt	30,437	23,300
Effective interest rate	12.00%
Interest expense, notes payable	2,089,356	1,205,338
Amortization of debt discount and debt issuance costs	230,723	164,549
Net deferred loan costs	190,742	102,435
Unamortized debt discount	20,362	107,221
Capital lease obligation	14,854
Lease interest rate	10.00%
Accumulated amortization	97,121	185,428
DufraneNuclearShielding [Member]
warrants exercise price	$ 0.20
Estimated fair value of warrants	159,996
Total Debt	725,000
Loan facility amount outstanding	683,036
interest rate of debt	18.00%
Interest expense, notes payable	1,788
Capital lease obligation	43,541
Crown Financial Notes
Warrants issued	666,667
warrants exercise price	$ 1.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	159,996
Total Debt	702,697	683,036
interest rate of debt	15.00%
Interest expense, notes payable	32,461	113,623
ParticipationNote 4 [Member]
Warrants issued	69,039
warrants exercise price	$ 0.20
Annual dividend yield		0.00%
Expected life (years)		2 years
Risk-free interest rate		0.25%
Expected volatility		623.00%
Estimated fair value of warrants	27,153
notes convertible into common stock share	287,660
Aggregate principal balance of notes	115,000
Total Debt	207,115
interest rate of debt		6.00%
Effective interest rate		8.10%
Revenue receivable initial rate		50.00%
note discount		27,015
proceeds to company		180,100
ParticipationNote 3 [Member]
Warrants issued	100,833
warrants exercise price	$ 1.20
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	1,624
Aggregate principal balance of notes	302,500
interest rate of debt	12.00%
Revenue Participation Notes balance	182,000
Revenue receivable initial rate	50.00%
CNotes 14% [Member]
Warrants issued	3,361,312
warrants exercise price	$ 1.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Expected volatility	100.00%
Estimated fair value of warrants	81,656
Embedded conversion feature at issuance	35,546
notes convertible into common stock share	5,854,260
Common stock, authorized shares	41,666,667
Derivative liability to equity	1,977,372
Aggregate principal balance of notes	2,296,342	2,904,736
shares issued in consideration, value amount	64,078
Total Debt	2,296,342	2,904,736
Total debt matured and in default	688,210
Notes payable to related parties	171,892
CNotes 14% [Member] | Minimum [Member]
Risk-free interest rate	0.17%
CNotes 14% [Member] | Maximum [Member]
Risk-free interest rate	0.33%
CNotes 12% [Member]
Warrants issued	273,583
warrants exercise price	$ 0.12
notes convertible into common stock share	1,391,553
Common stock, authorized shares	1,137,417
Derivative liability to equity	272,980
Aggregate principal balance of notes	225,000
shares issued in consideration, value amount	614,205
Total Debt	100,000
Accrued interest	116,225
Other Debt [Member]
Warrants issued	200,000
warrants exercise price	$ 0.20
Estimated fair value of warrants	12,000
Total Debt	43,280
unsecured loan agreement, amount		30,000
interest rate of debt		8.00%
unpaid principal balance of unsecured loan		30,000
GE Ionics [Member]
Total Debt	2,100,000	2,100,000
Default note rate		10.00%
STW original debt with GE, amount	11,239,437
Deferred Compensation Notes [Member]
Total Debt	279,095	279,095
Revenue Participation Notes [Member]
Total Debt	2,337,500	852,702
ParticipationNote 1 [Member]
Warrants issued	27,500
warrants exercise price	$ 1.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.33%
Expected volatility	100.00%
Aggregate principal balance of notes	165,000
interest rate of debt	12.00%
Revenue Participation Notes balance	165,000
Revenue receivable initial rate	50.00%
Revenue receivable subsequent rate	10.00%
Revenue payable maximum amount	295,000
Cash fees related to issuance of notes	16,500
Warrants issued related to cash fees due for issuance of notes	2,750
ParticipationNote 2 [Member]
Warrants issued	100,833
warrants exercise price	$ 1.20
Annual dividend yield	0.00%
Expected life (years)	2 years
Risk-free interest rate	0.25%
Expected volatility	623.00%
Estimated fair value of warrants	33,398
Aggregate principal balance of notes	302,500
interest rate of debt	12.00%
Revenue Participation Notes balance	302,500
Revenue receivable initial rate	50.00%
Equipment contract [Member]
Total Debt	$ 110,000	$ 137,573

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2014

Notes Payable Tables

Notes Payable

Name	2014			2013
14% Convertible Notes	$	2,296,342		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		55,000			43,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		2,337,500			852,702
Note payable to Crown Financial LLC, a related party		702,697			683,036
Note payable to Dufrane Nuclear Shielding, LLC, a related party		725,000			--
Equipment finance contracts		110,000			137,573
Capital lease obligations		30,437			23,300
Unamortized debt discount		(20,362)			(107,221)
Total Debt		8,715,709			7,291,501
Less: Current Portion		(5,890,414	)		(4,668,492	)
Total Long Term Debt	$	2,825,295		$	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		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,573,000
Total revenue participation notes	$	2,337,500

XML

Derivative Liability (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Annual dividend yield	0.00%	0.00%
Expected volatility	735.00%	623.00%
Minimum [Member]
Expected life (years)	5 months 19 days	5 months 19 days
Risk-free interest rate	0.11%	0.11%
Maximum [Member]
Expected life (years)	7 months 6 days	7 months 6 days
Risk-free interest rate	0.25%	0.25%
FairValueInputsLevel3Member
Embedded conversion Options	751,439	1,467,579
Warrants	50,901	163,406
Increase (Decrease) in fair value	802,340	1,630,985

XML

Stockholders' Deficit (Tables)

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Amendment shares issued

Security	Number  of Underlying Common Shares		ExerciseP rice		Expire
Warrants issued for Professional Services		250,000		24		2014
Warrants associated with the January 14, 2009 Bridge Note		80,000		18		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		250,000		48		2014
Warrants associated with the 12% Convertible Notes		273,583		0.12		2014-2015
Warrants associated with 2012 Revenue Participation Notes		30,250		1.2		2014
Warrants associated with May 2012 Subscription Agreement		87,500		1.2		2014
Warrants associated with June-September 14% Convertible Notes		91,667		1.2		2014
Warrants associated with November 14% Convertible notes		462,917		1.2		2014
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20 – 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with November 2013 Unit Share Offering		645,833		1.2		2015
Sub-total of Warrants outstanding		3,056,788
Common stock associated with the 12% Convertible Notes plus accrued interest		4,627,570		0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		287,660		0.12		2015
12/31/2013 Accrued Default interest		86,186		0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		7,685,772		0.08		2015
12/31/2013 Accrued Default interest		33,050		0.08		2014
12/31/2013 Calibre Note interest		27,328		0.08		2014
Common stock associated with November 2013 Unit Share Offering		645,833		0.08		2015
Common stock payable as fees		608,279	various			2014
Total securities		17,058,466

Securities to acquire common stock outstanding

Security	Number of Underlying Common Shares		Exercise Price		Expire
Warrants associated with the 12% Convertible Notes		66,667		0.012		2015
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20– 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with 2013 and 2014 Unit Share Offerings		2,682,645		1.20– 1.50		2015 - 2016
Sub-total of Warrants outstanding		3,634,350
Common stock associated with the 12% Convertible Notes plus accrued interest		1,391,553		0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		164,513		0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		5,854,260		0.48		N/A
Common stock associated with 2013 and  2014 Unit Share Offerings		41,539		0.48		N/A
Common stock payable as fees		3,356,762	various
Total		14,442,977

Warrant activity

A summary of the Company’s warrant activity and related information during the year ended December 31, 2014 follows:

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2013		5,401,239		$	5.16	1.06	$	32,830
Issued		1,552,807			1.26	2.0
Exercised		--
Forfeited		--
Cancelled		--
Expired		(3,897,258	)		1.92
Outstanding at December 31, 2013		3,056,788		$	1.26	1.07	$	131,320
Exercisable		3,056,788		$	1.26	1.07	$	131,320
Outstanding at January 1, 2014		3,056,788		$	4.29	1.07	$	131,320
Issued		2,349,312			1.27	1.46
Exercised		--
Forfeited		--
Cancelled		(312,500	)
Expired		(1,459,250	)		13.89
Outstanding at December 31, 2014		3,634,350		$	1.27	1.18	$	851,313
Exercisable		3,634,350		$	1.27	1.18	$	851,313

XML

Nature of the Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Nature of the Business and Significant Accounting Policies

History of the Company

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

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. 

Formation of New Subsidiaries

Effective April 16, 2014, the Company formed another new subsidiary, STW Water Process & Technologies, LLC (“Water Process”), a Texas limited liability company. The Company is the sole member of Water Process, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation policy

The consolidated financial statements for the years ended December 31, 2014 and 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, STW Water Process & Technologies, LLC, and 75% owned subsidiary of STW Energy Services, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

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

Non-Controlling interest

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

Going Concern and Management's Plans

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $39,112,171 as of December 31, 2014, and as of that date was delinquent in payment of $2,594,128 of sales and payroll taxes. As of December 31, 2014, $3,192,305 of notes payable are in default. Since its inception in January 2008 through December 31, 2014, management has raised equity and debt financing of approximately $18,000,000 to fund operations and provide working capital. The cash resources of the Company are insufficient to meet its planned business objectives without additional financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.

There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

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

Use of Estimates

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

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2014, there were no uninsured deposits.

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

As of December 31, 2014, three vendors accounted for 20% of total accounts payable. During the year ended December 31, 2014, two vendors accounted for 69% of total purchases. As of December 31, 2013, three vendors accounted for 64% of total accounts payable. During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.

As of December 31, 2014, three customers accounted for 43%, 11% and 3% of accounts receivable. During the year ended December 31, 2014, three customers accounted for 39%, 11% and 7% of total revenues. As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.

Fair Value of Financial Instruments

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

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

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

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities.

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.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment.

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

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

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant.

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

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

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2014 and 2013.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2014	$	--	$	--	$	802,340	$	802,340
December 31, 2013	$	--	$	--	$	1,630,985	$	1,630,985

Accounting for Derivative Liabilities

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

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

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

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

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

Long-lived Assets and Intangible Assets

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

The Company had no such asset impairments at December 31, 2014 or 2013. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Services Revenues from Master Services Agreements

During the years ended December 31, 2014 and 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 realizes revenues from these contracts as the services are performed and signed off by the customer; revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

During the year ended December 31, 2014, the Company recognized $18,227,371 of revenues from its oil & gas and water reclamation services contracts, of which $2,079,269 were revenue from related parties. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

Services Revenues from Water Reclamation Services

The Company provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations. Revenues are recognized when the services are performed or the equipment is delivered to the customer. During the years ended December 31, 2014 and 2013, the Company realized $380,657 and $2,735, respectively, of revenues from services and product sales of its water reclamation business segment.

