10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

OR

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

For the transition period from_____ to _____

STW RESOURCES HOLDING CORP

(Exact Name of Registrant as Specified in Charter)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  ]   No [X]

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

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

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

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

As of October 6, 2015, there were 35,844,548 shares of the issuer’s common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS
		Page
PART I	FINANCIAL INFORMATION
Item 1	Unaudited Condensed Consolidated Financial Statements:	1
	Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014	1
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six month periods ended June 30, 2015 and 2014	2
	Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited) for the six months ended June 30, 2015	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six month periods ended June 30, 2015 and 2014	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 4	Controls and Procedures	42
PART II	OTHER INFORMATION
Item 1	Legal proceedings	42
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3	Defaults upon Senior Securities	45
Item 5	Other information	45

PART I

ITEM 1. FINANCIAL STATEMENTS

STW Resources Holding Corp

Condensed Consolidated Balance Sheets

	June 30, 2015			December 31, 2014
ASSETS	(Unaudited)
Current Assets
Cash	$	28,030		$	137,524
Accounts receivable, trade, net		2,592,932			3,493,918
Accounts receivable from related parties		--			7,980
Deferred project costs		1,994,245			480,000
Prepaid expenses and other current assets		447,639			329,475
Assets of discontinued operations		113,015			1,078,142
Total Current Assets		5,175,861			5,527,039
Long Term Assets
Property and equipment, net		997,628			1,203,082
TOTAL ASSETS	$	6,173,489		$	6,730,121
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Book overdraft	$	609,611		$	--
Accounts payable		2,960,629			3,467,690
Payable to related parties:
Black Pearl Energy, LLC		69,680			1,276,588
Crown Financial, LLC		1,592,252			2,034,810
Dufrane Nuclear, Inc.		80,732			--
Accrued compensation - officers		948,380			873,380
Current portion of notes payable, net of discounts, including $1,685,211and $1,077,235 payable to related parties, respectively		8,053,635			5,869,484
Sales and payroll taxes payable		2,013,354			2,197,768
Insurance premium finance contract payable		330,198			208,271
Accrued expenses and interest		2,246,567			1,727,734
Deferred revenue		2,196,313			680,000
Accrued compensation		436,875			495,934
Accrued board compensation		--			496,067
Fees payable in common stock		191,724			2,783,711
Stock subscriptions payable		117,000			27,000
Liabilities of discontinued operations		1,898,802			2,584,164
Derivative liability		283,161			802,340
Total Current Liabilities		24,028,913			25,524,941
Notes payable, net of discount and current portion, $540,919 and $623,159 payable to related parties, respectively		1.867,679			2,093,217
Total Liabilities		25,896,592			27,618,158
Commitments and contingencies (Note 9)
Stockholders' Deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		--			--
Common stock; $0.001 par value; 191,666,667shares authorized, 35,239,048 and 28,194,953 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		35,242			28,197
Additional paid in capital		24,099,362			18,383,411
Accumulated deficit		(43,508,853	)		(39,112,171	)
Total Stockholders' Deficit of STW Resources Holding Corp.		(19,374,249	)		(20,700,563	)
Non-controlling interest in subsidiary		(348,854	)		(187,474	)
Total Stockholders’ Deficit		(19,723,103	)		(20,888,037	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	6,173,489		$	6,730,121

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

-1-

STW Resources Holding Corp

Condensed Consolidated Statements of Operations

For the three and six month periods ended June 30, 2015 and 2014 (Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Revenues:
Water treatment services	$	118,859		$	10,051		$	267,770		$	10,051
Energy and construction services		2,468,601			3,045,588			4,517,743			5,157,913
Related parties services revenue		--			17,104			354			35,138
Net revenues		2,587,460			3,072,743			4,785,867			5,203,102
Cost of revenues		1,717,706			3,346,112			3,004,985			5,108,280
Gross Profit		869,754			(273,369	)		1,780,882			94,822
Operating expenses
Research and development		1,310			56,465			7,435			151,955
Sales and marketing		39,547			144,335			265,860			215,816
General and administrative		2,031,969			2,655,612			4,292,420			4,535,110
Depreciation and amortization		41,420			9,951			71,308			21,543
Total operating expenses		2,114,246			2,866,363			4,637,023			4,924,424
Loss from operations		(1,244,492	)		(3,139,732	)		(2,856,141	)		(4,829,602	)
Interest expense, including related party interest of  $38,318 and $54,164 for the three months ended June 30, 2015 and 2014, respectively, and $68,202 and $96,883 for the six months ended June 30, 2015 and 2014, respectively.		(1,418,157	)		(462,188	)		(2,595,741	)		(861,616	)
Change in derivative liability		1,353,429			(456,809	)		1,627,209			(443,536	)
Loss from continuing operations	$	(1,309,220	)	$	(4,058,729	)	$	(3,824,673	)	$	(6,134,754	)
(Loss) income from  operations of discontinued entities		(329,217)			14,951			(733,389)			(363,767)
Net Loss		(1,638,437 )			(4,043,778	)		(4,558,062 )			(6,498,521	)
Share of net income (loss) of subsidiary attributable to non-controlling interest		(80,347	)		10,641			(161,380	)		(30,928	)
Net Loss of STW Resources Holding Corp.	$	(1,558,090	)	$	(4,054,419	)	$	(4,396,682	)	$	(6,467,593	)
Loss per common share – basic and diluted	$	(0.05	)	$	(0.17	)	$	(0.14	)	$	(0.29	)
Weighted average shares outstanding - basic and diluted		32,151,614			23,611,937			31,090,024			22,094,923

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

-2-

STW Resources Holding Corp

Condensed Consolidated Statement of Stockholders’ Deficit (Unaudited)

For the six months ended June 30, 2015

	Common Stock $0.001 Par				Additional Paid In		Accumulated			Non- Controlling			Stockholders’
	Number		Amount		Capital		Deficit			Interest			Deficit
Balance, December 31, 2014		28,194,953	$	28,197	$	18,383,411	$	(39,112,171	)	$	(187,474	)	$	(20,888,037	)
Shares issued to employees from fees payable in common stock		2,192,834		2,194		1,748,732								1,750,926
Shares issued to consultants from fees payable in common stock		2,102,456		2,103		1,649,743								1,651,846
Shares issued as board of director fees		908,658		909		674,091								675,000
Shares issued for subscriptions stock payable		15,385		15		9,985								10,000
Shares issued upon conversion of notes payable and accrued interest		276,391		276		355,684								355,960
Shares issued in connection with the 2015 Transfer Agreements as origination fees		525,000		525		420,475								421,000
Shares issued for  financing fees		500,000		500		279,500								280,000
Shares issued per Saltech & Black Pearl Energy Agreements		523,371		523		305,182								305,705
Value of warrants issued as debt issuance costs						272,559								272,559
Net loss for the period								(4,396,682	)		(161,380	)		(4,558,062	)
Balance, June 30, 2015		35,239,048	$	35,242	$	24,099,362	$	(43,508,853	)	$	(348,854	)	$	(19,723,103	)

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

-3-

STW Resources Holding Corp

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six month periods ended June 30, 2015 and 2014

	Six Month Periods Ended June 30:
	2015			2014
Cash flows from operating activities – continuing operations
Net loss of STW Resources Holding Corp	$	(3,824,673	)	$	(6,134,754	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		71,308			21,630
Change in fair value of derivative liability		(1,627,209	)		443,536
Financing costs of notes payable		606,089			42,592
Change in fair value of debt instruments converted to equity		--			(272,980	)
Amortization of discount and debt issuance costs		1,354,148			90,833
Share-based compensation		1,472,448			1,655,444
Changes in working capital:
(Increase) Decrease in accounts receivable		788,007			(652,609	)
(Increase) Decrease in deferred project costs		(1,514,245	)		--
(Increase) Decrease in prepaid expenses and other current assets		(118,200	)		(593,133	)
Increase (Decrease) in accounts payable		232,599			1,192,132
Increase (Decrease) in sales and payroll taxes payable		329,823			1,657,246
Increase (Decrease) in deferred revenue		1,516,313			--
Increase (Decrease) in accrued expenses and interest		542,905			871,573
Increase (Decrease) in accrued compensation		(45,896	)		306,164
Increase (Decrease) in accrued board compensation		178,933			--
Net cash used in operating activities		(37,650	)		(1,372,326	)
Cash flows from investing activities – continuing operations
Purchase of equipment, net of equipment loans		(170,035	)		(107,431	)
Net cash used in investing activities		(170,035	)		(107,431	)
Cash flows from financing activities – continuing operations
Book overdraft		609,611			(8,211	)
Stock subscriptions payable		100,000			540,000
Related party accounts receivables		7,980			12,471
Related party accounts payables, credit facilities, notes, and advances		(631,537	)		1,156,036
Increase (Decrease) in insurance premium finance contract payable		121,927			526,462
Proceeds from notes payable		2,119,000			80,000
Principal payments of notes payable		(623,798	)		(95,496	)
Proceeds from issuance of common stock		--			122,500
Debt issuance costs		(131,000	)		--
Net cash provided by financing activities – continuing operations		1,572,183			2,333,762
Net increase in cash – continuing operations		1,364,498			854,005
Cash flows from operating activities – discontinued operations
Net loss	$	(733,389	)	$	(363,767	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation of discontinued entities		18,681			94,857
Loss on disposition of property and equipment of discontinued entities		114,809			--
Change in working capital:
(Increase) Decrease in assets of discontinued operations		1,184,582			(1,585,872	)
Increase (Decrease) in liabilities of discontinued operations held for sale		(2,005,981	)		1,660,622
Net cash used in operating activities - discountinued operations		(1,421,298	)		(194,160	)
Cash flows from investing activities – discontinued operations
Cash flows from financing activities – discontinued operations
Principal payments of notes payable of discontinued operations		(52,694	)		--
Net cash provided by financing activities – discontinued operations		(52,694	)		--
Net increase in cash – discontinued operations		(1,473,992	)		(194,160	)
Net increase (decrease) in cash		(109,494	)		659,845
Cash at beginning of period		137,524			4,699
Cash at end of period	$	28,030		$	664,544

 (Continued)

-4-

STW Resources Holding Corp

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six month periods ended June 30, 2015 and 2014

Supplemental cash flow information:
Cash paid for interest	$	84,708	$	12,679
Cash paid for income taxes	$	--	$	--
Non-cash investing and financing activities:
Shares issued from common stock subscriptions payable	$	10,000	$	150,000
Value of shares issued to employees as compensation	$	1,750,926	$	301,625
Value of shares issued to consultants	$	1,651,846	$	352,175
Value of shares issued as board fees	$	675,000	$	558,157
Value of shares issued in connection with extension of notes payable	$	--	$	67,354
Value of shares issued in payment of accrued PIK interest	$	--	$	510,769
Value of shares issued upon conversion of notes payable and accrued interest	$	355,960	$	1,588,074
Shares issued for 2015 Transfer Agreement origination fees	$	421,000	$	--
Shares issued for  Financing Fees	$	280,000	$	--
Value of shares issued as charitable contributions	$	--	$	110,000
Shares issued per Salttech & Black Pearl Energy Agreements	$	305,705	$	--
Value of warrants issued as debt issuance costs	$	272,559	$	--
Value of conversion feature of JMJ convertible note payable	$	--	$	50,000
Value of derivative associated with convertible note payable	$	--	$	715,981

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

-5-

STW Resources Holding Corp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six Month Periods Ended June 30, 2015 and 2014

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp and its subsidiaries (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. During the six months ended June 30, 2015, the Company decided to shut down the operations of its Energy and Oilfield businesses. Accordingly, some information included in our form 10-K may not be comparable to the information included in this form 10-Q. The December 31, 2014 condensed consolidated balance sheet was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015, see Reclassifications below.

History of the Company

STW Resources Holding Corp, 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.

Consolidation policy

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2015, include the accounts of the STW Resources Holding Corp and its wholly owned subsidiaries: STW Water Process & Technologies LLC and STW Pipeline Maintenance & Construction, LLC. The condensed consolidated financial statements for the three and six months ended  June 30, 2014, include STW Resources Holding Corp and STW Pipeline Maintenance & Construction, LLC as STW Water Process & Technologies, LLC was not established prior to the quarterly period ended June 30, 2014. All significant intercompany transactions and balances have been eliminated in consolidation.

STW Oilfield Construction LLC and the Company’s 75% owned subsidiary STW Energy, LLC have been reported as discontinued operations.

-6-

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. Additionally, the financial statements for June 30, 2014, December 31, 2014, and March 31, 2015 have been revised for the discontinued operations (See Note 8).

Non-Controlling interest

On June 25, 2013, the Company invested in a limited liability company (“LLC”) by obtaining a 75% interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2014, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a cumulative net loss attributable to non-controlling interests of $187,474 for the year ended December 31, 2014. During the three and six month period ended June 30, 2015, a net loss attributable to the non-controlling interest of $80,347 and $161,380, respectively, was incurred. As of June 30, 2015, the net deficit interest in the subsidiary held by the non-controlling interest is $348,854.

Going Concern

The Company’s condensed 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 $43,508,853 as of June 30, 2015, and as of that date was delinquent in payment of $2,013,354 of sales and payroll taxes. As of June 30, 2015, $5,546,655 of notes payable were in default. Since its inception in January 2008 through December 31, 2014, management had raised equity and debt financing of approximately $21,000,000 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 any at all.

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

-7-

Use of Estimates

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

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations. As of June 30, 2015 and December 31, 2014, the allowances for doubtful accounts were zero and $6,773, respectively.

Loan Discounts

The Company amortizes loan discounts over the term of the loan using the effective interest method.

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner per institution. At June 30, 2015, there were no account balances per institution that would have exceeded the $250,000 insurance limit.

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

As of June 30, 2015, three vendors accounted for 18%, 12% and 11% of total accounts payable. During the three months ended June 30, 2015, three vendors accounted for 58%, 15%, and 8% of total purchases. During the six months ended June 30, 2015, three vendors accounted for 63%, 18%, and 8% of total purchases. 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 June 30, 2015, three customers accounted for 34%, 33% and 13% of accounts receivable. During the three months ended June 30, 2015, three customers accounted for 75%, 12% and 7% of net revenues. During the six months ended June 30, 2015, three customers accounted for 74%, 8% and 8% of net revenues. 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.

Fair Value of Financial Instruments

“Fair value” is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments. Our derivative liabilities are recorded at fair value (see Note 5).

-8-

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

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

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

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

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

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

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

The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2015 and December 31, 2014.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2015	$	--	$	--	$	283,161		$	283,161
Fair value of Derivative Liability at December 31, 2014	$	--	$	--	$	802,340		$	802,340

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as a derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations in other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification to a liability are recorded at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, with anti-dilution provisions, and price protection features on outstanding common stock warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using the Black-Scholes model (see Note 5).

-9-

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

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

Long-lived Assets and Intangible Assets

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

The Company had no such asset impairments during the six months ending June 30, 2015 or 2014. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

During the year ended December 31, 2014, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. These MSAs authorize the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services. The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the three and six months ended June 30, 2015, the Company recognized $2,468,601and $4,518,097, respectively of revenues from these services contracts, which included zero and $354, respectively of revenues from related parties. During the three and six months ending June 30, 2014, the Company realized revenue of $3,062,692 and $5,193,052, respectively from services contracts, which included $17,104 and $35,138, respectively of the service revenue was from related parties.

Business Segments

The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note 10.

Income Taxes

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

-10-

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

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at June 30, 2015 and December 31, 2014, respectively.

Common Stock and Common Stock Warrants Issued to Employees

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

At June 30, 2015 and December 31, 2014, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

The basic net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive shares arising from debt or equity instruments. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2015 and December 31, 2014, the Company had 14,036,978 and 14,442,977 shares issuable upon conversion or exercise, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

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

Computer equipment and software	3 years
Furniture	3 years
Tools, equipment, and vehicles	3-5 years
Leasehold improvements	remaining life of lease

Stock Subscriptions Payable

The initial balance of stock subscriptions payable as of December 31, 2014, was $27,000 representing 41,539 shares to be issued. During the three and six months ended June 30, 2015, zero and $10,000, respectively of these stock subscriptions payable were issued representing zero and 15,385, respectively shares of common stock. The remaining balance of stock subscriptions payable as of June 30, 2015, is $117,000 representing 126,154 shares to be issued.

-11-

Fees Payable in Common Stock

During the three and six months ended June 30, 2015, the Company agreed to issue a net of 1,663,334 and 2,676,596 shares, respectively, valued at $991,801 and $1,826,450 in payment of performance bonuses, employment signing bonuses, consulting fees, and interest. During the three and six months ended June 30, 2015, the Company issued an aggregate of 3,209,740 and 5,595,052 shares, respectively, of its common stock, valued at $2,196,150 and $4,335,434, respectively, in payment of performance bonuses, employment signing bonuses, consulting fees, and interest which left a remaining balance in fees payable in common stock of $191,724, or 391,306 shares.

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

NOTE 2 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
Office furniture and equipment	$	29,467		$	29,467
Tools and yard equipment		673,942			621,995
Vehicles and construction equipment		477,187			635,220
Facilities and leasehold improvements		15,933			15,933
Total, cost		1,196,529			1,302,615
Accumulated Depreciation and Amortization		(198,901	)		(99,533	)
Property and equipment, net	$	997,628		$	1,203,082

Depreciation and amortization expense for the three and six month periods ended June 30, 2015 were $41,420 and $71,308, respectively. Depreciation and amortization expense for both the three and six month periods ended June 30, 2014 were $9,951 and $21,543, respectively.

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

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an Accounts Purchase Agreement (the “Accounts Purchase Agreement”) with Crown Financial, LLC (“Crown Financial”) under the Texas Finance Code, pursuant to which Crown Financial might, at its sole discretion, purchase certain of the STW Energy’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown would 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 should pay STW Energy on the related invoice less fess and prior advances. Each account receivable purchased by Crown would 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 would 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. As of the date of this report there were no accounts in default.

-12-

The Accounts Purchase Agreement shall remain valid 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. As of June 30, 2015 and December 31, 2014, respectively, there were no accounts receivables subject to recourse due to nonpayment of the purchased accounts.

NOTE 4 – NOTES PAYABLE

The Company’s notes payable at June 30, 2015 and December 31, 2014, consisted of the following:

	June 30,			December 31,
Name	2015			2014
14% convertible notes	$	2,296,342		$	2,296,342
12% convertible notes		100,000			100,000
2015 transfer agreements		1,375,000			--
GE Ionics note		2,100,000			2,100,000
Deferred compensation notes		279,095			279,095
Revenue participation notes		2,371,500			2,337,500
Crown Financial note		620,459			702,698
Black Pearl note payable		777,096			--
Dufrane note payable		555,879			725,000
Other short-term debt		55,000			55,000
2015 Q2 short term financing		486,000			--
Discontinued operations L/T debt		--			(752,441	)
Equipment finance contracts		48,168			110,000
Capital lease obligations		25,388			30,437
Total notes payable		11,089,927			7,983,631
Less: current portion		(9,222,248	)		(5,890,414	)
Net long term portion notes payable	$	1,867,679		$	2,093,217
Current portion notes payable	$	9,222,248		$	5,890,414
Less items as follows:
Unamortized loan discounts and loan fees		568,337			20,930
Discontinued operations		600,276			--
Total current portion of notes payable, net of discounts	$	8,053,635		$	5,869,484

14% Convertible Notes

As of June 30, 2015 and December 31, 2014, the aggregate principal balances of the 14% convertible notes are $2,296,342 and $2,296,342, respectively. During the six month period ended June 30, 2015, the Company had no activity on these notes. As of June 30, 2015, the total of outstanding 14% convertible notes was $2,296,342 of which $2,264,800 matured on or before June 30, 2015 and were in default, however, as of October 6, 2015, none of the note holders have declared the notes in default. During the six month period ended June 30, 2014, the Company converted principal and accrued interest of $973,869 in exchange for 1,628,335 shares of the Company’s common stock. The value of the stock issued was $781,337 resulting in additional interest expense of $192,532 upon the conversion of convertible debt. During the three month period ended June 30, 2014, the Company converted principal and accrued interest of $741,912 in exchange for 1,545,650 shares of the Company’s common stock. The value of the stock issued was $927,390 resulting in additional interest expense of $185,478 upon the conversion of convertible debt. At June 30, 2014, the total of outstanding 14% convertible notes was $2,326,517 of which $294,752 matured on November 30, 2013 and was in default; however, none of the note holders had declared the notes in default. During the six month period ended June 30, 2013, the Company converted principal of $25,000. The Company did not convert any principal or accrued interest of the 14% convertible notes during the three months ending June 30, 2013.

-13-

As of June 30, 2015 and 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% convertible notes payable to accredited investors that matured on November 30, 2011 and are currently in default. At June 30, 2015, the remaining balance was $100,000. In connection with the issuance of the 12% convertible notes, the Company also issued 273,583 warrants to purchase common stock at an exercise price of $0.12 per share that expire at various dates through 2015. The 12% convertible notes are convertible into 1,454,053 shares of the Company’s common stock.

During the three and six months ended June 30, 2015, the Company has had no activity on the 12% convertible notes. The notes are currently in default, however, as of October 6, 2015, 2015, the note holders have not declared the notes in default. During the three and six months ended June 30, 2014, the Company had no activity and issued 1,137,417 shares of its common stock valued at $614,205 in payment of $225,000 of principal and $116,225 of accrued interest (total of $341,225), respectively. 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.

Other Short-Term Debt

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 matured on January 1, 2015. The balance of the note payable as of June 30, 2015 and December 31, 2014, was $30,000. It is currently in default, however, as of October 6, 2015, MKM capital has not declared the note in default.

In September 2014, the Company entered into short term loan agreements with seven accredited investors for short term notes of $145,000 to be used to sustain daily operating activities. The notes matured in October 2014 with 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 171,667 shares of common stock. These shares were included in the "Fees Payable in Common Stock" and were expensed as interest in the current period. As of June 30, 2015 and December 31, 2014, all but $25,000 of the delinquent loans had been repaid, but as of October 6, 2015, the remaining lender has not declared a default on the payment of his note.