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. The Company recognizes revenue on a contract once the services or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonable assured and amounts are fixed and determinable. During the year ended December 31, 2013, the Company realized $534,000 of contract revenues from this project.

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 Note 11.

Income Taxes

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

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

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns. The Company files income tax returns in the U.S. federal jurisdiction and Texas jurisdiction. All tax years remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. The Company’s periodic tax returns filed in 2010 and, thereafter, are subject to examination by state taxing authorities in accordance with normal statutes of limitations in the applicable jurisdictions.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits. The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2014 and 2013. The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2014 and December 31, 2013, respectively.

Comprehensive Loss

The Company does not  have any components of other comprehensive income (loss) as defined by ASC 220, "Reporting Comprehensive Income." For the years ended December 31, 2014 and 2013, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

Common Stock, Common Stock Options, and Common Stock Warrants Issued to Employees

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

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

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the anti-dilutive effect on losses. As of December 31, 2014, the Company had 14,442,977 dilutive shares outstanding, which have been excluded as their effect is anti-dilutive.

Property and Equipment

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

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

Stock Subscriptions Payable

During the year ended December 31, 2014, the Company received $1,248,500 of proceeds from unit offerings of its common stock in consideration of 2,353,414 shares of its common stock. During the year ended December 31, 2014, the Company cancelled $150,000 of stock subscriptions payable for 312,500 shares of its common stock. As of December 31, 2014, the Company has 41,539 shares remaining to be issued from stock subscriptions at a value of $27,000.

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from unit offerings of its common stock in consideration of 645,833 shares of its common stock. The stock was not issued as of December 31, 2013 and $310,000 was reported as Stock Subscriptions Payable as of December 31, 2013.

Fees Payable in Common Stock

During the year ended December 31, 2014, the Company agreed to issue an aggregate of 4,813,465 shares of its common stock, net of 382,879 of cancelled shares, in payment of consulting fees and employee incentives valued at an aggregate of $4,517,379. During the year ended December 31, 2014, the Company issued 2,061,985 shares of its common stock as fees payable in common stock at an aggregate value of $1,965,566. As of December 31, 2014, the Company has 3,359,762 shares remaining to be issued associated with this obligation at an aggregate value of $2,783,711.

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 2,074,946 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 1,466,667 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 608,279 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on disclosure of uncertainties about an entity's ability to continue as a going concern. The new standard provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In June 2014, the FASB issued a new standard on accounting for share-based payments. The new standard clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant date fair value of the award. The new standard also clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite service has already been rendered. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In May 2014, the FASB issued a new standard on recognizing revenue in contracts with customers. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new standard creates a five-step process to recognize revenue that requires entities to exercise judgment when considering contract terms and relevant facts and circumstances. The new standard also requires expanded disclosures surrounding revenue recognition. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

Other recently issued accounting standards are not expected to have a material effect on the Company's consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Current liabilities
Notes payable to related parties	$ 1,700,394	$ 854,928
Fees payable to related parties	$ 1,173,500
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	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value	$ 0.0001	$ 0.001
Common stock, authorized shares	191,666,667	41,666,667
Common stock, issued shares	28,194,953	18,542,642
Common stock, outstanding shares	28,194,953	18,542,642

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Segment Information

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

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

	Year Ended December 31, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	380,657		$	18,227,371		$	--		$	18,608,028
Costs of revenues		312,277			17,241,311			--			17,553,588
Operating expenses		1,283,862			3,468,949			9,063,932			13,816,743
Other income (expense)		--			--			(2,136,075	)		(2,136,075	)
Segment income (loss)	$	(1,215,482	)	$	(2,482,889	)	$	(11,200,007	)	$	(14,898,378	)
	Year Ended December 31, 2013
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	536,735		$	1,408,896		$	--		$	1,945,631
Costs of revenues		472,978			1,202,336			--			1,675,314
Operating expenses		102,210			763,900			2,718,330			3,584,440
Other income (expense)		--			--			(3,767,256	)		(3,767,256	)
Segment income (loss)	$	(38,453	)	$	(557,340	)	$	(6,485,586	)	$	(7,081,379	)

Segment Assets

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	3,561,024	$	247,665	$	5,178,123
Fixed assets		837,602		524,219		76,178		1,437,999
Other assets		--		--		97,121		97,121
Segment Assets	$	2,207,036	$	4,085,243	$	420,964	$	6,713,243
	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	579,541	$	4,040	$	583,581
Fixed assets		--		694,219		52,419		746,638
Other assets		--		--		185,428		185,428
Segment Assets	$	--	$	1,273,760	$	241,887	$	1,515,647

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Apr. 02, 2015	Jun. 30, 2014
Document And Entity Information
Entity Registrant Name	STW RESOURCES HOLDING CORP.
Entity Central Index Key	0001357838
Document Type	10-K
Document Period End Date	Dec. 31, 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?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 12,894,724
Entity Common Stock, Shares Outstanding		31,683,150
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2014

XML

Subsequent Events

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Subsequent Events

Management evaluated all activity of the Company through April 2, 2015, the consolidated financial statements issuance date, and has concluded that no material subsequent events have occurred that would require recognition in the financial statements or disclosures in the notes to the financial statements, except as discussed below.

On January 22, 2015, the Company filed a Certificate of Amendment to increase the number of common stock shares from 41,666,667 to 191,666,667.

Issuance of convertible notes and common stock:

In January of 2015 the Company started to raise capital for the purpose of retiring some of the older loans with higher interest rates. To the date of this Report, the Company has issued $1,375,000 of new debt to 4 investors; after reductions for discounts and fees, the Company raised approximately $1,144,000 for that purpose. The new convertible notes bear interest of 5% through July 15, 2015, and  15% if in default and are convertible, subject to limitations, at $0.65. In connection with this funding, in February 2015, the Company issued 525,000 shares of common stock valued at $481,500 to the four investors as further inducement.

On January 15, 2015 the Company issued 62,500 shares of common stock to an investor, at a unit price of $1.59, in payment of interest on a short term loan for a value of $99,375 and an additional 170,000 shares of common stock, at a unit price of $1.40, to a consultant for services valued at $238,000.

On January 27, 2015 the Company issued 281,167 shares of common stock, at various unit prices, valued at $210,642 to 19 employees for signing bonuses and continued service to the company.

On January 28, 2015 the Company issued 158,335 shares of common stock, at various unit prices, to 7 investors valued at $223,501 in payment of interest on 7 short term loans.

In the first week of February 2015 the Company issued 378,334 shares of common stock, at various unit prices, valued at $429,834 to 4 employees pursuant to their employment contracts.

On February 3, 2015 the Company issued 15,385 shares of common stock, at a unit price of $0.65, to an accredited investor based on a unit offering at $0.65 per unit raising $10,000 of additional capital for the Company.

On February 6, 2015 the Company 150,001 shares of common stock, at various unit prices, to 2 consultants valued at $144,333 in payment of services rendered in 2014 and the renewal of a 2015 contract.

On February 18, 2015 the Company issued 184,975 shares of common stock to an investment group, at a unit price of $0.65, valued at $140,581 for services rendered in procuring investors for the company.

On February 23, 2015 the Company issued 562,500 shares of common stock to 6 directors, at a unit price of $0.80, valued at $450,000 for services rendered in prior year(s).

On February 24, 2015 the Company issued 100,000 shares of common stock, at a unit price of $0.65, to a consultant for services valued at $65,000.

On February 27, 2015, pursuant to the January 8, 2015 Board of Director’s Minutes, a total of 900,000 shares were issued by the Company to 2 employees and 1 consultant for services performed in 2014. They were issued at a unit price of $0.80 per common share at a value of $720,000.

On January 21, 2015 the Company interred into a securities purchase agreement with 3 accredited investors and received aggregate gross proceeds of $750,000 for 5% Convertible Promissory  Notes of the Company.

On February 24, 2015, the Board voted to increase the short term financing round previously approved by the Board on January 08, 2015 shall be increased in authorization by $250,000 to $1,250,000, together with authorizing an additional 100,000 shares of the Company’s stock in order to close on an offer from an additional $250,000 investor.

The Board also agreed that in exchange for MKM Master Opportunity Fund, Ltd. extending the Company’s note obligation that the shares of the Company’s restricted common stock shall be increased from the original extension amount of 41,667 (250,000 pre-reverse merger) to 55,556 shares (333,334 pre-reverse merger).

Black Pearl note payable:

On February 26, 2015, the Company negotiated an extension on the note payable to Black Pearl Energy, a Related Party, and established the balance at $1,079,944 plus $105,363 in interest due. The note is to be paid on a monthly basis of $12,000 per month for 48 months and a balloon payment in February of 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and net the note down to $805,863 and reduce the interest due to approximately $67,000. Additionally Black Pearl is to be granted 75,000 shares to cure the default and 131,704 shares of common stock to make the extension.

On March 26, 2015, the Company approved three Executive Long Term Agreements for Stanley T. Weiner (as President and CEO), Paul DiFrancesco (as Head of Finance) and D. Grant Seabolt, Jr. (as General Counsel and Corporate Secretary).

On March 26, 2015, the Board approved amending certain outstanding employment agreements to clarify that any options issuable thereunder, shall only be issued at such time when the Company’s option plan is fully funded and implemented; the Company circulated these amendments to the respective employees and has no reason to believe they will not be countersigned by each such employee.

The terms of the employment agreements are as follows:

Stanley T. Weiner shall be employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary shall be $15,000 monthly ($180,000 annually) during the first year of employment, $22,000 monthly ($264,000 annually) during the second year of employment, and $29,000 monthly ($348,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock.  He will also be subject to a twelve month severance award in the event of termination.

Paul DiFrancesco shall be employed as Head of Finance for a three year term effective February 1, 2015. His base salary shall be $12,000 monthly ($144,000 annually) during the first year of employment, $16,000 monthly ($192,000 annually) during the second year of employment, and $16,000 monthly ($192,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

Grant Seabolt shall be employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary shall be $8,000 monthly ($96,000 annually) during the first year of employment, $9,500 monthly ($114,000 annually) during the second year of employment, and $9,500 monthly ($114,000 annually) during the third year of employment.  He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 100,000 shares of the Company’s common stock.  He will also be subject to quarterly bonuses equal to 25,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination.