GE Ionics

On August 31, 2010, the Company entered into a Settlement Agreement with GE Ionics (“GE”) relating to a $2,100,000 note payable that was amended on October 30, 2011 (“GE Note”). On May 7, 2012, GE informed the Company that the Company 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 GE 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%.

-14-

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 Ionics, Inc. ("GE") filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the "GE Lawsuit"). Although the lawsuit arises out of STW's obligations to GE under its Settlement Agreement with GE entered into on August 31, 2010, upon which STW owed GE $2.1 million plus interest. GE elected to forgo suit on the settlement amount and sued STW for the original debt of $11,239,437, plus interest and attorneys' fees (the "Original Debt"). STW filed its Answer asserting that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE had, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote. The lawsuit is currently in the discovery phase of litigation and the parties are exploring settlement. (See Note 9)

Deferred Compensation Notes

As of June 30, 2015, and December 31, 2014, the Company had a balance of $279,095 and $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in house counsel. The notes matured on December 31, 2012, and the notes are in default, however, as of October 6, 2015, none of the note holders have declared the notes in default.

Revenue Participation Notes

As of June 30, 2015 and December 31, 2014, the Company had an outstanding balance of $2,371,500 and $2,337,500, respectively, of Revenue Participation Notes comprised as follows:

	June 30,		December 31,
Name	2015		2014
2012 Revenue Participation Notes	$	165,000	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500		302,500
2013 Revenue Participation Notes - STW Energy		182,000		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		115,000		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,607,000		1,573,000
Total revenue participation notes	$	2,371,500	$	2,337,500

These notes are more fully described in the notes to the consolidated financial statements for the year ended December 31, 2014, which were included in the Company’s Annual Report on Form 10-K as filed with the SEC on April 3, 2015.

2014 Revenue Participation Notes – STW Resources Upton Project

On September 30, 2014, the Company issued its first note for the new Upton Project. The financing is a senior secured master note (“Master Note”) with a 15% coupon and a maturity of 18 months. According to the terms of the Master Note, the Company should pay interest only in the first three months of the issuance, and commencing on the fourth month of the issuance, the Company should pay equal monthly payment of principal and accrued interest through the maturity date of the Master Note with revenue participation interest. Additionally, the Master Note carries 5% royalty to be distributed based on pro rata ownership by investors in the Master Note. Payments for principal and interest will come solely from 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 Master Note. As of June 30, 2015, the total principal amount of this financing was $1,607,000. At June 30, 2015, $502,760 of the principal payments was in default. As of the date of this Report, the investors have not declared a default on the payment of the Master Note.

-15-

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in our subsidiary: STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of June 30, 2015 and December 31, 2014, the Company had drawn down $620,458 and $702,697, respectively, of this loan facility. This loan is part of the discontinued operations.

Black Pearl Energy, LLC, a related party

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 the Company’s CEO, Stan Weiner, former COO, Lee Maddox, and one of our directors and General Counsel, Grant Seabolt. Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, of which $1,054,944 had been advanced as of December 31, 2014. The credit was issued in the form of a promissory note (the "Note"). On February 26, 2015, the open balance of the credit line and accrued interest were converted into a note payable, described in more details in the Black Pearl note payable herein below, and the credit line was dissolved.

On February 26, 2015, the Company negotiated an extension on the note payable to Black Pearl for the outstanding balance of $1,079,944 plus $105,363 of accrued interest under the Credit Agreement. The note is to be paid on a monthly basis of $12,000 per month for 48 months and the rest of the payment will become due in February 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and reduced the principal and accrued interest to approximately $805,863 and $67,000, respectively. Additionally, we would issue 75,000 shares of common stock to Black Pearl to cure the default and 131,704 shares of common stock in consideration of the extension. These stock awards were accrued as fees payable in common stock when the awards were vested.

As of June 30, 2015 and December 31, 2014, the Company had $777,096 of related party notes payables and zero, respectively, to Black Pearl.

Dufrane Nuclear, Inc. , a related party

As of June 30, 2015 and December 31, 2014, the Company has a related party note payable of $555,879 and $725,000, respectively, to Dufrane Nuclear, Inc. a company controlled by Mr. Joshua Brooks, the Company’s Former Chief Operating Officer. During the six months ended June 30, 2015 and 2014, the Company made payments on the note of $169,121 and zero, respectively, in principal.

2015 Transfer Agreement Convertible Notes Payable

During the six months ended June 30, 2015, the Company issued $1,375,000 of convertible transfer agreements to four (4) accredited investors. The transfer agreements bear interest at 5% and mature at various dates through October 17, 2015. The transfer agreements are convertible, including accrued interest, into 2,141,827 shares at a conversion price of $0.65 per share. In the event of default, the transfer agreements are convertible at a price equal to the lower of (a) $0.65 or (b) 60% multiplied by the lowest closing trade price of the common shares for the ten (10) trading days immediately prior to the applicable conversion date.

-16-

The conversion feature of the 2015 transfer agreements meet the definition of a derivative due to the reset provision to occur upon the issuance of equity based instruments at below $0.65 per share or upon default of the notes and is accounted for as a derivative liability. The Company has determined the value of the conversion feature upon default of this note using the Black-Scholes pricing model to be $1,108,030 as of the date of issuance, of which $479,877 was recorded as a financing cost in the condensed consolidated statement of operations and $628,153 was recorded as a loan discount. In connection with these transfer agreements, the Company issued 525,000 shares of its common stock to the investors valued at $470,500. The Company also incurred third party loan fees of $151,347 on these notes. The value of the conversion feature of $628,153 and $746,847 will be amortized as interest expense over the term of the note under the straight line method, which we believe approximates the effective interest method due to their short term nature. The effective interest rate of these transfer agreements was determined to be 102.5%.

2015  Short Term Financing

In the second quarter of 2015, the Company obtained short term loans from three qualified investors totaling $450,000. As part of the short term loans, one investor was given a discount on two notes totaling $73,500 and awarded 650,000 shares of common stock at various prices valued at $340,000 plus 4,000,000 shares, to be issued only in the event of a default, valued at $1,600,000. Another investor was awarded 100,000 shares of common stock at various prices valued at $80,000 plus 500,000 warrants at an exercise price of $0.59 per share.  These costs in excess of the stated value were written off as current expenses due to the short term nature of the loans and others were deferred and will be expensed over the life of the short term loans as interest expense.

For the six months ended June 30, 2015 and 2014, interest expense on all notes payable (including related parties in Note 6) described above was $2,595,741 and $861,616, respectively, which included $1,354,148 and $58,328, respectively, of amortization of debt discount and debt issuance costs.

NOTE 5 - DERIVATIVE LIABILITY

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

From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments.

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

During the first quarter of 2015, the Company computed a historical volatility of 315% using daily pricing observations for recent periods. We applied a historical volatility rate of 315% during the period ended June 30, 2015, and future periods, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these 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.

-17-

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of June 30, 2015 and December 31, 2014:

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Annual dividend yield		0	%		0	%
Expected life (years)		0.50 – 0.01			0.60 - 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		315	%		735	%

	June 30, 2015		December 31, 2014
Embedded conversion features	$	279,011	$	751,439
Warrants		4,152		50,901
	$	283,161	$	802,340

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

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Balance beginning	$	802,340		$	1,630,985
Value of derivative liability associated with JMJ note payable		--			42,592
Value of derivative liability attributable to conversion feature of transfer agreements		1,108,030			--
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	)
Change in fair value		(1,627,209	)		95,892
Balance ending	$	283,131		$	802,340

The increase in fair value of the derivative liability is largely attributable to the derivative liability associated with the conversion feature of the transfer agreement convertible notes payable. The change in the fair value of the derivative liability is attributable to the expiration of some of the warrants that were outstanding.

NOTE 6 – RELATED PARTY TRANSACTIONS

Officers’ Compensation

During the six months ended June 30, 2015 and 2014, we incurred $87,500 and $75,000, respectively, in officers’ compensation due to our Director, Chairman, and CEO, Mr. Stanley Weiner. During the three month periods ended June 30, 2015 and 2014, we incurred $45,000 and $37,500, respectively, in officers’ compensation. During the six months ended June 30, 2015 and 2014, Mr. Weiner was paid $22,500 and zero, respectively. During the three months ended June 30, 2015 and 2014 Mr. Weiner was paid $22,500 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $478,083 and $413,083, respectively, were payable to Mr. Weiner for his compensation.

-18-

During the six months ended June 30, 2015 and 2014, we incurred zero and $75,000, respectively, in officers’ compensation due to one of our former Directors and former Chief Operating Officer, Mr. Lee Maddox. During the three months ended June 30, 2015 and 2014, we incurred zero and $37,500, respectively, in officers’ compensation due to Mr. Maddox. During the six months ended June 30, 2015 and 2014, the Company paid Mr. Maddox $30,000 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $190,500 and $220,500, respectively, were payable to Mr. Maddox for his compensation.

During the six months ended June 30, 2015 and 2014, we incurred $60,000 and zero, respectively, in officers’ compensation due to one of our Directors and Officer, Mr. Paul DiFrancesco. During the three months ended June 30, 2015 and 2014, we incurred $36,000 and zero, respectively, in officers’ compensation due to Mr. DiFrancesco. During the six months ended June 30, 2015 and 2014, the Company paid Mr. DiFrancesco $52,500 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $7,500 and zero, respectively, were payable to Mr. DiFrancesco for his salary.

During the six months ended June 30, 2015 and 2014, we incurred $47,500 and $45,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. During the three months ended June 30, 2015 and 2014, we incurred $24,000 and $22,500, respectively, in general counsel services fees expense with Seabolt Law Group. During the six months ended June 30, 2015 and 2014, the Company paid Mr. Seabolt $15,000 and $15,000, respectively. As of June 30, 2015 and December 31, 2014, the balances of $212,297 and $179,797, respectively, were payable to Seabolt Law Group for their services.

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. There has been no additional activity during the six months ending June 30, 2015. The balance in the accrued officer’s compensations for our former COO, Mr. Brooks, was $60,000 at both June 30, 2015 and December 31, 2014.

During six months ended June 30, 2015 and 2014, we incurred $96,436 and $317,118, respectively, in CFO, audit preparation, tax, and SEC compliance services fees expense with Miranda CFO Services, Inc. and Miranda & Associates, a Professional Accountancy Corporation, firms owned by our Chief Financial Officer, Mr. Robert J. Miranda. During three months ended June 30, 2015 and 2014, we incurred $45,688 and $168,520, respectively, in CFO, audit preparation, tax, and SEC compliance services fees expense with Miranda CFO Services, Inc. and Miranda & Associates. As of June 30, 2015 and December 31, 2014, the balances of $67,207 and $219,271, respectively, were payable to Miranda & Associates for these services.

During six month periods ended June 30, 2015 and 2014, we incurred $100,000 and $100,000, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC, Mr. Jennings. During three month periods ended June 30, 2015 and 2014, we incurred $50,000 and $50,000, respectively, in officers’ salary due to Mr. Jennings. During the six month period ended June 30, 2014, we incurred with Mr. Jennings a signing bonus comprised of 50,000 shares of the Company’s common stock valued at $21,000. As of June 30, 2015 and December 31, 2014, the balance of zero and $121,000, was payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards were accrued as fees payable in common stock the awards are vested.