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Condensed Consolidated Statements of Operations (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Revenues
Contract and service revenues	$ 16,528,759	$ 1,598,081
Service revenues from related party	2,079,269	347,550
Total revenues	18,608,028	1,945,631
Costs of Revenues	17,553,588	1,675,314
Gross Profit	1,054,440	270,317
Operating Expenses
Research and Development	156,346	80,556
Sales and marketing	1,014,997	37,066
General and administrative	12,407,485	3,406,438
Depreciation	237,915	60,380
Total operating expenses	13,816,743	3,584,440
Loss from operations	(12,762,303)	(3,314,123)
Other Income (Expense)
Interest expense	(2,119,261)	(1,205,338)
Loss on disposition of property and equipment	(44,820)
Gain on Debt Settlement - Brooks	123,898
Change in derivative liability	(95,892)	(2,561,918)
Net Loss	(14,898,378)	(7,081,379)
Less: Share of net loss of subsidiary attributable to non-controlling interest	(141,550)	(48,424)
Net Loss of STW Resources	$ (14,756,828)	$ (7,032,955)
Loss per common share - basic and diluted	$ (0.60)	$ (0.42)
Weighted average shares outstanding - basic and diluted	24,721,493	16,665,400

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Derivative Liability

12 Months Ended

Dec. 31, 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 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) and removed this $1,977,372 derivative liability due to the availability of sufficient authorized shares to settle these outstanding contracts.

During the year ended December 31, 2014, the Company recalculated its historical volatility factor to be 735% and applied this factor in estimating the value of the derivative instruments. During the year ended December 31, 2013, the Company computed a historical volatility of 623% using daily pricing observations for recent periods. We applied a historical volatility rate during the year ended December 31, 2013, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and embedded conversion features.

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

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of December 31, 2014 and December 31, 2013:

	For the year ended December 31, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.60 – 0.47			0.60 – 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		735	%		623	%

	December 31, 2014		December 31, 2013
Embedded Conversion features	$	751,439	$	1,467,579
Warrants		50,901		163,406
	$	802,340	$	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 year ended December 31, 2014			For the year ended December 31, 2013
Balance beginning	$	1,630,985		$	1,046,439
Value of derivative liability associated with JMJ note payable		42,592			--
Value of derivative liability attributable to conversion of notes payable and accrued interest		(694,149	)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980	)		--
Reclassification of derivative liability due to increased share authorization		--			(1,977,372	)
Change in fair  value		95,892			2,561,918
Balance ending	$	802,340		$	1,630,985

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Notes Payable

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Notes Payable

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

Name	2014			2013
14% Convertible Notes	$	2,296,342		$	2,904,736
12% Convertible Notes		100,000			375,000
Other Short-term Debt		55,000			43,280
GE Note		2,100,000			2,100,000
Deferred Compensation Notes		279,095			279,095
Revenue Participation Notes		2,337,500			852,702
Note payable to Crown Financial LLC, a related party		702,697			683,036
Note payable to Dufrane Nuclear Shielding, LLC, a related party		725,000			--
Equipment finance contracts		110,000			137,573
Capital lease obligations		30,437			23,300
Unamortized debt discount		(20,362)			(107,221)
Total Debt		8,715,709			7,291,501
Less: Current Portion		(5,890,414	)		(4,668,492	)
Total Long Term Debt	$	2,825,295		$	2,623,009

14% Convertible Notes

Between November 2011 and December 2012, the Company issued a series of 14% convertible notes payable to accredited investors. The Company also issued 3,361,312 two year warrants to purchase common stock at an exercise price of $1.20 per share. These notes are convertible into 5,854,260 shares of the Company’s common stock as of December 31, 2014.

The Company valued the warrants and the embedded conversion feature at inception using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.17% - 0.33%; expected volatility of 100%. The estimated fair value of the warrants issued between November 2011 and December 2012 was $81,656 and the embedded conversion feature was $35,546 at issuance and was recorded as a derivative liability at such time in the accompanying consolidated balance sheets. The warrants and embedded conversion feature were included in the derivative liabilities account each reporting period as the Company had insufficient authorized shares to settle outstanding contracts (see Note 6). On July 12, 2013, the Company increased its share authorization to 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) and reclassified the $1,977,372 derivative liability to equity due to the availability of sufficient authorized shares to settle these outstanding contracts.

As of December 31, 2014 and December 31, 2013, the aggregate principal balances of these notes are $2,296,342 and $2,904,736, respectively. During the year ended December 31, 2014, the Company converted principal and accrued interest of $977,151 in exchange for 1,696,856 shares of the Company’s common stock. The Company also issued 1,071,353 shares for the extension of notes valued at $609,257. Thirteen (13) notes were extended until June 1, 2015 and one (1) note was extended until December 15, 2019.

The value of the stock issued was $812,607 resulting in additional interest expense of $203,350 upon the conversion of interest. As of December 31, 2014, the total of outstanding 14% convertible notes is $2,296,342 of which $688,210 matured on or before December 31, 2014 and is in default, however, as of April 2, 2015, none of the note holders have declared the notes in default.

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

12% Convertible Notes

Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that were scheduled to mature on November 30, 2011 and are currently in default. The Company also issued warrants to purchase 273,583 shares of common stock at an exercise price of $0.12 per share that expire at various dates through 2015.

During the year ended December 31, 2014, the Company paid an aggregate of $50,000 of principal of two of these notes. During the year ended December 31, 2014, the Company issued 1,137,417 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. As of December 31, 2014, there is one remaining note payable that has a principal balance of $100,000 and is convertible into 1,391,553 shares of the Company’s common stock.

Other Short-Term Debt

During the year ended December 31, 2014, the Company paid $43,280 of principal balance that was comprised of a settlement of a note payable to an accredited investor.

On January 1, 2014, the Company issued a $30,000 short term note to an investor, MKM Capital. The note bears interest at 8% and matures on January 1, 2015. The balance of this note payable as of December 31, 2014, is $30,000.

In September and October 2014, the Company entered into short term loan agreements, which matured in October 2014, with eight accredited investors totaling $170,000, to sustain some of its daily operating expenses; the loans had a 5% transaction fee at maturity and the lenders were entitled to receive 18% interest if the notes were not paid at maturity. As additional consideration for the loan, the Company agreed to issue the lenders an aggregate of 202,916 shares of common stock, which are only issuable if and when the Company increases its authorized capital. In October 2014 five of the investors extended their notes to October 24, 2015 for the additional consideration of 17,918 shares of common stock in lieu of interest. These shares were included in the "Fees Payable in Common Stock" and were expensed as interest in the current period. As of the date of this Report, all but $25,000 of the loans have been repaid, but the remaining lender has not declared a default on the payment of his note. On January 28, 2015, 158,335 of the shares were issued. The remaining shares are accrued as Fees Payable in Common Stock. (See Note 9 and Note 12).

GE Ionics Note

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

Under the terms of the August 31, 2010 note, interest at the rate of WSJ prime plus 2% is due on the note, upon default, interest is due at the maximum legal rate which is 10% in the state of Texas. The note matured on September 1, 2013, and is in default. Interest on the note through December 31, 2014, has been accrued pursuant to the terms of the note through May 6, 2012, interest upon default on  May 7, 2012, has been accrued at the maximum default rate in the state of Texas which is 10%.

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

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

Deferred Compensation Notes

As of December 31, 2014, the Company has a balance of $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in-house counsel. The notes matured December 31, 2012, and the notes are in default.

Revenue Participation Notes

As of December 31, 2014, the Company has an outstanding balance of $2,337,500 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		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,573,000
Total revenue participation notes	$	2,337,500

These notes are described as follows:

2012 Revenue Participation Notes

During February 2012, the Company issued to certain accredited investors (the “Investors”) revenue participation interest notes with a principal amount of $165,000 (the “March 2012 Notes”). These March 2012 Notes mature on January 31, 2017 and carry an interest rate of 12%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish and/or produced water. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received two times their investment amount and 10% of the net revenues thereafter until such time as they have received an additional $295,000 at which time the March 2012 Notes are retired in full. The Investors received warrants to purchase 27,500 shares of the Company’s common stock. These warrants have an exercise price of $1.20, are immediately exercisable and a two year maturity. The Company incurred cash fees of $16,500 which is recorded as a loan origination fee and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet and is being amortized to interest expense, and issued 2,750 warrants under the same terms as those received by the Investors. As of December 31, 2014, the Company has not generated revenue related to these revenue participating notes.

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

As of December 31, 2014, the aggregate principal balance of these notes payable is $165,000.

2013 Revenue Participation Notes – STW Resources Salt Water Remediation Technology

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

The Company also issued 100,833 warrants in connection with this investment. These warrants have an exercise price of $1.20, are immediately exercisable and expire on various dates through June 30, 2015.

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

As of December 31, 2014, the aggregate principal balance of these notes payable is $302,500.

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

During the year ended December 31, 2013, the Company issued to four (4) accredited investors revenue participation note with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company. These notes mature eighteen (18) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 9.4%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Energy services contracts. The Investor shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 15,167 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on various dates through June 30, 2015.

The 6% original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $325,000. The Notes maintain an original issue discount of $75,000 and are due on or before March 26, 2015; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained. The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Energy Services, LLC ("Energy Services") subsidiary, until each Note has been paid in full. All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes. If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full. In consideration for the Note, the Company shall issue 2 year warrants to purchase one share of common stock for each two dollars of such holder's investment, at an exercise price of $1.80 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 27,083 shares. The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.

The Company valued the 15,167 warrants associated with the $182,000 notes using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $5,004 and recorded this loan discount to be amortized to interest expense over the term of the loan.

As of December 31, 2014, the aggregate principal balance of these notes payable is $182,000.

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

During the year ended December 31, 2013, the Company issued to two (2) accredited investors convertible revenue participation notes with an aggregate principal amount of $207,115 and an original issue discount of $27,015, yielding net cash proceeds of $180,100 to the Company. These notes mature seven (7) months from the date of issuance and carry a stated interest rate of 6% and an effective interest rate of 8.1%. Principal and interest payments shall come solely from the Investors share of the revenue participation fees from STW Pipeline Maintenance &Construction services contracts. The Investors shall receive the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 69,039 warrants in connection with this investment. These two year warrants bear an exercise price of $1.80 per share. The notes are convertible into 287,660 shares of the Company’s common stock.

The 6% convertible original issue discount notes with revenue participation interests (the "Notes") were issued pursuant to a private offering (the "Notes Offering"), with a maximum offering size of $207,000. The Notes maintain an original issue discount of $27,000 and are due on or before May 18, 2014; all payments on the Notes shall come solely from the Note holder's share of the revenue participation fees, as hereinafter explained. The Company shall pay each Note Holder out of the Company's share of the Net Operating Revenues; as such term is defined in the Note, of its STW Pipeline Maintenance & Construction, LLC ("Pipeline") subsidiary, until each Note has been paid in full. All payments shall be made on a quarterly basis; provided however that only interest shall be paid in the first quarter and thereafter, payments shall follow the payment schedule set forth in the Notes. If payments are not made on the schedule payment date, interest on the Notes shall increase to 18% until the Notes are paid in full. The Notes are convertible into shares of the Company's common stock at $0.12 per share, subject to adjustment for standard anti-dilution features. In consideration for the Notes, the Company issued 2-year warrants to purchase two shares of common stock for each one dollar of such holder's investment, at an exercise price of $1.20 per share; provided however, that the Company shall only issue an aggregate of warrants to purchase up to 69,000 shares. The Company is required to reserve a sufficient number of shares to be able to issue all of the shares underlying the Notes if same are fully converted. The Notes are secured by a continuing security interest in the Company's net revenues and proceeds thereof.

The Company valued the 69,039 warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $27,153 and recorded this debt discount to be amortized to interest expense over the term of the loan agreement.

On October 15, 2014 the Company, STW Resource Holding Corp, converted a revenue participation offering of STW Pipeline. Principal and accrued interest of $93,543 was exchanged for 129,921 shares of STW Resource Holding Corp common stock to an investor at a unit price of $0.72 per share. The value of the stock issued was $99,374 resulting in additional interest expense of $5,831 upon the conversion of convertible debt.

As of December 31, 2014, the aggregate principal balance of the remaining note payable is $115,000.

2014 Revenue Participation Notes – STW Resources Upton Project

From September 30, 2014 through December 31, 2014, the Company issued an aggregate of $1,573,000 of notes to eleven (11) accredited investors for the Upton Project. The financing is a Senior Secured Master Note, with a 15% coupon and a maturity of 18 months with interest only payments paid the first three months and equal monthly payments of principal and interest paid for months four though eighteen of the Master Note with Revenue Participation Interest. Additionally, a 5% royalty is assigned to the Master Note, which will be distributed based on pro rata ownership by investors in the Master Note. Principal and interest payments will come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish water. This Agreement, including but not limited to the revenue sharing arrangement, is applicable to the brackish water processing facility being built with the proceeds of the Notes. As of December 31, 2014, the aggregate principal balance of these notes payable is $1,573,000.

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of December 31, 2014 and 2013, the Company had drawn down $702,697 and $683,036, respectively of this loan facility.

The Company issued 666,667 warrants in connection with this loan agreement, in lieu of a cash loan fee. These warrants have an exercise price of $1.20, are immediately exercisable and a two year maturity. The Company valued the warrants using the Black-Scholes option pricing model, using the following variables: annual dividend yield of 0%; expected life of 2 years; risk free rate of return of 0.25%; expected volatility of 623%. The Company estimated the value of the warrants to be $159,996 and recorded this loan fee a prepaid loan fee to be amortized to interest expense over the term of the loan.

Related party interest expense for this loan was $32,461 and $113,623, for the years ended December 31, 2014 and 2013, respectively.

Note payable to Dufrane Nuclear Shielding, LLC, a related party

On December 22, 2014, the Company entered into an unsecured loan agreement with Dufrane Nuclear Shielding, LLC, in the amount of $725,000 (See note 7). The note bear interest at 10.0% and is payable in monthly principal and interest installments of $43,541 commencing on January 15, 2015. The note matures on December 15, 2016. Dufrane Nuclear Shielding, LLC is a related party since the company is owed by Joshua Brooks, the Company’s former COO.  The note provides for default interest rate of $18% and requires the payment of $60,000 of accrued officers’ compensation in the event of default.

Related party interest expense for this loan was $1,788 for the year ended December 31, 2014.

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 $0.66 per share or 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. During the year ended December 31, 2014, the Company drew $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 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%. In October and November 2014 the note and interest was paid off by the issuance of 103,810 shares of common stock valued at an average of $0.535 per share.

Equipment Finance Contracts

During the year ended December 31, 2013, the Company financed the purchase of vehicles and other equipment with equipment finance contracts from various banks and finance institutions. The contracts mature in three to five years and bear interest rates ranging from 4.7% to 8.0%. The contracts are secured by the associated equipment. As of December 31, 2014 and2013, the Company has an aggregate balance of $110,000 and $137,573, respectively, 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%. In July of 2014, the Company entered into a lease for a commercial ice machine with Executive Leasing, Inc. The lease contract calls for Thirty six (36) monthly payments of $505 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $14,854 with an implicit interest rate in the lease of 12%. As of December 31, 2014 and December 31, 2013, the principal balances on these capital leases totaled $30,437 and $23,300, respectively.

For the years ended December 31, 2014 and 2013, interest expense on all notes payable described above was $2,089,356 and $1,205,338, respectively, which included $230,723 and $164,549, respectively, of amortization of debt discount and debt issuance costs. There was no interest capitalized in 2014 and 2013. As of December 31, 2014 and 2013, net deferred loan costs, net of $190,742 and $102,435 accumulated amortization, respectively were $97,121 and $185,428, respectively. The balance of unamortized discount at December 31, 2014 and 2013, were $20,362 and $107,221, respectively.

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Derivative Liability (Tables)

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Warrants and embedded conversion options which have no observable market data

	For the year ended December 31, 2014			For the year ended December 31, 2013
Annual dividend yield		0	%		0	%
Expected life (years)		0.60 – 0.47			0.60 – 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		735	%		623	%

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

	For the year ended December 31, 2014			For the year ended December 31, 2013
Balance beginning	$	1,630,985		$	1,046,439
Value of derivative liability associated with JMJ note payable		42,592			--
Value of derivative liability attributable to conversion of notes payable and accrued interest		(694,149	)		--
Change in derivative liability associated with conversion of notes payable and accrued interest		(272,980	)		--
Reclassification of derivative liability due to increased share authorization		--			(1,977,372	)
Change in fair  value		95,892			2,561,918
Balance ending	$	802,340		$	1,630,985

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Nature of the Business and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

History of the Company

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

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.

Formation of New Subsidiaries

Effective April 16, 2014, the Company formed another new subsidiary, STW Water Process & Technologies, LLC (“Water Process”), a Texas limited liability company. The Company is the sole member of Water Process, owning 100% of the membership interest in such entity, which is managed by its members.

Consolidation Policy

The consolidated financial statements for the years ended December 31, 2014 and 2013 include the accounts of the Company and its wholly owned subsidiaries, STW Resources, Inc., STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, STW Water Process & Technologies, LLC, and 75% owned subsidiary of STW Energy Services, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

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

Non-Controlling Interest

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

Going Concern and Management's Plan

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $39,112,171 as of December 31, 2014, and as of that date was delinquent in payment of $2,594,128 of sales and payroll taxes. As of December 31, 2014, $3,192,305 of notes payable are in default. Since its inception in January 2008 through December 31, 2014, management has raised equity and debt financing of approximately $18,000,000 to fund operations and provide working capital. The cash resources of the Company are insufficient to meet its planned business objectives without additional financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with

oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses.

There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

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

Use of Estimates

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

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner. At December 31, 2014, there were no uninsured deposits.

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

As of December 31, 2014, three vendors accounted for 20% of total accounts payable. During the year ended December 31, 2014, two vendors accounted for 69% of total purchases. As of December 31, 2013, three vendors accounted for 64% of total accounts payable. During the year ended December 31, 2013, two vendors accounted for 28% of total purchases.

As of December 31, 2014, three customers accounted for 43%, 11% and 3% of accounts receivable. During the year ended December 31, 2014, three customers accounted for 39%, 11% and 7% of total revenues. As of December 31, 2013, three customers accounted for 42%, 17% and 17% of accounts receivable. During the year ended December 31, 2013, three customers accounted for 27%, 22% and 17% of total revenues.

Fair Value of Financial Instruments

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

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

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

Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities.

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.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment.

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

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

The fair value the 12% convertible debentures was estimated using the Black Scholes Merton method, which approximates the Binomial Lattice valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant.

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

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

The following table presents certain financial instruments measured and recorded at fair value in the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2014 and 2013.

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2014	$	--	$	--	$	802,340	$	802,340
December 31, 2013	$	--	$	--	$	1,630,985	$	1,630,985

Accounting for Derivative Liabilities

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

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

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

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

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

Long-lived Assets and Intangible Assets

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

The Company had no such asset impairments at December 31, 2014 or 2013. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Services Revenues from Master Services Agreements

During the years ended December 31, 2014 and 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 realizes revenues from these contracts as the services are performed under the customer purchase orders. As services are performed and signed off by the customer, the Company generates an invoice and recognizes the revenue from its customers. Revenues are recognized when collectability of the receivable is reasonably assured and amounts are fixed and determinable.

During the year ended December 31, 2014, the Company recognized $18,227,371 of revenues from its oil & gas and water reclamation services contracts, of which $2,079,269 were revenue from related parties. During the year ended December 31, 2013, the Company recognized $1,408,896 of revenues from these services contracts, of which $347,550 were revenue from related parties.

Services Revenues from Water Reclamation Services

The Company provides customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including analysis, design, evaluation, implementation and operations. Revenues are recognized when the services are performed or the equipment is delivered to the customer. During the years ended December 31, 2014 and 2013, the Company realized $380,657 and $2,735, respectively, of revenues from services and product sales of its water reclamation business segment.

Contract Revenue and Cost Recognition on Engineering and Design Services

During the year ended December 31, 2013, the Company completed a contract to design, build and deliver a proprietary water desalinization facility to produce 700,000 gallons of water a day by converting brackish well water into the equivalent of rain water to maintain the greens and fairways of the Ranchland Hills Golf Club in Midland, Texas. The Company recognizes revenue on a contract once the services or products are delivered or completed and accepted by the customer. This is based on a thorough analysis of the written contract. Revenues from these contracts are recognized when the customer has passed credit tests and collection is reasonable assured and amounts are fixed and determinable. During the year ended December 31, 2013, the Company realized $534,000 of contract revenues from this project.

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 Note 11.

Income Taxes

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

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

The Company has adopted the provisions set forth in FASB ASC Topic 740, to account for uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain tax positions based on its understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of income tax expense in the Company’s financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns. The Company files income tax returns in the U.S. federal jurisdiction and one state jurisdiction. The Company’s periodic tax returns filed in 2011 and, thereafter, are subject to examination by taxing authorities in accordance with normal statutes of limitations in the applicable jurisdictions.

The Company uses the “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions and to establish measurement criteria for income tax benefits. The Company has determined that it has no material unrecognized tax assets or liabilities related to uncertain tax positions as of December 31, 2014 and 2013. The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2014 and December 31, 2013, respectively.

Comprehensive Loss

The Company does not have any components of other comprehensive income (loss) as defined by ASC 220, “Reporting Comprehensive Income.” For the years ended December 31, 2014 and 2013, comprehensive income (loss) consists only of net loss and, therefore, a Statement of Other Comprehensive Loss has not been included in these consolidated financial statements.