During six month periods ended June 30, 2015 and 2014, we incurred $100,000 and none, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Water Process and Technologies, LLC, Mr. Murphy. During three month periods ended June 30, 2015 and 2014, we incurred $50,000 and none, respectively, in officers’ salary due to Mr. Murphy. In the second quarter of 2014, we incurred with Mr. Murphy a signing bonus comprised of 333,333 shares of the Company’s common stock valued at $200,000. As of June 30, 2015 and December 31, 2014, the balance of zero and $200,000, was payable to Mr. Murphy for the value of signing bonuses due under his employment agreement. These stock awards were accrued as fees payable in common stock the awards are vested.

-19-

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.

Pursuant to 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.

For the six months ended June 30, 2015 and 2014, the Company incurred director fees of $225,000 and $337,500, respectively. During the six months ended June 30, 2015 and 2014, the Company issued 908,658 and 930,261 shares of its common stock in payment of director fees, valued at $675,000 and $558,167, respectively. For the three months ended June 30, 2015 and 2014, the Company incurred director fees of $112,500 and $168,750, respectively. During the three months ended June 30, 2015 and 2014, the Company issued 346,158 and 930,261 shares of its common stock in payment of these fees, valued at $225,000 and $558,167, respectively. As of June 30, 2015 and December 31, 2014, the Company has accrued compensation due to its directors (both current and former) of zero and $496,067, respectively.

Related Party Notes Payable

For a more complete discussion of the notes to Black Pearl Energy, LLC and Dufrane Nuclear see Note 4 – Notes Payable.

Related Party Sales

During the six months ended June 30, 2015 and 2014, the Company had related party sales of $354 and $35,138, respectively. During three months ended June 30, 2015 and 2014, the Company had related party sales of zero and $17,104, respectively. Related party sales are a combination of sales to three companies, Black Pearl Energy, LLC, Dufrane Construction, and Dufrane Nuclear Shielding Inc.

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.

-20-

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 June 30, 2015 and December 31, 2014, the Company had a related party payable of $1,592,252 and $2,034,810, respectively to Crown Financial.

NOTE 7 – STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock with a par value of $0.001 per share. As of June 30, 2015, no preferred shares were issued or outstanding and the Company does not currently have any plans to issue any preferred shares

Common Stock

The Company is authorized to issue up to 191,666,667 shares of common stock with a par value of $0.001 per share. During the six months ended June 30, 2015, the Company issued common shares as follows:

On January 15, 2015, the Company issued 62,500 shares of common stock to an investor, at a per share price of $1.56, in payment of interest on a short term loan for a value of $97,500 and an additional 170,000 shares of common stock, at a per share 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 per share prices, valued at $209,825 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 per share prices, to 7 investors valued at $225,128 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 per share prices, valued at $344,100 to 4 employees pursuant to their employment contracts.

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

On February 3, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.68, to an accredited investor for $68,000 in loan origination fees.

On February 6, 2015, the Company issued 150,001 shares of fully vested common stock, at various per share prices, to 3 consultants valued at $119,500 in payment of services rendered in 2014, previously accrued, and the renewal of a 2015 contract.

On February 6, 2015, the Company issued 225,000 shares of common stock, at various per share prices, to 3 accredited investors for $187,000 in loan origination fees.

On February 17, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.81, to an accredited investor for $81,000 in loan origination fees.

On February 18, 2015, the Company issued 184,975 shares of common stock to an investment group, at a per share price of $0.65, valued at $120,233 for services rendered in procuring investors for the company.

-21-

On February 19, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.85, to an accredited investor for $85,000 in loan origination fees.

On February 23, 2015, the Company issued 562,500 shares of common stock to 6 directors, at a per share 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 per share 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 1 employee and 2 consultants for services performed in 2014. They were issued at a per share price of $0.80 per common share at a total value of $720,000.

On May 14, 2015, the Company issued 341,667 shares of common stock to two consultants valued at $230,501.

On May 15, 2015, the Company issued 26,000 shares of common stock to two consultants valued at $18,610.

On May 18, 2015, the Company issued 206,667 shares of common stock to two consultants valued at $155,000.

On June 12, 2015,the Company issued 500,000 shares of its common stock and warrants to purchase up to 500,000 shares of the Company’s common stock at $0.59 per share to an accreditor investor who provided the Company with a $385,000 original issue discount bridge note, which yielded net proceeds of $350,000 to the Company. The shares were valued at $280,000.

On June 26, 2015 the Company issued 800, 000 shares of common stock to six employees for accrued signing bonuses valued at $677,000. The Company also issued 183,334 shares of common stock to two consultants valued at $137,501.

On June 30, 2015 the Company issued 333, 333 shares of common stock to one employee for an accrued signing bonus valued at $200,000. The Company issued 578,927 shares of common stock valued at $339,039 to satisfy an obligation to Salttech, its contracts with Black Pearl Energy, and a financial obligation to an investor. The Company also issued 346,158 shares of common stock to members of the Board of Directors valued at $225,000. Additionally, the Company issued 239,812 shares of common stock to two consultants valued at $167,500.

As of June 30, 2015, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

-22-

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		25,000	0.12		2015
Warrants issued to Crown Financial, LLC		666,667	1.20		2016
Warrants issued on $20,000 short term loan		33,333	1.20		2015
Warrants associated with 2013 Revenue Participation Notes		84,205	1.80		2015
Warrants issued with 2013 Unit Share Offerings		333,333	1.20		2015
Warrants issued with 2014 Unit Share Offerings		2,328,542	1.20 – 1.50		2016
Warrants issued with 2013 and 2014 Unit Share Offerings		20,770	1.50		2017
Warrants issued with 2015 Q2 Financing		500,000	0.59		2017
Sub-total of Warrants outstanding		3,991,850
Common stock associated with the 12% Convertible Notes plus accrued interest		1,454,053	0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		166,910	0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		6,231,244	0.48		N/A
Common stock associated with 2015 Transfer Agreements		1,734,615	0. 65		N/A
Common stock associated with 2014 Unit Share Offerings		117,000	various		N/A
Common stock payable as fees		341,306	various		N/A
Total		14,036,978

Warrants

A summary of the Company’s warrant activity and related information during the six months ended June 30, 2015 follows:

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2015		3,634,350		$	1.27	1.18	$	851,313
Issued		500,000			0.59	2.00
Exercised		--
Forfeited		--
Cancelled		--
Expired		(142,500	)		0.75
Outstanding at June 30, 2015		3,991,850		$	1.20	0.86	$	792,563
Exercisable		3,991,850		$	1.20	0.86	$	792,563

-23-

NOTE 8 – DISCONTINUED OPERATIONS

During the three months ended June 30, 2015, the Company discontinued the operations of STW Energy, LLC and STW Oilfield Construction, LLC. These business units have ceased operations and the Company is in process of disposing of assets and settling liabilities. Because of continued losses, the Company made the decision to close STW Energy, LLC and STW Oilfield Construction, LLC. In the three month period ending June 30, 2015, the company sold or transferred all remaining fixed assets to STW Pipeline Maintenance & Construction, LLC and incurred a loss on the sale of assets of $114,000. No further significant losses are expected.

A summary of assets and liabilities of discontinued operations is as follows:

	June 30, 2015		December 31, 2014
	(Unaudited)
Carrying amounts of major classes of assets included as part of discontinued operations:
Cash	$	--	$	3,550
Accounts receivable, trade, net		112,979		216,262
Accounts receivable from related parties				511,809
Prepaid expenses and other current assets		36		111,604
Total Current Assets		113,015		843,225
Long Term Assets
Property and equipment, net		--		234,917
Total major classes of assets of the discontinued operations.	$	113,015	$	1,078,142

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Book overdraft	$	56,466	$	17,445
Accounts Payable		683,193		1,055,575
Payable to related parties:
Black Pearl Energy, LLC		6,709		94,717
Crown Financial, LLC		685		685
Current portion of notes payable, net of discounts		600,276		752,441
Sales and payroll taxes payable		514,237		474,075
Accrued expenses and interest		24,072		41,383
Accrued compensation		13,163		147,843
Total major classes of liabilities of the discontinued operations.	$	1,898,801	$	2,584,164

-24-

Loss from Discontinued Operations is as follows:

	Six Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:	$	504,699		$	4,011,025
Revenues
Cost of revenues		(719,103	)		(3,349,019	)
Operating expenses		(321,815	)		(941,884	)
Interest expense		(82,361	)		(83,889	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(733,389	)	$	(363,767	)

	Three Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:
Revenues	$	23,705		$	2,540,605
Cost of revenues		(126,117	)		(1,929,945	)
Operating expenses		(71,639	)		(549,994	)
Interest expense		(40,357	)		(45,715	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(329,217	)	$	14,951

NOTE 9 – 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 2014, 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 June 30, 2015 and December 31, 2014, the principal balances on these capital leases totaled $25,388 and $30,438, respectively.

Future minimum lease payments under the capital lease and operating lease as of June 30, 2015, are as follows:

Years ending December 31:	Capital Lease		Operating Lease		Totals
2015	$	6,588	$	58,500	$	65,088
2016		13,176		117,000		130,176
2017		8,960		117,000		125,960
2018		--		117,000		117,000
Thereafter		--		204,750		204,750
Total minimum lease payments		28,724		614,250		642,974
Less interest		3,336
Capital lease obligation		25,388
Less current portion		5,332
Long-term capital lease obligation	$	20,056

-25-

During the six months ended June 30, 2015 and 2014, rental expense for all property, including equipment rentals cost of sales, and equipment operating leases was $736,527 and $1,076,926, respectively, which includes over $645,071 and $1,015,516, respectively, of equipment rental used on projects and reflected in cost of revenues. Related party rental expense during the six months ended June 30, 2015 and 2014, was $604 and zero, respectively.

During the three months ended June 30, 2015 and 2014, rental expense for all property, including equipment rentals cost of sales, and equipment operating leases was $408,637 and $688,751, respectively, which includes over $361,923 and $670,458, respectively, of equipment rental used on projects and reflected in cost of revenues. Related party rental expense during the three months ended June 30, 2015 and 2014, was zero for both.

Product Purchase and Manufacturing License Agreement

On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Saltech B.V (“Saltech”), a company based in the Netherlands. The agreement provides exclusive rights to purchase Saltech’s DyVaR devices which are used to remove salinity from brackish/brine water streams. The agreement grants 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 was $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. These stock awards were accrued as fees payable in common stock as the awards are vested and was settled upon the issuance of the shares in June 2015.  During the three and six months ended June 30, 2015, the company paid $100,000 and $100,000, respectively in royalties to Salttech.

As of June 30, 2015, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2015	$	140,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments	$	980,000

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.

-26-

Employment Agreements

STW Pipeline Maintenance & Construction, LLC, has an employment agreement with Adam Jennings that expired on September 22, 2014, but is renewable by mutual consent of the Company and Mr. Jennings. The employment agreement for Mr. Jennings has been renewed.

Stanley T. Weiner is employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary is $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 could be rewarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 400,000 fully vested shares of the Company’s common stock. He will also be awarded quarterly bonuses equal to 50,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Paul DiFrancesco is employed as Head of Finance for a three year term effective February 1, 2015. His base salary is $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 could be rewarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 fully vested shares of the Company’s common stock. He will also be awarded quarterly bonuses equal to 50,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Grant Seabolt is employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary is $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 could be awarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 200,000 fully vested shares of the Company’s common stock. He will be awarded quarterly bonuses equal to 25,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Contingencies

The Company is subject to various claims and contingencies in the normal course of business that arise from litigation, business transactions, or employee-related matters. The Company establishes reserves when it believes a loss is probable and is able to estimate its potential exposure. For reasonably possible loss contingencies, the Company discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. While actual losses may differ from the amounts recorded and the ultimate outcome of our pending actions is generally not yet determinable, the Company does not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on its business, financial position, results of operations, or cash flows. In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. All items, whereby the Company agrees with the amount of the claim, have been recorded in the current period and are reflected in accounts payable.

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE Ionics, Inc. ("GE") filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the "GE Lawsuit"). Although the lawsuit arises out of STW's obligations to GE under its Settlement Agreement with GE entered into on August 31, 2010, upon which STW owed GE $2.1 million plus interest. GE elected to forgo suit on the settlement amount and sued STW for the original debt of $11,239,437, plus interest and attorneys' fees (the "Original Debt"). STW filed its Answer asserting that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE had, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because management has determined the probability of recovery is remote. The lawsuit is currently in the discovery phase of litigation and the parties are exploring settlement. The Company has a note payable of $2,100,000 recorded as its estimated loss on this matter.

-27-

Sichenzia and Ross Lawsuit. On June 13, 2014, Sichenzia Ross Friedman Ference LLP (“Sichenzia Ross”) filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $80,036.22 in legal fees and expenses from the Company. The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters. 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 Judgment by Confession with the Court. This has been fully accrued for.

Bob J. Johnson & Associates Lawsuit. Since June 30, 2014, 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 St. 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 some initial discovery from the Company; however, the Company’s counsel is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction. The Company continues to vigorously defend this lawsuit and Management does not expect to incur any liability beyond its costs of defense.

Arbitration Judgment

Viewpoint Securities, LLC Arbitration. On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP") who entered into an engagement agreement, dated March 9, 2008 (as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010), with STW whereby the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company. The demand alleged breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement. VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock, payment of a $15,000 promissory note plus 3+ years of interest at 12%, attorneys' fees of $18,000.00 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 $196,727.77 on Viewpoint's claim for $216,217 in fees and expenses, plus $5,541.46 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commending April 1, 2014. The Arbitrator denied Viewpoint's claims related to the Company's warrants, a $15,000 promissory note plus 12% interest and for $18,000 in attorneys' fees. The Award was final on April 01, 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. Subsequent to June 30, 2015, on July 07, 2015, STW and Viewpoint signed a “Payment and Standstill Agreement, wherein the parties agreed that the total Arbitration Award with interest totaled $228,170.92, that Viewpoint would not seek post Award attorneys’ fees from STW, and that so long as STW made bi-weekly payments of $2,000.00, beginning on July 10, 2015, Viewpoint would stay any efforts to collect on the Arbitration Award, and when fully paid, would fully release STW from the Arbitration Award. The Company has made all scheduled payments to date.

-28-

United Drilling, Inc. Lawsuit. On May 06, 2015, United Drilling, Inc. (“United Drilling”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 83rd Judicial District in Pecos County, Texas, styled United Drilling, Inc. v. STW Resources Holding Corp. et al., Cause No. P-7405-83-CV (the “United Lawsuit”). United Drilling provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $1,577,883.33 related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay United Drilling; therefore, United Drilling filed the United Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. United Drilling seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to United Drilling. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against United Drilling for wrongfully placing a lien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, United Drilling. STW and United Drilling have participated in substantive settlement discussions and have a definitive settlement agreement prepared awaiting execution. Based on the Company counsel’s legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

Dufrane Nuclear Shielding, Inc. Counterclaims. On July 16, 2015, Dufrane Nuclear Shielding, Inc., Dufrane Construction, LLC (collectively “Dufrane”) and Joshua C. Brooks filed a counterclaim against STW and its subsidiaries in Case No. CV-50864, pending in the 238th District Court of Midland County, Texas, styled STW Resources Holding Corp., et al. v. Felipe Sanchez, et al. (the “Dufrane Counterclaims”). Dufrane is suing STW over a $725,000 promissory note and an equipment rental agreement, and Joshua C. Brooks is suing STW alleging he was not released from certain guaranty obligations with equipment providers. STW and its subsidiaries filed a general denial and the parties have been working together on an agreed accounting of payments made and the allocations of those payments, with a view towards settling the Dufrane Counterclaims.

Seaboard International, Inc. Lawsuit. On July 07, 2015, Seaboard International, Inc. (“Seaboard”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 112th Judicial District in Pecos County, Texas, styled Seaboard International, Inc. v. Case Drilling & Pump, LLC, et al., Cause No. P-11813-112-CV (the “Seaboard Lawsuit”). Seaboard provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $80,685.01related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay Seaboard; therefore, Seaboard filed the Seaboard Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. Seaboard seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to Seaboard. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against Seaboard for wrongfully placing alien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, Seaboard. The Company will vigorously defend this lawsuit and does not expect significant liability from this matter. Based on the Company counsel's legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

NOTE 10 – 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 supplies, analysis, design, evaluation, implementation and operations.

Oil and Gas Services

Our subsidiary, STW Pipeline Maintenance & Construction, LLC, offers a wide a range of oilfield, 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 expenses 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.

-29-

Segment Operations

	Six months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	267,770		$	4,518,097	$	--		$	4,785,867
Costs of revenues		271,963			2,733,022		--			3,004,985
Operating expenses		931,725			1,039,647		2,665,651			4,637,023
Other income (expense)		--			--		(968,532	)		(968,532	)
Segment income (loss)	$	(935,918	)	$	745,428	$	(3,634,183	)	$	(3,824,673	)

	Three months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	118,859		$	2,468,601	$	--		$	2,587,460
Costs of revenues		126,437			1,591,269		--			1,717,706
Operating expenses		397,208			493,754		1,223,284			2,114,246
Other income (expense)		--			--		(64,728	)		(64,728	)
Segment income (loss)	$	(404,786	)	$	383,578	$	(1,288,012	)	$	(1,309,220	)

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,193,051		$	--		$	5,203,102
Costs of revenues		--			5,108,280			--			5,108,280
Operating expenses		219,584			1,006,691			3,698,149			4,924,424
Other income (expense)		--			--			(1,305,152	)		(1,305,152	)
Segment income (loss)	$	(209,533	)	$	(921,920	)	$	(5,003,301	)	$	(6,134,754	)

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	3,062,692		$	--		$	3,072,743
Costs of revenues		--			3,346,112			--			3,346,112
Operating expenses		88,036			662,802			2,115,525			2,866,363
Other income (expense)		--			--			(918,997	)		(918,997	)
Segment income (loss)	$	(77,985	)	$	(946,222	)	$	(3,034,522	)	$	(4,058,729	)

-30-

Segment Assets

	June 30, 2015
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	3,529,556	$	1,203,281	$	443,024	$	5,175,861
Fixed assets		484,217		450,042		63,369		997,628
Other assets		--		--		--		--
Segment Assets	$	4,013,773	$	1,653,323	$	506,393	$	6,173,489

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	2,831,798	$	1,325,807	$	5,527,039
Fixed assets		837,602		289,302		76,178		1,203,082
Other assets		--		--		--		--
Segment Assets	$	2,207,036	$	3,121,100	$	1,401,985	$	6,730,121

NOTE 11 – SUBSEQUENT EVENTS

Shares Issued

On July 9, 2015, the Company issued 355,500 shares of common stock to forty-three employees for performance bonuses, valued at $71,100.

On July 22, 2015, the Company issued 200,000 shares of common stock to a qualified investor pursuant to the terms of the loan payoff, valued at $40,000.

On July 28, 2015, the Company issued 50,000 shares of common stock to a consultant for services rendered, valued at $32,500.

Other Events

In August 2015, STW Water Process & Technologies, LLC (STW Water) entered into a lease agreement with MRK Development, LLC (MRK) for the rights to collect, process, and sell the water located on and below the surface of properties owned by MRK. The lease calls for the initial payment of $10,000 in cash and the issuance of 100,000 shares of common stock of STW Resources Holding Corp. The lease is for a period of 30 years with automatic renewals on a year by year basis unless terminated by either party with a 60 day notice. There are additional ‘bonus’ payments of cash and stock when certain levels of Gallon per Day (GPD) are met. Additionally, there is a Royalty based on a received price of the water sold on a ‘per 1,000 gallons’ basis. The percentage of the royalty escalates from 10% to 15% dependent on the GPD.

On August 20, 2015, Alan Murphy was appointed to the Company’s Board of Directors. Pursuant to the agreement with Mr. Murphy, the Company agreed to pay him the following compensation: (a) 33,334 shares of the Company’s common stock upon the execution of the agreement; (b) a fee at the rate of $75,000 per year ($27,329 for the partial year 2015), which shall be paid solely at the Company’s discretion in cash or in shares of the Company’s stock; (c) a cash payment of $1,000.00 for each day of attendance at meetings of the Company’s Board of Directors or any other meeting called by the Company and attended by Mr. Murphy; and (d) reimbursement of all reasonable costs of travel, lodging, and entertainment reasonably necessary for Mr. Murphy to carry out his duties, so long as any such expense in excess of $100 is approved in advance by the Company.

-31-

In the month of August 2015 the Company agreed to act as the intermediary agent to an agreement in which two of the current officers of the Company are selling their share of a related party company Black Pearl Energy, LLC, (BPE), to the third owner and withdrawing from BPE. In addition to the Company acting as an intermediary, it entered into an agreement reconciling payments between the Company and the related party company, for which the Company’s Management does not anticipate it having any financial risk or benefit.

On August 17, 2015, management entered into a short term financing with a lender for $375,000. The note contained a $75,000 (or 20%) original issue discount and a legal fee for $5,000. The note will bear interest at 8%. The lender will be granted 250,000 shares of common stock. The Company received $295,000 from the investor.

On August 21, 2015, the Board of Directors approved an agreement with MDM Worldwide Solutions, Inc. (MDM) to handle investor relations for the Company commencing July 15, 2015 and running for six months. Upon acceptance of the agreement the Company will issue 100,000 shares of common stock to MDM. Fees for the service include a monthly retainer of $20,000.

On September 14, 2015, the Board of Directors authorized management to inter into short term financing with three separate lenders for a total of $598,000, $198,000 from each lender. The notes will bear interest at 5% and contains a 10% original issue discount. The notes will be convertible at $0.65 per common share, or 60% of the lowest daily closing bid price for the 10 day period preceding the conversion. In addition each lender will be granted 225,000 shares of common stock. The Company will reserve 2,566,000 shares of common stock with the transfer agent to facilitate the conversion. To-date we have received $100,000 each from two of the investors.