Common Stock and Common Stock Warrants Issued to Employees

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

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

Income (Loss) per Share

The basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. The diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted income (loss) per share is the same as basic income (loss) per share due to the anti-dilutive effect on losses. As of December 31, 2014, the Company had 14,442,977 dilutive shares outstanding, which have been excluded as their effect is anti-dilutive.

Property and Equipment

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

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

Stock Subscriptions Payable

During the year ended December 31, 2014, the Company received $1,248,500 of proceeds from unit offerings of its common stock in consideration of 2,353,414 shares of its common stock. During the year ended December 31, 2014, the Company cancelled $150,000 of stock subscriptions payable for 312,500 shares of its common stock. As of December 31, 2014, the Company has 41,539 shares remaining to be issued from stock subscriptions payable at a value of $27,000.

During the year ended December 31, 2013, the Company received stock subscriptions and $310,000 of proceeds from unit offerings of its common stock in consideration of 645,833 shares of its common stock. The stock was not issued as of December 31, 2013 and $310,000 was reported as Stock Subscriptions Payable as of December 31, 2013.

Fees Payable in Common Stock

During the year ended December 31, 2014, the Company agreed to issue an aggregate of 4,813,465 shares of its common stock, net of 382,879 of cancelled shares, in payment of consulting fees and employee incentives valued at an aggregate of $4,517,379. During the year ended December 31, 2014, the Company issued 2,061,985 shares of its common stock as fees payable in common stock at an aggregate value of $1,965,566. As of December 31, 2014, the Company has 3,359,762 shares remaining to be issued associated with this obligation at an aggregate value of $2,783,711.

During the year ended December 31, 2013, the Company agreed to issue an aggregate of 2,074,946 shares of its common stock in payment of consulting fees valued at an aggregate of $826,897. As of December 31, 2013, the Company has issued 1,466,667 of the shares associated with this obligation at a value of $595,000. As of December 31, 2013, the Company is obligated to issue the remaining 608,279 common shares at a value of $231,897.

Loan Discounts

The Company amortizes loan discounts under the effective interest method.

Recently Issued Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on disclosure of uncertainties about an entity's ability to continue as a going concern. The new standard provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In June 2014, the FASB issued a new standard on accounting for share-based payments. The new standard clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant date fair value of the award. The new standard also clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite service has already been rendered. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

In May 2014, the FASB issued a new standard on recognizing revenue in contracts with customers. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new standard creates a five-step process to recognize revenue that requires entities to exercise judgment when considering contract terms and relevant facts and circumstances. The new standard also requires expanded disclosures surrounding revenue recognition. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. The Company is in the process of evaluating the impact of adoption on the Company's consolidated financial statements.

Other recently issued accounting standards are not expected to have a material effect on the Company's consolidated financial statements.

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Income Taxes

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Income Taxes

The Company's net loss before income taxes totaled $14,756,828 and $7,032,955 for the years ended December 31, 2014 and 2013, respectively, accordingly, no provision for income taxes were provided in the accompanying financial statements.

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

	Years Ended December 31,
	2014			2013
Income tax benefit at the U.S. statutory income tax	$	(5,017,321	)	$	(2,391,205	)
Change in fair value of derivative liability		32,603			871,052
Non-controlling interest in loss of subsidiary		48,127			16,464
Non-deductible penalties and other expenses		472,619			290,420
Changes in Valuation allowance		4,463,972			1,213,269
Total	$	—		$	—

Based on the weight of available evidence and uncertainties regarding the Company's ability to generate profits in the near future, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not be realized.  Therefore, the company has recorded a full valuation allowance against the net deferred tax assets.

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

	December 31, 2014			December 31, 2013
Deferred noncurrent tax asset:
Net operating loss carry-forward	$	2,036,123		$	1,481,871
Accrual to Cash conversion		3,991,660			1,480,682
Stock based compensation		1,361,342			--
Depreciation		(38,995	)		(38,995	)
Charitable Contributions		37,400			18,768
Valuation allowance		(7,387,530	)		(2,942,326	)
Total	$	—		$	—

The future utilization of the Company's federal net operating loss and tax credit carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future.

At December 31, 2014, the Company had federal income tax net operating losses of approximately $6.7 million.  The federal net operating losses expire at various dates beginning in 2029.The Company files income tax returns in the U.S. federal jurisdiction and Texas jurisdiction.  All tax years remain open to examination for the U.S. federal jurisdiction as a result of net operating loss carryforwards. The Company’s periodic tax returns filed in 2010 and, thereafter, are subject to examination by state taxing authorities in accordance with normal statutes of limitations in the applicable jurisdictions.

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Related Party Transactions

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Related Party Transactions

Officers’ Compensation

During years ended December 31, 2014 and 2013, we incurred $150,000 annually in officers’ compensation due to our Director, Chairman and CEO, Mr. Stanley Weiner. As of December 31, 2014 and 2013, the balances of $413,083 and $263,083, respectively, were payable to Mr. Weiner for his officers’ salary.

During the years ended December 31, 2014 and 2013, we incurred $75,000 and $150,000, respectively, in officers’compensation due our former Director and Chief Operating Officer, Mr. Lee Maddox. As of December 31, 2014 and 2013, the balances of $220,500 and $170,500, respectively, were payable to Mr. Maddox for his officers’ salary.

During the years ended December 31, 2014 and 2013, we incurred $90,000 annually in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. As of December 31, 2014 and 2013, the balances of $179,797 and $121,083, respectively, were payable to Seabolt Law Group for these services.

During the years ended December 31, 2014 and 2013, we incurred $449,496 and $63,107, respectively, in CFO, audit preparation, tax, and SEC compliance services expense with Miranda & Associates, a Professional Accountancy Corporation, and Miranda CFO Services, Inc., (“Miranda”) firms owned by our Chief Financial Officer, Mr. Robert J. Miranda.  During the year ended December 31, 2014, we paid Miranda cash of $182,110 and 120,292 shares of common stock valued at $72,175 toward these fees. As of December 31, 2014, we have agreed to pay 206,667 shares of common stock valued at $155,000 toward these obligations, which would leave an accounts payable balance of $64,271 as of December 31, 2014. The stock awards are accrued as fees payable in common stock as of December 31, 2014. As of December 31, 2014 and December 31, 2013, the balances of $219,271 and $24,060, respectively, were payable to these firms for these services.  The December 31, 2014, balances are comprised of $64,271 of accounts payable and $155,000 of fees payable in common stock, for a combined balance payable of $219,271.

As of December 31, 2013, the balance of $132,490 was payable to Dufrane Nuclear Shielding, LLC (“Dufrane”). Additionally, as of December 31, 2013, the balance of $150,000 was payable as Fees Payable in Common Stock and $30,000 was payable to Joshua Brooks as accrued officers compensation. During the years ended December 31, 2014 and 2013, we incurred $90,000 and $30,000, respectively, in officers’ compensation due to our former Chief Operating Officer, Mr. Joshua Brooks. During the year ended December 31, 2014, we also incurred with Mr. Joshua Brooks a performance bonus comprised of 333,333 shares of the Company’s common stock valued at $120,000.

During the year ended December 31, 2013, the Company cancelled the $150,000 of stock subscriptions payable and incurred an additional $593,358 of net related party payables with Dufrane. On December 22, 2014, the Company entered into a settlement agreement and a $725,000 note payable to Dufrane. Under the terms of the settlement agreement, the 333,333 shares of common stock payable was cancelled and $180,000 of accrued officers’compensation payable were discharged leaving a balance of accrued officers’ compensation of $60,000 as of December 31, 2014.

The settlement agreement with Joshua Brooks also provided for the transfer of various items of tools, vehicles, and other equipment to Dufrane.  The agreement further requires that the Company remove Mr. Brooks from any personal guarantees or co-signatures that he made on vehicle loans or other liabilities of the Company.

During the years ended December 31, 2014 and 2013, we incurred $180,000 and $18,461, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC. Mr. Adam Jennings. During year ended December 31, 2014, we incurred with Mr. Adam Jennings signing bonuses comprised of 266,667 shares of the Company’s common stock valued at $142,000. As of December 31, 2014 and 2013, the balance of $121,000 and $27,000, respectively, were 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.

During the year ended December 31, 2014, we incurred $107,692, in officers’ salary due to the President of our wholly-owned subsidiary, STW Water Process and Technologies, LLC. Mr. Alan Murphy. During year ended December 31, 2014, we incurred with Mr. Alan Murphy a signing bonus comprised of 333,333 shares of the Company’s common stock valued at $200,000.

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 33,333 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.

The Company’s advisory board was comprised of three members. Each advisory board member was granted 9,375 shares upon joining the board and 12,500 shares annually thereafter. The advisory board was dissolved on June 12, 2013.

During the year ended December 31, 2014, we incurred $635,000 in board and consulting fees with Paul DiFrancesco, a Director. Mr. DiFrancesco was paid cash of $282,500, awarded 538,870 shares of common stock in the Company, valued at $277,500 for services related to 2014 activities, and $75,000 per year as compensation for serving on our board of directors.

During the year ended December 31, 2014, the Company recorded board fees in the accompanying consolidated statement of operations of $562,500 and issued 930,261 shares of its common stock valued at $558,157, leaving a balance of $496,067 of accrued board fees payable as of December 31, 2014.

During the year ended December 31, 2013, the Company recorded board fees in the accompanying consolidated statement of operations of $602,849 and made payments of $43,500 in cash and issued 840,625 shares of its common stock having valued at $302,625, leaving a balance of $491,924 of accrued board fees as of December 31, 2013.

Other related party transactions

As of December 31, 2014 and 2013, the Company has $1,371,305 and $139,763, respectively, of related party payables to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, former COO, and General Counsel.

As of December 31, 2014, STW Energy, a subsidiary of the Company, has a related party receivable of $519,789 from Black Pearl Energy, LLC.

During the years ended December 31, 2014 and 2013, the Company, had related party sales of $2,079,269 and $347,550, respectively. Related party sales are a combination of sales to three companies, (1) Black Pearl Energy, LLC, (2) Dufrane Construction, LLC and (3) Dufrane Nuclear Shielding LLC.

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 $1,054,944 has been advanced as of December 31, 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 250,000 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, STW Resource Holding Corp 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.

As of December 31, 2014, the Company has a related party payable of $2,035,495 to Crown Financial.

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 $0.72 per share, as is equal to the amount of the guaranty (the "Guaranty Shares"). The value of the 63,667 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, former Chief Operating Officer	September 24, 2013	$	45,800	(1	)		63,667

(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.