Since June 30, 2015, there has been two new litigations instituted against the Company.

Dufrane Nuclear Shielding, Inc. Counterclaims. On July 16, 2015, Dufrane Nuclear Shielding, Inc., Dufrane Construction, LLC (collectively “Dufrane”) and Joshua C. Brooks filed a counterclaim against STW and its subsidiaries in Case No. CV-50864, pending in the 238th District Court of Midland County, Texas, styled STW Resources Holding Corp., et al. v. Felipe Sanchez, et al. (the “Dufrane Counterclaims”). Dufrane is suing STW over a $725,000 promissory note and an equipment rental agreement, and Joshua C. Brooks is suing STW alleging he was not released from certain guaranty obligations with equipment providers. STW and its subsidiaries filed a general denial and the parties have been working together on an agreed accounting of payments made and the allocations of those payments, with a view towards settling the Dufrane Counterclaims.

Seaboard International, Inc. Lawsuit. On July 07, 2015, Seaboard International, Inc. (“Seaboard”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 112th Judicial District in Pecos County, Texas, styled Seaboard International, Inc. v. Case Drilling & Pump, LLC, et al., Cause No. P-11813-112-CV (the “Seaboard Lawsuit”). Seaboard provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $80,685.01related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay Seaboard; therefore, Seaboard filed the Seaboard Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. Seaboard seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to Seaboard. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against Seaboard for wrongfully placing a lien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, Seaboard.  The Company will vigorously defend this lawsuit and does not expect significant liability from this matter. Based on the Company counsel’s legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

Default on Note Payable

On July 24, 2015, the Company defaulted on a note payable in the principal amount of $423,500.  The Company had 15 days to cure the default but failed to cure the default within this time frame. The note payable provided for a reserve of 4,000,000 shares of the Company’s common stock as security on the note. Upon the Company’s failure to cure the default the 4,000,000 shares of the Company’s restricted common stock was to be released to the note holder.

-32-

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

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

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

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

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

Overview

The Company 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.

Plan of Operations

Due to our recurring net losses and negative cash flows from operations and negative working capital, substantial doubt exists about our ability to continue as a going concern exists.

For the next twelve months, we plan to focus our operation 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 2014 and the quarter ended June 30, 2015, we earned most of our revenue through our subsidiary, STW Pipeline Maintenance & Construction, LLC and while we continue to benefit from our ownership of that entity, we shall continue to focus on successfully implementing our water reclamation services.

-33-

As discussed further in the Liquidity and Capital Resources section herein below, we have limited funds to support our operations. Our continuation as a going concern subsequent to June 30, 2015, is dependent on our ability to obtain additional financing to fund the continued operation of our business model for a long enough period to achieve profitable operations. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

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

Three months ended June 30, 2015 Compared to the Three Months Ended June 30, 2014

Our revenue, operating expenses and net loss from operations for the three month period ended June 30, 2015 as compared to the three month period ended June 30, 2014, were as follows – some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:

	Three Months Ended June 30:									% Change Increase
	2015			2014			Change			(Decrease)
NET REVENUES	$	2,587,460		$	3,072,743		$	(485,283	)	-15.8	%
COSTS OF REVENUES		1,717,706			3,346,112			(1,628,406	)	-48.7	%
Gross Profit		869,754			(273,369	)		1,143,123		418.2	%
OPERATING EXPENSES:
Research & development		1,310			56,465			(55,155	)	-97.7	%
Sales and marketing		39,547			144,335			(104,788	)	-72.6	%
General and administrative		2,031,969			2,655,612			(623,643	)	-23.5	%
Depreciation		41,420			9,951			31,469		316.2	%
Total operating expenses		2,114,246			2,866,363			(752,117	)	-26.2	%
Loss from operations		(1,244,492	)		(3,139,732	)		1,895,240		60.4	%
Interest expense		(1,418,157	)		(462,188	)		(955,969	)	206.8	%
Change in derivative liability		1,353,429			(456,809	)		1,810,238		-396.3	%
Loss from continuing operations		(1,309,220	)		(4,058,729	)		2,749,509		-67.7	%
Loss from operations of discontinued entities		(329,217	)		14,951			(344,168	)	-2,302.0	%
Loss after discontinued operations		(1,638,437	)		(4,043,778	)		2,405,341		-59.5	%
Share of net loss of subsidiary attributable to non-controlling interest		(80,347	)		10,641			(90,988	)	-855.1	%
Net Loss	$	(1,558,090	)	$	(4,054,419	)	$	2,496,329		-61.6	%

-34-

Net Revenues: During the three months ended June 30, 2015, we realized $118,859 of revenues from our water reclamation business segment and $2,468,601 of revenues from our oil & gas services business segment. During the three months ended June 30, 2014, we realized $10,051 in revenues from our water reclamation business segment and $3,062,692 from our oil & gas services business segment. The decrease of $485,283 during the three months ended June 30, 2015 as compared to the same period in 2014 was mainly caused by a decrease of $594,091 in revenues from our oil & gas services business segment which was discontinued during the three months ended June 30, 2015. Despite the overall decrease in net revenues, our revenue from water reclamation business segment increased by $108,808 in the three months ended June 30, 2015 as compared to the same period in 2014 because of our increased operational activities in this business segment as compared to start-up activities during the same period in 2014.

Cost of Revenues: Total costs of revenues for the three months ended June 30, 2015 were $1,717,706 as compared to $3,346,112 for the three months ended June 30, 2014, a decrease of $1,628,406 or 48.7%. The decrease in costs of revenue is attributable to the costs of revenues of discontinued operations in our oil & gas services business segment. Costs of revenues during the three months ended June 30, 2015 and 2014, are comprised of labor, fringe benefits, equipment rental, and other costs of providing water reclamation and oil & gas services.

Gross Profit: During the three months ended June 30, 2015, we realized a gross profit of $869,754 from our water reclamation and oil & gas services business segments compared to a gross loss of $273,369 realized during the three months ended June 30, 2014, an increase of $1,143,123 or 418.2%, which was caused by our increased revenue in water reclamation business segment and an improvement in our gross profit margins during the three months ended June 30, 2015 as we discontinued operations of two of our oil & gas services business units in this period.

Research and development expenses: Research and development expenses decreased by $55,155 or 97.7% to $1,310 for the three months ended June 30, 2015 from $56,465 for the three months ended June 30, 2014. The decrease in research and development expenses is attributable to our water reclamation business segment that was in development during the three months ended June 30, 2014 and is operational during the three months ended June 30, 2015.

Sales and marketing expenses: Sales and marketing expenses decreased by $104,788 or 72.6% to $39,547 for the three months ended June 30, 2015 from $144,355 for the three months ended June 30, 2014. The decrease in sales and marketing expenses are attributable to decreased expenses of our oil & gas services business segment due to the business units that were discontinued.

General and Administrative Expense: General and administrative expenses decreased $623,643 or 23.5% to $2,031,969 for the three months ended June 30, 2015 from $2,655,612 for the three months ended June 30, 2014. Our general and administrative expenses for the three months ended June 30, 2015 consisted of professional fees of $62,449, insurance of $47,836, management fees of $227,231, salaries and wages of $883,799, penalties of $367, and director fees of $112,500, and other general & administrative expenses of $697,787, for a total of $2,031,969. Our general and administrative expenses for the three months ended June 30, 2014 consisted of professional fees of $171,259, consulting fees of $3,472, insurance of $52,034, penalties of $479,762, salaries & wages of $608,074, management fees of $644,252, director fees of $168,750, and other general & administrative expenses of $528,009 for a total of $2,655,612.

The primary reasons for the decrease in General and Administrative Expense during the three months ended June 30, 2015 compared to the corresponding period for 2014 was a combination of a decrease of $479,395 in penalties, a decrease of $417,023 in management fees, a decrease of $108,810 in professional fees, and an increase of $381,584 in other general & administrative expenses. During the three month periods ended June 30, 2015 and 2014, non-cash stock based compensation expenses relating to consulting and other fees included in general and administrative expenses were $462,221 and $1,331,761, respectively.

-35-

Interest Expense: Interest expense increased by $955,069 to $1,418,157 for the three month period ended June 30, 2015 from $462,188 for the three month period ended June 30, 2014. The increase is due to additional interest expenses incurred on additional debt financing incurred by us since June 30, 2014 and additional loan fees and loan discount amortization incurred in new financings during the three months ended June 30, 2015.

Change in derivative liability: During the three month period ended June 30, 2015, we recorded a $1,353,429 decrease in the fair value of the derivative liability from March 31, 2015. During the three month period ended June 30, 2014, we recorded a $456,809 increase in the derivative liability from March 31, 2014, a difference of $1,810,238 between the three months ended June 30, 2015 and 2014. The increase in the derivative liability during the three months ended June 30, 2015 is attributable to an a $1,353,429 decrease in the value of the derivative liability as of June 30, 2015, which is largely attributable to a decrease in the value of shares from $0.82 at March 31, 2015 to $0.37 at June 30, 2015. The increase in the derivative liability during the three months ended June 30, 2014 is attributable to the reduction of the remaining term of outstanding warrants, offset by the effect of increased share values as of June 30, 2014.

Net Loss from continuing operations: Net loss from continuing operations decreased by $2,749,509, or 67.7%, to a net loss of $1,309,220 for the three month period ended June 30, 2015 from a net loss of $4,058,729 for the three month period ended June 30, 2014. This net loss reflects the increased revenues with improved gross margin, less increased operating expenses and change in derivative liability discussed above.

Non-controlling interest in Net Loss: During the three months ended June 30, 2015 and 2014, we reported $80,347 loss and $10,641 income, respectively, as the non-controlling interest in the net loss or income 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.

Income (loss) from discontinued operations: Loss from discontinued operations increased by $344,168 to a Loss from discontinued operations of $329,217 from a profit of $14,951 for the three months ended June 30, 2014.