The service agreement was terminated by mutual agreement on December 24, 2014, when the Company executed a Settlement Agreement and Note Payable to Dufrane Nuclear Shielding, LLC, a company controlled by Mr. Joshua Brooks, the Company’s former executive officer.

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Stockholders' Deficit

12 Months Ended

Dec. 31, 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. No such shares are issued or outstanding and the Company does not currently have any plans to issue shares of such stock.

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

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

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

Common Stock

As of the date of this Report, the Company has authorized 191,666,667 shares of common stock with a par value of $0.001. During the years ended December 31, 2014 and 2013, the Company issued common shares as follows:

Year ended December 31, 2013:

On June 6, 2013, the Company issued 58,853 shares of its common stock valued at $21,187 in payment of $6,965 accrued interest on convertible note payable and 125,063 shares of its common stock valued at $45,022 in payment of $15,000 of principal on a 14% convertible note payable. The settlement of this $15,000 note payable and $6,966 of accrued interest, (combined total of $21,966) for common stock valued at $66,209 resulted in an additional interest expense of $44,243.

Prior to the July 12, 2013, amendment to our Articles of Incorporation to increase our authorized capital from 16,666,667 shares of common stock to 41,666,667 shares (see Note 12 for January 22, 2015 increase to 191,666,667 shares) of common stock (the "Amendment"), we did not have sufficient shares of authorized capital to meet all of our outstanding security obligations. Some of these obligations required us to issue shares of common stock to our officers and directors, pursuant to the agreements we maintain with them or board approved issuances to such persons; following the Amendment, on September 16, 2013 the company issued an aggregate of 840,628 shares of common stock, with a value of $297,581, as follows:

Name	Amount of Shares		Triggering Event
Stanley T. Weiner		104,167	2012 Director Compensation
Manfred E. Birnbaum		104,167	2012 Director Compensation
D. Grant Seabolt, Jr.		104,167	2012 Director Compensation
Joseph I. O'Neill III		104,167	2012 Director Compensation
Audry Lee Maddox		59,375	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn		104,167	2012 Director Compensation
Paul DiFrancesco		104,167	2012 Director Compensation
Bill G. Carter		104,167	2012 Director Compensation
Steven Schachman		26,042	2012 Advisory Board Compensation
Hunter Hill		26,042	2012 Advisory Board Compensation

On September 16, 2013, the Company issued 350,000 shares of its Common stock in payment of accrued compensation. These shares were authorized by the board of directors at a value of $0.10 per share based on the value on March 5, 2013, the date that the board of directors approved the payment in shares. At the time of the March 5, 2013, board action to approve the payment of the accrued fees in stock, the Company did not have adequate shares authorized to settle the contracts so the issuance of shares was delayed until September 16, 2013. These shares were issued on September 16, 2013, at a value at the time of issuance of $126,000, resulting in a reduction of accrued compensation expense of $84,000.

During August and October, 2013, the Company issued to four (4) accredited investors revenue participation notes with an aggregate principal amount of $182,000 and an original issue discount of $42,000, yielding net cash proceeds of $140,000 to the Company.

These note mature eighteen (18) months from the date of issuance and carry stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Energy services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 15,167 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on various dates through June 30, 2015.

During September, 2013, the Company issued to a related party accredited investor convertible a revenue participation note with an aggregate principal amount of $65,804 and an original issue discount of $15,186, yielding net cash proceeds of $50,618 to the Company. This note matures eighteen (18) months from the date of issuance and carries stated interest rates of 6%. Principal and interest payments shall come solely from the Investors’ share of the revenue participation fees from STW Oilfield Construction services contracts. The Investors shall receive 50% of the net revenues from such contracts until such time as they have received their investment amount at which time the note is retired in full. The Company also issued 21,935 warrants in connection with this investment. The warrants bear an exercise price of $1.80 per share and expire on September 27, 2015. The note is convertible into 91,391 shares of the Company’s common stock. On December 6, 2013, the Company and this investor agreed to a mutual rescission of this note and the related warrants. The net cash proceeds of $50,418 are included in the total balance of $134,013 as Payable to Related Party, Dufrane Nuclear Shielding Inc., a company controlled by our former COO, Mr. Joshua Brooks.

In the months of October and December 2013 seven (7) of the Company’s consultants were issued 1,083,333 shares in exchange for their invoice amounts due from the company.

On December 9, 2013, the Company issued 333,333 shares to an employee as a signing bonus under an employment contract. The Company also issued 50,000 shares of its common stock to an employee of its subsidiary, STW Pipeline Maintenance & Construction, LLC, as an installment on a signing bonus under an employment contract with the subsidiary.

Year ended December 31, 2014:

During January 2014, the Company issued an aggregate of 926,603 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 122,190 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 1,220,101 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 250,000 shares of its common stock valued at $145,000 to consultants for services rendered.

During March 2014, the Company issued 312,500 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 130,208 shares of its common stock in consideration of $62,500 cash proceeds realized from the sale of stock to accredited investors at $0.48 per share.

In April 2014 the Company issued 104,166 shares of common stock on a unit share offering at $0.48 for proceeds of $70,000. The Company issued 930,261 shares of common stock to the Board of Directors for services rendered; this was valued at $558,157. Additional shares of 100,000 were issued to an employee as a signing bonus valued at $60,000. Officer’s compensation was paid by issuing 402,708 shares of common stock in lieu of paying $241,625. Consultants were issued 186,958 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 1,545,650 shares of its common stock.

In May 2014 a consultant was issued 83,333 shares of common stock in lieu of fees of $60,000.

On June 4, 2014 the company issued 58,333 shares to a consultant at $0.10 per share in payment of $35,000 of consulting fees.

In June 2014 the Company issued 20,833 shares of common stock on a unit share offering at $0.48 for proceeds of $30,000. A charitable contribution was made of 166,667 shares of common stock valued at $110,000.

In July 2014 the Company issued 1,104,167 shares of common stock on a unit share offering at $0.48 for proceeds of $530,000. The Company also issued 41,667 shares for 8,333 warrants at $0.12 for $50,000, 22,561 shares in payment of PIK interest for $10,829, and 83,333 shares for a loan, valued at $40,000.

Two employees also received 283,333 shares of stock for signing bonus and services to the company; these shares were valued at $136,000.

In August 2014 the Company issued 724,167 shares of common stock on a unit share offering at $0.60 for proceeds of $437,500. The Company also issued 108,333 shares to consultants in lieu of paying Consultant fees of $49,000.

In September 2014 the Company issued 10,000 shares of common stock to a consultant in lieu of paying Consultant fees of $4,800 and issued an additional 95,833 shares to employees as signing bonuses.

On September 23, 2014, 100,000 shares of common stock were issued to three employees at $1.32 per share as part of their employment/signing bonuses. 

On October 15, 2014 the Company, STW Resource Holding Corp, converted a revenue participation offering of STW Pipeline. Principal and accrued interest of $93,543 was exchanged for 129,921 shares of STW Resource Holding Corp common stock to an investor at a unit price of $0.72 per share. The value of the stock issued was $99,374 resulting in additional interest expense of $5,831 upon the conversion of convertible debt.

On October 23, 2014, the Company issued 33,333 shares of common stock to an investor at a unit value of $1.44 per share on the conversion of $21,120 of a short term convertible note. The value of the stock issued was $48,000 resulting in additional interest expense of $26,880 upon the conversion of convertible debt.

On November 5, 2014 the company issued 70,477 shares of common stock to an investor at a unit value of $1.17 per share on the conversion of $41,102 of a short term convertible note. The value of the stock issued was $82,458 resulting in additional interest expense of $41,356 upon the conversion of convertible debt.

On November 20, 2014, the Company issued 8,333 shares of common stock for a value of $5,000 to one of the investors in the July offering at a unit value of $0.60 per share.

In November and December 2014 it was necessary to issue an additional net of 319 shares to cover the rounding effect of the 1 for 6 reverse stock split.

On December 23, 2014 the Company issued 68,522 shares to an investor for the conversion of a 14% note for $30,175 and the accrued interest of $2,715. The value of the stock was $34,169, resulting in additional interest expense of $1,278 upon the conversion of convertible debt.

On December 31, 2014 the Company issued 207,500 shares for a value of $124,500 to 11 investors pursuant to their purchase of the July 2014 offering at $0.60 per unit.

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

Security	Number  of Underlying Common Shares		ExerciseP rice		Expire
Warrants issued for Professional Services		250,000		24		2014
Warrants associated with the January 14, 2009 Bridge Note		80,000		18		2014
Warrants associated with the acquisition of the Company's Preferred Shares outstanding		250,000		48		2014
Warrants associated with the 12% Convertible Notes		273,583		0.12		2014-2015
Warrants associated with 2012 Revenue Participation Notes		30,250		1.2		2014
Warrants associated with May 2012 Subscription Agreement		87,500		1.2		2014
Warrants associated with June-September 14% Convertible Notes		91,667		1.2		2014
Warrants associated with November 14% Convertible notes		462,917		1.2		2014
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20 – 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with November 2013 Unit Share Offering		645,833		1.2		2015
Sub-total of Warrants outstanding		3,056,788
Common stock associated with the 12% Convertible Notes plus accrued interest		4,627,570		0.02		2014
Common stock associated with Pipeline Convertible Revenue Participation notes		287,660		0.12		2015
12/31/2013 Accrued Default interest		86,186		0.02		2014-2015
Common stock associated with the 14% Convertible Notes plus accrued interest		7,685,772		0.08		2015
12/31/2013 Accrued Default interest		33,050		0.08		2014
12/31/2013 Calibre Note interest		27,328		0.08		2014
Common stock associated with November 2013 Unit Share Offering		645,833		0.08		2015
Common stock payable as fees		608,279	various			2014
Total securities		17,058,466

As of December 31, 2014, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

Security	Number of Underlying Common Shares		Exercise Price		Expire
Warrants associated with the 12% Convertible Notes		66,667		0.012		2015
Warrants associated with 2013 Revenue Participation Notes		185,038		1.20– 1.80		2015
Warrants issued to Crown Financial, LLC		666,667		1.2		2016
Warrants issued on $20,000 short term loan		33,333		1.2		2015
Warrants issued with 2013 and 2014 Unit Share Offerings		2,682,645		1.20– 1.50		2015 - 2016
Sub-total of Warrants outstanding		3,634,350
Common stock associated with the 12% Convertible Notes plus accrued interest		1,391,553		0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		164,513		0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		5,854,260		0.48		N/A
Common stock associated with 2013 and  2014 Unit Share Offerings		41,539		0.48		N/A
Common stock payable as fees		3,356,762	various
Total		14,442,977

Warrants

A summary of the Company’s warrant activity and related information during the year ended December 31, 2014 follows:

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2013		5,401,239		$	5.16	1.06	$	32,830
Issued		1,552,807			1.26	2.0
Exercised		--
Forfeited		--
Cancelled		--
Expired		(3,897,258	)		1.92
Outstanding at December 31, 2013		3,056,788		$	1.26	1.07	$	131,320
Exercisable		3,056,788		$	1.26	1.07	$	131,320
Outstanding at January 1, 2014		3,056,788		$	4.29	1.07	$	131,320
Issued		2,349,312			1.27	1.46
Exercised		--
Forfeited		--
Cancelled		(312,500	)
Expired		(1,459,250	)		13.89
Outstanding at December 31, 2014		3,634,350		$	1.27	1.18	$	851,313
Exercisable		3,634,350		$	1.27	1.18	$	851,313

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Commitments and Contingencies

12 Months Ended

Dec. 31, 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.