Six months ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

Our revenue, operating expenses and net loss from operations for the six month period ended June 30, 2015 as compared to the six month period ended June 30, 2014, were as follows – some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:

	Six Months Ended June 30:									% Change Increase
	2015			2014			Change			(Decrease)
NET REVENUES	$	4,785,867		$	5,203,102		$	(417,235	)	-8.0	%
COSTS OF REVENUES		3,004,985			5,108,280			(2,103,295	)	-41.2	%
Gross Profit		1,780,882			94,822			1,686,060		1778.1	%
OPERATING EXPENSES:
Research & development		7,435			151,955			(144,520	)	-95.1	%
Sales and marketing		265,860			215,816			50,044		23.2	%
General and administrative		4,292,420			4,535,110			(242,690	)	-5.4	%
Depreciation		71,308			21,543			49,765		231.0	%
Total operating expenses		4,637,023			4,924,424			(287,401	)	-5.8	%
Loss from operations		(2,856,141	)		(4,829,602	)		1,973,461		40.9	%
Interest expense		(2,595,741	)		(861,616	)		(1,734,125	)	201.3	%
Change in derivative liability		1,627,209			(443,536	)		2,070,745		-466.9	%
Loss from continuing operations		(3,824,673	)		(6,134,754	)		2,310,081		-37.7	%
Loss from operations of discontinued entities		(733,389	)		(363,767	)		(369,622	)	-101.6	%
Loss after discontinued operations		(4,558,062	)		(6,498,521	)		1,940,459		-29.9	%
Share of net loss of subsidiary attributable to non-controlling interest		(161,380	)		(30,928	)		(130,452	)	-421.8	%
Net Loss	$	(4,396,682	)	$	(6,467,593	)	$	2,070,911		-32.0	%

-36-

Net Revenues: During the six months ended June 30, 2015, we realized $267,770 from our water reclamation business segment and $4,518,097 of revenues from our oil & gas services business segment, including $354 of revenues from a related party. During the six months ended June 30, 2014, we realized $10,051 in revenues from our water reclamation business segment and $5,193,051 from our oil & gas services business segment, including $35,138 of revenues from related parties. The $417,235 net decrease in revenues between the six months ended June 30, 2015 and June 30, 2014 is comprised of a $257,719 increase in revenues from our water reclamation business segment, net of a $674,954 decrease in revenues from our oil & gas services business segment. The increase in water reclamation revenues during the six months ended June 30, 2015 is attributable in increased operational activities in this business segment as compared to start-up activities in this business segment during the three months ended June 30, 2014. The decrease in revenues from our oil & gas services business segment is attributable to our discontinued operations during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

Cost of Revenues: Total costs of revenues for the six months ended June 30, 2015 were $3,004,985 as compared to $5,108,280 for the six months ended June 30, 2014, a decrease of $2,103,295 or 41.2%. The decrease in costs of revenue is attributable to the costs of revenues of discontinued operations in our oil & gas services business segment. Costs of revenues during the three months ended June 30, 2015 and 2014, are comprised of labor, fringe benefits, equipment rental, and other costs of providing water reclamation and oil & gas services.

Gross Profit: During the six months ended June 30, 2015, we realized a gross profit of $1,780,882 from our water reclamation and oil & gas services business segments compared to a gross profit of $94,822 realized during the six months ended June 30, 2014, a net increase in gross profit of $1,686,060 or 1778.1%. During the six months ended June 30, 2014, our water reclamation business had recently commenced operations but had limited revenues. During the six months ended June 30, 2015, we discontinued operations of two of our oil & gas services business units which resulted in an improvement in our gross profit margins during the three months ended June 30, 2015.

Research and development expenses: Research and development expenses decreased by $144,520 or 95.1% to $7,435 for the six months ended June 30, 2015 from $151,955 for the six months ended June 30, 2014. The decrease in research and development expenses is attributable to our water reclamation business segment that was in development during the six months ended June 30, 2014 and is fully operational during the six months ended June 30, 2015.

Sales and marketing expenses: Sales and marketing expenses increased by $50,044 or 23.2% to $265,860 for the six months ended June 30, 2015 from $215,816 for the six months ended June 30, 2014. The increase in sales and marketing expenses are attributable to increased expenses of our water reclamation services business segment that has experienced rapid sales growth during the six months ended June 30, 2015.

General and Administrative Expense: General and administrative expenses decreased $242,690 or 5.4% to $4,292,420 for the six months ended June 30, 2015 from $4,535,110 for the six months ended June 30, 2014. Our general and administrative expenses for the six months ended June 30, 2015 consisted professional fees of $306,687, insurance of $124,653, management fees of $383,825, salaries and wages of $2,066,933, penalties of $367, and board of director fees of $225,000, and other general & administrative expenses of $1,184,955, for a total of $4,292,420. Our general and administrative expenses for the six months ended June 30, 2014 consisted professional fees of $308,603, consulting fees of $179,154, insurance of $82,827, penalties of $806,999, salaries & wages of $796,983, management fees of $992,102, board of director fees of $337,500, and other general & administrative expenses of $1,030,942 for a total of $4,535,110.

The primary reasons for the decrease in comparing the six months ended June 30, 2015 to the corresponding period for 2014 was due largely to an $806,632 decrease in penalties, $608,278 decrease in management fees, $179,054 decrease in consulting fees, offset by a $1,269,950 increase in salaries & wages and a net of $81,322 increase in other general & administrative expenses. During the three month periods ended June 30, 2015 and 2014, non-cash stock based compensation expenses relating to consulting and other fees included in general and administrative expenses were 3,365,450 and $1,655,444, respectively.

-37-

Interest Expense: Interest expense increased by $1,734,125 to $2,595,741 for the six month period ended June 30, 2015 from $861,616 for the six month period ended June 30, 2014. The increase is due to additional interest expenses incurred on additional debt financing incurred by us since June 30, 2014 and additional loan fees and loan discount amortization incurred in new financings during the six months ended June 30, 2015.

Change in derivative liability: During the six month period ended June 30, 2015, we recorded a $1,627,209 decrease in the fair value of the derivative liability from January 1, 2015. During the six month period ended June 30, 2014, we recorded a $443,536 increase in the derivative liability from January 1, 2015, a net difference of $2,070,745 between the six months ended June 30, 2015 and 2014. The increase in the derivative liability during the six months ended June 30, 2015 is attributable to an increase of $1,108,030 related to the conversion feature of short term notes, reduced by a $1,627,209 decrease in the value of the derivative liability as of June 30, 2015, which is largely attributable to a decrease in the value of shares from $0.84 at December 31, 2014 to $0.37 at June 30, 2015. The increase in the derivative liability during the six months ended June 30, 2014 is attributable to the reduction of the remaining term of outstanding warrants, offset by the effect of increased share values as of June 30, 2014.

Non-controlling interest in Net Loss: During the six months ended June 30, 2015 and 2014, we reported net losses of $161,380 and $30,928, 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 from continuing operations: Net loss from continuing operations decreased by $2,310,081, or 37.7%, to a net loss of $3,824,673 for the six month period ended June 30, 2015 from a net loss of $6,134,754 for the six month period ended June 30, 2014. This net loss reflects the increased revenues with improved gross margin, less increased operating expenses and change in derivative liability discussed above.

Net loss from discontinued operations: Net loss from discontinued operations increased by $369,622 to a net loss of $733,389 from a net loss of $363,767 for the six months ended June 30, 2014.

Liquidity, Capital Resources, and Management Plans

Our condensed consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As presented in the consolidated financial statements, we incurred a net loss of $4,558,062 during the six months ended June 30, 2015, and losses are expected to continue in the near term. The accumulated deficit since inception was $43,508,853 at June 30, 2015 (Refer to Note 7 for our discussion of stockholder deficit.) We have been funding our operations through private loans and the sale of common stock in private placement transactions. (Refer to Note 4 and Note 7 in the condensed consolidated financial statements for our discussion of notes payable and shares issued, respectively.) Our cash resources are insufficient to meet our planned business objectives without additional financing. These and other factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of our company to continue as a going concern.

Management anticipates that significant additional expenditures will be necessary to develop and expand our oil & gas services and water reclamation services business units before significant positive operating cash flows can be achieved. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At June 30, 2015, we had $28,030 of cash on hand. These funds are insufficient to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the issuance of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.

-38-

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. As of the date of this Report, we have not entered into any formal agreements regarding the above.

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

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.

Cash, total current assets, total assets, total current liabilities and total liabilities as of June 30, 2015 as compared to December 31, 2014, were as follows:

	June 30, 2015		December 31, 2014
Cash	$	28,030	$	137,524
Total current assets	$	5,175,861	$	5,527,039
Total assets	$	6,173,489	$	6,730,121
Total current liabilities	$	24,028,913	$	25,524,941
Total liabilities	$	25,896,592	$	27,618,158

At June 30, 2015, we had a working capital deficit of $18,853,052 compared to a working capital deficit of $19,997,902 at December 31, 2014. Current liabilities decreased to $24,028,913 at June 30, 2015 from $25,524,941 at December 31, 2014, primarily as a result of our derivative liability.

Our operating activities used net cash of $785,086 for the six months ended June 30, 2015 compared to net cash used in operations of $1,566,486 for the six months ended June 30, 2014. The net cash used in operations for the six months ended June 30, 2015, reflects a net loss of $4,558,062, decreased by $1,876,784 in non-cash charges and by $1,8 96,192 net increase in the working capital accounts. The net cash used in operations for the six months ended June 30, 2014 reflects a net loss of $6,498,5821, decreased by $2,044,984 in non-cash charges and by $2,856,123 increase in the working capital accounts.

Our investing activities used cash of $170,035 and $107,431 for the six months ended June 30, 2015 and June 30, 2014, respectively. Our investing activities for the six months ended June 30, 2015 and 2014 are attributable to purchases of equipment, net of related equipment loans.

-39-

Our operating activities from continuing operations used net cash of $37,650 for the six months ended June 30, 2015 compared to net cash used in continuing operations of $1,372,3266 for the six months ended June 30, 2014. The net cash used in continuing operations for the six months ended June 30, 2015, reflects a net loss of $3,824,673, decreased by $1,876,784 in non-cash charges and by $1,910,239 net increase in the working capital accounts. The net cash used in continuing operations for the six months ended June 30, 2014 reflects a net loss of $6,134,754, decreased by $1,981,055 in non-cash charges and by $2,781,374 increase in the working capital accounts.

Our investing activities from continuing operations used cash of $170,035 and $107,431 for the six months ended June 30, 2015 and June 30, 2014, respectively. Our investing activities from continuing operations for the six months ended June 30, 2015 and 2014 are attributable to purchases of equipment, net of related equipment loans.

Our financing activities from continuing operations provided cash of $1,572,183 for the six months ended June 30, 2015, which is comprised of bank overdraft of $609,611, proceeds of stock subscriptions of $100,000, decrease of $7,980 in related party receivables, repayment of $631,537 of related party payables, insurance premium finance contract of $121,927, proceeds of $2,219,000 from notes payable, the repayment of $631,538 of notes payable, and debt issuance costs of $131,000. Our financing activities from continuing operations resulted in cash inflow of $2,333,763 for the six months ended June 30, 2014, which is represented by $8,211 of book overdraft, increase of stock subscriptions payable of $540,000, a net increase in related party accounts payable of $1,168,508, increase in the insurance premium financing of $526,462, the repayment of $95,496 of notes payable, proceeds from notes payable of $80,000, and proceeds from the issuance of common stock of $122,500.

Our operating activities from discontinued operations used net cash of $1,421,298 for the six months ended June 30, 2015 compared to net cash used in discontinue operations of $194,160 for the six months ended June 30, 2014. The net cash used in discontinued operations for the six months ended June 30, 2015, reflects a net loss of $733,389, decreased by $133,490 in non-cash charges and by $821,399 net decrease in the working capital accounts. The net cash used in discontinued operations for the six months ended June 30, 2014 reflects a net loss of $363,767, decreased by $94,857 in non-cash charges and by $74,750 increase in the working capital accounts.

Our financing activities from discontinued operations used cash of $52,694 for the six months ended June 30, 2015, which is comprised of the repayment of $52,694 of notes payable.