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%. In July of 2014, the Company entered into a lease for a commercial ice machine with Executive Leasing, Inc. The lease contract calls for Thirty six (36) monthly payments of $505 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $14,854 with an implicit interest rate in the lease of 12%. As of December 31, 2014 and 2013, the principal balances on these capital leases totaled $30,438 and $23,300, respectively.

Future minimum lease payments under the capital lease and operating lease as of December 31, 2014, are as follows:

Years ending December 31:	Capital Leases			Operating Lease		Totals
2015	$	13,176		$	117,000	$	130,176
2016		13,176			117,000		130,176
2017		8,960			117,000		125,960
2018		--			117,000		117,000
2019		--			117,000		117,000
Thereafter		--			87,750		87,750
Total minimum lease payments		35,312			672,750		708,062
Less interest		(4,874	)
Capital lease obligation		30,438
Less current portion		(10,382	)
Long-term capital lease obligation	$	20,056

Rental expense for all property, including equipment rentals in the cost of sales, and equipment operating leases during the years ended December 31, 2014 and 2013, respectively, was $4,041,793 (which includes approximately$3.6million of equipment rental used on projects and reflected in cost of revenues) and $78,558, respectively. Related party rental expense during the years ended December 31, 2014 and 2013, was $472,450 and $14,292, 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 66,667 shares of its common stock in consideration of this agreement.

As of December 31, 2014, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2015	$	324,000
2016		240,000
2017		240,000
2018		240,000
2019		120,000
Total minimum royalty payments	$	1,164,000

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

On September 23, 2013, one of our wholly owned subsidiaries, STW Pipeline Maintenance & Construction, LLC (“Pipeline Maintenance”), entered into an Executive Employment Agreement with Adam Jennings to serve as Pipeline Maintenance's President (the "Jennings Agreement") for a term of one year, unless otherwise terminated or mutually extended. The Company is a party to the Jennings Agreement only to the extent of the obligations it is required to perform under the Jennings Agreement. Pursuant to the Jennings Agreement, Mr. Jennings may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent. The Company also agreed to issue an aggregate of 200,000 shares of its common stock to Mr. Jennings as a signing bonus, to be issued in four (4) equal installments on each consecutive 90th day following Mr. Jennings employment; provided however that the first installment shall be paid within 30 days of signing the agreement and if Mr. Jennings voluntarily terminates employment before September 20, 2014, he shall return the most recently received installment of such signing bonus back to the Company. The Company also has sole discretion to grant Mr. Jennings stock options in the Company. Mr. Jennings is also entitled to receive 10% of Pipeline Maintenance's distributable limited liability company net profits during his employ. The Company has sole rights to terminate Mr. Jennings' employment for cause. The value of the first installment of the signing bonus of 50,000 shares of common stock was recorded on September 23, 2013 as fees payable in common stock.

The Company amended the employment agreement with Mr. Jennings on April 1, 2014 for an additional year. The terms of the amendment, Mr. Jennings base salary was increased to $200,000 per year. He was also awarded an additional 166,667 shares of its common stock to Mr. Jennings valued at $100,000 as an additional signing bonus.

On September 20, 2013, the Company entered into an Executive Employment Agreement with Joshua Brooks (the "Brooks Agreement"), to serve as the Company's Vice President of Operations, primarily focusing on the Company's oilfield construction, services and maintenance operations and to observe and learn the other activities that the Company is involved in including water processing. The term of the Brooks Agreement is for a term of one year, unless otherwise terminated or mutually extended. Pursuant to the Brooks Agreement, Mr. Brooks is entitled to an annual salary of $120,000, which shall be paid on a quarterly basis, in shares of the Company's common stock at a price per share equal to the weighted average trading value of such stock during the same quarter. As incentive to help develop the operation and profitability of Pipeline Maintenance, Mr. Brooks is entitled to an aggregate of an additional 4,000,000 shares of the Company's common stock upon the occurrence of certain Company milestones in gross sales and/or profit. As a signing bonus, the Company shall issue Mr. Brooks 333,333 shares of its common stock, which Mr. Brooks must return on a pro-rata basis, if he voluntarily resigns before March 20, 2014. Mr. Brooks shall be entitled to bonuses and stock options, which the Company may award and grant in its sole discretion, and to the benefits offered to similarly situated executives. The Company shall reimburse Mr. Brooks for reasonable business expenses he incurs while carrying out his duties under the Brooks Agreement, and they shall also reimburse him for use of his personal vehicle at standard mileage rates and provide him with a laptop computer and cellular phone, if needed to carry out such duties. The Company shall indemnify Mr. Brooks to the fullest extent permitted under Nevada law. Unless Mr. Brooks is terminated for cause by the Company, which they maintain the right to do, or as a result of disability, Mr. Brooks is entitled to certain severance as set forth in the Brooks Agreement. Mr. Brooks maintains the right to terminate his employment at any time upon 30 days advance written notice and shall be entitled to all compensation payable up through such thirtieth day, after which all of the Company's obligations (other than indemnification and specific benefits) shall cease. Pursuant to the Brooks Agreement, Mr. Brooks is under a 1 year non-compete/solicitation agreement. The value of the signing bonus of $140,000 was recorded as fees payable in common stock on September 20, 2013.The Company has issued 333,333 shares of common stock to satisfy the obligation. As of December 31, 2013 there was no remaining obligation.

On May 27, 2014, one of our wholly owned subsidiaries, STW Water Process and Technologies, LLC (“STW Water”), entered into an Executive Employment Agreement with Alan Murphy to serve as STW Water’s President (the "Murphy Agreement") for a term of three years, unless otherwise terminated or mutually extended. The initial base salary pursuant to the Murphy agreement is $200,000 annually. The base salary is subject to an annual review and Mr. Murphy is entitled to receive performance bonuses up to 100% of his base salary, subject to the sole discretion of the Company’s CEO. The Company is a party to the Murphy Agreement only to the extent of the obligations it is required to perform under the Murphy Agreement. Pursuant to the Murphy Agreement, Mr. Murphy may not accept other employment or engage in activity that may interfere with his duties under the agreement without obtaining the Company's prior written consent. The Company also agreed to issue an aggregate of 333,333 shares of its common stock valued at $200,000 to Mr. Murphy as a signing bonus. The Company also agreed to grant Mr. Murphy 500,000 stock options in the Company upon the formation and funding of the Company’s employee stock option plan. The Company has sole rights to terminate Mr. Jennings' employment for cause.

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 $0.72 per share, as is equal to the amount of the guaranty (the "Guaranty Shares"). The value of the 63,667 shares of common stock was recorded on September  24, 2013, as fees payable in common stock. The Company maintains the right to terminate these service agreements at any time with written notice. The term of the agreement/guaranty is for 6 months. The following table provides salient information about this service agreement, which is attached as an exhibit to this Report.

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, former Chief Operating Officer	September 24, 2013	$	45,800	(1)		63,667		63,667

(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. The service agreement was terminated by mutual agreement on December 24, 2014, when the Company executed a Settlement Agreement and Note Payable to Dufrane Nuclear Shielding, LLC, a company controlled by Mr. Joshua Brooks, the Company’s former executive officer.

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 Note 5, Notes Payable - 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.

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. On October 8, 2014, the Parties entered into a Settlement Agreement whereby the Company agreed to pay Sichenzia Ross $80,036.22 on or before November 28, 2014 or within three business days of the Company closing its current round of financing. The agreement to pay was secured by the Company providing Sichenzia Ross an “Affidavit of Judgment by Confession” in the amount of $80,036.22 to be filed only if the Company failed to pay the $80,036.22 by the due date, plus a five day cure period ending on December 03, 2014. On December 10, 2014, Sichenzia Ross filed the Judgement by Confession with the Court and the Judgment remains unsatisfied.

J. Johnson & Associates Lawsuit. There has been one lawsuit filed 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 and BJJA has sought initial discovery from the Company; 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.

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 94,444 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 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. The Award was final on April 1, 2014, and on October 28, 2014, Viewpoint filed a lawsuit in San Diego County, California Superior Court seeking to enforce its Arbitration Award, in Case No. 37-2014-00036027-CU-PA-CTL. On December 08, 2014, the Company filed a motion to dismiss the enforcement action due to Viewpoint having forfeited its corporate rights in California due to non-payment of California corporate taxes, and that motion is still pending before the Court. The full amount of this award has been accrued for in Accounts Payable.

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Notes Payable (Details 1) (USD $)	Dec. 31, 2014
Revenue Participation Notes balance	$ 2,337,500
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 5 [Member]
Revenue Participation Notes balance	$ 1,573,000

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Commitments and Contingencies (Details 2) (Joshua Brooks, former Chief Operating Officer [Member], USD $)	12 Months Ended
	Dec. 31, 2014
Joshua Brooks, former Chief Operating Officer [Member]
Date of Agreement	Sep. 24, 2013
Amount of Personal Guaranty	$ 45,800
Guaranty Shares	63,667
No. of Shares Owned Following Receipt of Guaranty Shares	63,667

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Property And Equipment Tables

Property, Plant and Equipment

	December 31, 2014			December 31, 2013
Office furniture and equipment	$	21,806		$	16,838
Tools and yard equipment		7,661			2,302
Vehicles and construction equipment		1,231,742			798,273
Leasehold improvements		15,933			--
Water wells under development		341,359			--
Total, cost		1,618,501			817,413
Accumulated Depreciation and Amortization		(180,502	)		(70,775	)
Total Property and Equipment	$	1,437,999		$	746,638

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2014

Commitments And Contingencies Tables

Future minimum lease payments

Future minimum lease payments under the capital lease and operating lease as of December 31, 2014, are as follows:

Years ending December 31:	Capital Leases			Operating Lease		Totals
2015	$	13,176		$	117,000	$	130,176
2016		13,176			117,000		130,176
2017		8,960			117,000		125,960
2018		--			117,000		117,000
2019		--			117,000		117,000
Thereafter		--			87,750		87,750
Total minimum lease payments		35,312			672,750		708,062
Less interest		(4,874	)
Capital lease obligation		30,438
Less current portion		(10,382	)
Long-term capital lease obligation	$	20,056

Product Purchase and Manufacturing license agreement

As of December 31, 2014, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2015	$	324,000
2016		240,000
2017		240,000
2018		240,000
2019		120,000
Total minimum royalty payments	$	1,164,000

Service Agreement

Name and Title	Date of Agreement	Amount of Personal Guaranty			Guaranty Shares		No. of Shares Owned Following Receipt of Guaranty Shares
Joshua Brooks, former Chief Operating Officer	September 24, 2013	$	45,800	(1)		63,667		63,667

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Commitments and Contingencies (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Future minimum lease payments
2015	$ 130,176
2016	130,176
2017	125,960
2018	117,000
2019	117,000
Thereafter	87,750
Total future minimum lease payments	708,062
Less interest
Capital lease obligation
Less current portion
Long-term capital lease obligation
Capital Lease Obligations [Member]
Future minimum lease payments
2015		13,176
2016		13,176
2017		8,960
2018
2019
Thereafter
Total future minimum lease payments		35,312
Less interest		(4,874)
Capital lease obligation		30,438
Less current portion		(10,382)
Long-term capital lease obligation		20,056
Operating Lease Expense [Member]
Future minimum lease payments
2015		117,000
2016		117,000
2017		117,000
2018		117,000
2019		117,000
Thereafter		87,750
Total future minimum lease payments		672,750
Less interest
Capital lease obligation
Less current portion
Long-term capital lease obligation

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Stockholders’ Deficit (Details)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Stanley T. Weiner [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Manfred E. Birnbaum [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
D. Grant Seabolt, Jr. [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Joseph I. O'Neill III [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Audry Lee Maddox [Member]
Shares	59,375
Triggering Event	2012 Advisory Board Compensation (156,250 shares) & Director Appointment Shares (200,000)
Dale F. Dorn [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Paul DiFrancesco [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Bill G. Carter [Member]
Shares	104,167
Triggering Event	2012 Director Compensation
Steven Schachman [Member]
Shares	26,042
Triggering Event	2012 Advisory Board Compensation
Hunter Hill [Member]
Shares		26,042
Triggering Event		2012 Advisory Board Compensation

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Consolidated Statements of Stockholders' Deficit (USD $)	CommonStockMember	Additional Paid In Capital	Accumulated Deficit [Member]	Non-Controlling Interest	Total
Beginning balance, Amount at Dec. 31, 2012	$ 16,053	$ 8,147,864	$ (17,322,388)		$ (9,158,471)
Beginning Balance, Shares at Dec. 31, 2012	16,051,435
Conversion of accrued interest on 12% convertible notes to common shares, Shares	58,853
Conversion of accrued interest on 12% convertible notes to common shares, Amount	59	21,128			21,187
Conversion of 12% convertible notes to common shares, Shares	125,063
Conversion of 12% convertible notes to common shares, Amount	125	44,897			45,022
Value of warrants issued for loan fee		171,996			171,996
Value of warrants issued with notes payable		65,555			65,555
Shares issued to board members as directors fees, Shares	762,500
Shares issued to board members as directors fees, Amount	762	273,738			274,500
Shares issued to advisory board members as fees, Shares	78,125
Shares issued to advisory board members as fees, Amount	78	28,047			28,125
Shares issued for consulting services, Shares	1,083,333
Shares issued for consulting services, Amount	1,083	432,917			434,000
Reclassification of derivative liability due to increase share authorization		1,977,372			1,977,372
Shares issued as employment signing bonuses, shares	383,333
Shares issued as employment signing bonus, amount	383	160,617			161,000
Non-controlling interest investment in subsidiary				2,500	2,500
Value of derivative associated with converted notes payable
Net Loss for the period			(7,032,955)	(48,424)	(7,081,379)
Ending Balance, Amount at Dec. 31, 2013	18,543	11,324,131	(24,355,343)	(45,924)	(13,058,593)
Ending Balance, Shares at Dec. 31, 2013	18,542,642
Value of warrants issued with notes payable		26,710			26,710
Shares issued to board members as directors fees, Shares	930,261
Shares issued to board members as directors fees, Amount	930	557,227			558,157
Shares issued for consulting services, Amount					788,625
Reclassification of derivative liability due to increase share authorization
Shares issued upon conversion of notes payable and accrued interest, Shares	3,068,004
Shares issued upon conversion of notes payable and accrued interest, Amount	3,069	1,849,007			1,852,076
Shares issued upon extension of notes payable, Shares	124,818
Shares issued upon extension of notes payable, Amount	125	68,491			68,616
Shares issued for conversion of accrued paid in kind interest, Shares	946,535
Shares issued for conversion of accrued paid in kind interest, Amount	947	539,830			540,777
Shares issued to consultants, Shares	788,625
Shares issued to consultants, Amount	789	774,786			775,575
Shares issued to employees as compensation, Shares	981,875
Shares issued to employees as compensation, Amount	982	1,010,393			1,011,375
Shares issued as charitable contribution, Shares	166,667
Shares issued as charitable contribution, Amount	167	109,833			110,000
Shares issued from common stock payable, Shares	333,333
Shares issued from common stock payable, Amount	333	159,667			160,000
Shares issued in connection with unit stock offering, Shares	2,311,875
Shares issued in connection with unit stock offering, Amount	2,312	1,219,187			1,221,499
Shares issued in connection with reverse stock split rounding, Shares	318
Shares issued in connection with reverse stock split rounding, Amount
Value of derivative associated with converted notes payable		694,149			694,149
Value of conversion feature of note		50,000			50,000
Net Loss for the period			(14,756,828)	(141,550)	(14,898,378)
Ending Balance, Amount at Dec. 31, 2014	$ 28,197	$ 18,383,411	$ (39,112,171)	$ (187,474)	$ (20,888,037)
Ending Balance, Shares at Dec. 31, 2014	28,194,953

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PAYABLE TO FACTOR

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

PAYABLE TO FACTOR

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an accounts purchase facility with Crown Financial, LLC (Crown) pursuant to an Account Purchase Agreement (the “Accounts Purchase Agreement”), pursuant to the Texas Finance Code. At December 31, 2014, and December 31, 2013, the amount payable to Crown, after grossing up the accounts receivable, was $1,746,479 and $0, respectively. These amounts are reflected in the amounts ‘Related party payable, Crown Financial, LLC’ on the Balance Sheet.

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

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

Factoring Agreement with Joshua Brooks

On September 26, 2013, STW Oilfield Construction, LLC (Oilfield Construction) entered into an accounts receivable factoring facility (the “Factoring Facility”) with Mr. Joshua Brooks, the Company's former Vice President of Operations, pursuant to a Loan Agreement (the “Factoring Agreement”), which shall not be deemed an account purchase agreement pursuant to the Texas Finance Code. The Factoring Facility includes a loan in the amount of $225,000, of which none is outstanding at December 31, 2014 or 2013.

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

The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Joshua Brooks as attorney in fact for various activities associated with the purchased accounts receivable, including opening Oilfield Construction's mail, endorsing

its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Mr. Brooks enforcing its rights under the Security Agreement and take possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type.

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

On December 22, 2014, we entered into a settlement agreement (the “Settlement”) with Dufrane, to settle our outstanding debts with them. Pursuant to the Settlement, the Company shall issue Dufrane a $725,000 promissory note, which bears interest at the rate of 10% per annum (the “Note”). The Note is due and payable in equal monthly installments beginning on January 15, 2015 and continuing until December 15, 2016, when a balloon payment for all then outstanding amounts under the Note shall be paid. Dufrane maintains the right to charge a 5% late fee if the Company is late on any of its payments due under the Note and interest shall increase to 18% per annum on any matured, unpaid amounts. If the Company fails to comply with any terms or conditions of the Settlement, including the terms of the Note, the Company shall immediately pay Brooks $30,000, which amount shall accrue 18% interest per annum until paid in full. As part of the Settlement, Mr. Brooks shall be released from all personal guarantees previously entered into with the Company; failure to do so constitutes an event of default under the Note. Additionally, the Company will return all vehicles owned by Mr. Brooks to him and maintains the option to return all vehicles and equipment previously leased from Dufrane or enter into a new rental agreement with Dufrane. Brooks and Dufrane agreed to refrain from performing rig washing, pipeline construction or water reclamation services to or for any of the Company’s or Black Pearl Energy, LLC’s current customers with whom they have master service agreements, for a period of one year; Brooks and Dufrane shall also refrain from soliciting same, with limited exceptions, during such time period. Pursuant to the Settlement, the parties, along with specified others, released each other from any and all claims they may have against each other. After netting all of the payables and receivables between the various subsidiaries of the Company, STW Resources Holding booked a gain of $123,898.

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2014

Segment Information Tables

Segment Operations and Assets

   Segment Operations

	Year Ended December 31, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	380,657		$	18,227,371		$	--		$	18,608,028
Costs of revenues		312,277			17,241,311			--			17,553,588
Operating expenses		1,283,862			3,468,949			9,063,932			13,816,743
Other income (expense)		--			--			(2,136,075	)		(2,136,075	)
Segment income (loss)	$	(1,215,482	)	$	(2,482,889	)	$	(11,200,007	)	$	(14,898,378	)
	Year Ended December 31, 2013
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	536,735		$	1,408,896		$	--		$	1,945,631
Costs of revenues		472,978			1,202,336			--			1,675,314
Operating expenses		102,210			763,900			2,718,330			3,584,440
Other income (expense)		--			--			(3,767,256	)		(3,767,256	)
Segment income (loss)	$	(38,453	)	$	(557,340	)	$	(6,485,586	)	$	(7,081,379	)

Segment Assets

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	3,561,024	$	247,665	$	5,178,123
Fixed assets		837,602		524,219		76,178		1,437,999
Other assets		--		--		97,121		97,121
Segment Assets	$	2,207,036	$	4,085,243	$	420,964	$	6,713,243
	December 31, 2013
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	--	$	579,541	$	4,040	$	583,581
Fixed assets		--		694,219		52,419		746,638
Other assets		--		--		185,428		185,428
Segment Assets	$	--	$	1,273,760	$	241,887	$	1,515,647

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Derivative Liability (Details Narrative)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Derivative Liability Details Narrative
Volatility rate to value derivative instruments	735.00%	623.00%

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Nature of the Business and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fair Value of Derivative Liability

Fair value of Derivative Liabilities:	Level 1		Level 2		Level 3		Total
December 31, 2014	$	--	$	--	$	802,340	$	802,340
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