-40-

Our financing activities provided cash of $845,627 for the six months ended June 30, 2015, which is comprised of proceeds of stock subscriptions of $100,000, decrease of $7,980 in related party receivables, repayment of $631,537 of related party payables, insurance premium finance contract of $121,927, proceeds of $2,219,000 from notes payable, the repayment of $740,743 of notes payable, and debt issuance costs of $131,000. Our financing activities resulted in cash inflow of $2,333,763 for the six months ended June 30, 2014, which is represented by $8,211 of book overdraft, increase of stock subscriptions payable of $540,000, a net increase in related party accounts payable of $1,168,508, increase in the insurance premium financing of $526,462, the repayment of $95,496 of notes payable, proceeds from notes payable of $80,000, and proceeds from the issuance of common stock of $122,500.

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 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 were to pay back all advanced funds on or before August 1, 2014, although such date would 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 250,000 restricted shares of our common stock (after which, Black Pearl will own 250,000 (1%) of our common stock) and a $25,000 transaction fee to be paid on the final closing date of the credit line. In the first quarter of 2015 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

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

Critical Accounting Policies and Estimates

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2014, for disclosures regarding the Company's critical accounting policies and estimates, as well as updates further disclosed in our interim financial statements as described in this Form 10-Q.

-41-

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of our fiscal quarter ended June 30, 2015, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon those evaluations, management concluded that our disclosure controls and procedures were not effective as of June 30, 2015, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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

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

Changes in Internal Control over Financial Reporting

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

Part II – Other Information

Item 1. Legal Proceedings

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

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.

-42-

Sichenzia and Ross Lawsuit. On June 13, 2014, Sichenzia Ross Friedman Ference LLP (“Sichenzia Ross”) filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $80,036.22 in legal fees and expenses from the Company. The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters. 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 Judgment by Confession with the Court, and the Judgment remains unsatisfied.

Bob J. Johnson & Associates Lawsuit. Since June 30, 2014, 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 St. 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 some initial discovery from the Company; however, the Company’s counsel is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction. The Company continues to vigorously defend this lawsuit and Management does not expect to incur any liability beyond its costs of defense.

Viewpoint Securities, LLC Arbitration. On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP") who entered into an engagement agreement, dated March 9, 2008 (as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010), with STW whereby the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company. The demand alleged breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement. VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock, payment of a $15,000 promissory note plus 3+ years of interest at 12%, attorneys' fees of $18,000.00 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 $196,727.77 on Viewpoint's claim for $216,217 in fees and expenses, plus $5,541.46 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commending April 1, 2014. The Arbitrator denied Viewpoint's claims related to the Company's warrants, a $15,000 promissory note plus 12% interest and for $18,000 in attorneys' fees. The Award was final on April 01, 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. Subsequent to June 30, 2015, on July 07, 2015, STW and Viewpoint signed a “Payment and Standstill Agreement, wherein the parties agreed that the total Arbitration Award with interest totaled $228,170.92, that Viewpoint would not seek post Award attorneys’ fees from STW, and that so long as STW made bi-weekly payments of $2,000.00, beginning on July 10, 2015, Viewpoint would stay any efforts to collect on the Arbitration Award, and when fully paid, would fully release STW from the Arbitration Award.

-43-

United Drilling, Inc. Lawsuit. On May 06, 2015, United Drilling, Inc. (“United Drilling”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 83rd Judicial District in Pecos County, Texas, styled United Drilling, Inc. v. STW Resources Holding Corp. et al., Cause No. P-7405-83-CV (the “United Lawsuit”). United Drilling provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $1,577,883.33 related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay United Drilling; therefore, United Drilling filed the United Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. United Drilling seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to United Drilling. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against United Drilling for wrongfully placing a lien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, United Drilling. STW and United Drilling have participated in substantive settlement discussions and have a definitive settlement agreement prepared awaiting execution. Based on the Company counsel's legal opinions regarding the invalidity of United Drilling's lien.

Dufrane Nuclear Shielding, Inc. Counterclaims. On July 16, 2015, Dufrane Nuclear Shielding, Inc., Dufrane Construction, LLC (collectively “Dufrane”) and Joshua C. Brooks filed a counterclaim against STW and its subsidiaries in Case No. CV-50864, pending in the 238th District Court of Midland County, Texas, styled STW Resources Holding Corp., et al. v. Felipe Sanchez, et al. (the “Dufrane Counterclaims”). Dufrane is suing STW over a $725,000 promissory note and an equipment rental agreement, and Joshua C. Brooks is suing STW alleging he was not released from certain guaranty obligations with equipment providers. STW and its subsidiaries filed a general denial and the parties have been working together on an agreed accounting of payments made and the allocations of those payments, with a view towards settling the Dufrane Counterclaims.

Seaboard International, Inc. Lawsuit. On July 07, 2015, Seaboard International, Inc. (“Seaboard”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 112th Judicial District in Pecos County, Texas, styled Seaboard International, Inc. v. Case Drilling & Pump, LLC, et al., Cause No. P-11813-112-CV (the “Seaboard Lawsuit”). Seaboard provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $80,685.01related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay Seaboard; therefore, Seaboard filed the Seaboard Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. Seaboard seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to Seaboard. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against Seaboard for wrongfully placing alien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, Seaboard. The Company will vigorously defend this lawsuit and does not expect significant liability from this matter. Based on the Company counsel’s legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item. Please refer to our Form 10-K filed with the SEC on April 3, 2015 under item 1.A Risk Factors.

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

The Company has authorized to issue up to 191,666,667 shares of common stock with a par value of $0.001 per share.

Information on any and all 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:

On May 13, 2015, the Company issued 500,000 shares of its common stock and warrants to purchase up to 500,000 shares of the Company’s common stock at $0.59 per share to an accreditor investor who provided the Company with a $385,000 original issue discount bridge note, which yielded net proceeds of $350,000 to the Company.

On May 14, 2015, the Company issued 341,667 shares of common stock to two consultants for value of $230,501.

On May 15, 2015, the Company issued 26,000 shares of common stock to two consultants for value of $18,610.

On May 18, 2015, Company issued 206,667 shares of common stock to two consultants for value of $155,000.

On July 9, 2015, the Company issued 355,500 shares of common stock to forty-three employees for performance bonuses, valued at $71,100.

On July 22, 2015, the Company issued 200,000 shares of common stock to a qualified investor pursuant to the terms of the loan payoff, valued at $40,000.

On July 28, 2015, the Company issued 50,000 shares of common stock to a consultant for services rendered, valued at $32,500.

The Company does not expect to incur any substantial liability from this matter.

-44-

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

Item 3. Defaults upon Senior Securities

GE Ionics Settlement Agreement

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

On August 31, 2010, the 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.

Item 5. Other Information

none

-45-

ITEM 6. EXHIBITS

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

-46-

(1)	Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the Securities and Exchange Commission on September 26, 2006.
(2)	Incorporated by reference to the Registrant’s Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on September 4, 2008.
(3)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 26, 2010.
(4)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 19, 2010.
(5)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2010.
(6)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2010.
(7)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 5, 2010.
(8)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2010.
(9)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2010.
(10)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 10, 2010.
(11)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 3, 2011.
(12)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2011.
(13)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 23, 2011.
(14)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2012.
(15)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 10, 2012.
(16)	Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 11, 2012.
(17)	Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 3, 2015.

-47-

SIGNATURES

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

	STW RESOURCES HOLDING CORP
	(Registrant)
Date: October 6, 2015	By: /s/ Stanley T. Weiner
	Stanley T. Weiner
	President and Chief Executive Officer (Principal Executive Officer)
Date: October 6, 2015	By: /s/ Robert J. Miranda
	Robert J. Miranda
	Vice President and Chief Financial Officer (Principal Accounting Officer)

-48-

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification (Section 302)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stanley Weiner, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of STW Resources Holding Corp., (Registrant).

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: October 6, 2015

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

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification (Section 302)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Miranda, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of STW Resources Holding Corp., (Registrant).

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information ; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: October 6, 2015

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

EX-32.1

Exhibit 32.1

CERTIFICATION OF DISCLOSURE PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of STW Resources Holding Corp. (the "Company") on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Stanley Weiner, President and CEO of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

Date: October 6, 2015

By: /s/ Stanley Weiner

       Stanley Weiner,

       President, Principal Executive Officer & CEO

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

EX-31.2

Exhibit 32.2

CERTIFICATION OF DISCLOSURE PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of STW Resources Holding Corp. (the "Company") on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Robert J. Miranda, CFO of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

Date: October 6, 2015

By: /s/ Robert J. Miranda

       Robert J. Miranda,

       Principal Financial Officer/Chief Financial Officer

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

XML

6. Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Share compensation, value			$ 1,472,448	$ 1,655,444
Repayment of note			623,798	95,496
Crown Financial Notes
Due to related parties	$ 1,592,252		1,592,252
Crown Financial [Member]
Due to related parties					$ 2,034,810
Weiner [Member]
Consulting fees incurred	45,000	$ 37,500	87,500	75,000
Payment of salary	22,500	0	22,500	0
Salary and consulting fees payable	478,083		478,083		413,083
Maddox [Member]
Consulting fees incurred	0	37,500	0	75,000
Payment of salary			30,000	0
Salary and consulting fees payable	190,500		190,500		220,500
DiFrancesco [Member]
Consulting fees incurred	36,000	0	60,000	0
Payment of salary			52,500	0
Salary and consulting fees payable	7,500	0	7,500	0
Seabolt [Member]
Consulting fees incurred	24,000	22,500	47,500	45,000
Payment of salary			15,000	15,000
Salary and consulting fees payable	212,297		212,297		179,797
Dufrane [Member]
Accrued professional fees	60,000		60,000		180,000
Due to related parties	611,561		611,561		725,000
Related party payable, common stock					333,333
Miranda Associates [Member]
Payment of salary	168,520	45,688	96,436	317,118
Accrued professional fees	67,207		67,207		219,271
President/Murphy [Member]
Payment of salary	50,000	0	100,000	0
Salary and consulting fees payable	0		0		200,000
Signing bonus, amount			$ 200,000
Signing bonus, shares			333,333
Officers Salary [Member]
Payment of salary	50,000	50,000	$ 100,000	100,000
Salary and consulting fees payable	0		0		121,000
Signing bonus, amount			$ 21,000
Signing bonus, shares			50,000
Board of Directors [Member]
Payment of salary	112,500	$ 168,750	$ 25,000	$ 337,500
Salary and consulting fees payable	$ 0		$ 0		$ 496,067
Shares issued compensation	346,158	930,261	908,658	930,261
Share compensation, value	$ 225,000	$ 558,167	$ 675,000	$ 558,167
Other Related Party [Member]
Related party sales	$ 0	$ 17,104	$ 354	$ 235,138

XML

9. Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Capital lease obligation	$ 25,388		$ 25,388		$ 20,362
Capital lease interest rate	10.00%
Option to purchase land and building	$ 825,500		825,500
Rental expense	408,637	$ 688,751	736,527	$ 1,076,926
Rental expense to related party	0	0	604	0
Rental expense to projects	$ 361,923	$ 670,458	645,071	$ 1,015,516
Product purchase agreement term	5 years
Royalty expense	$ 100,000		100,000
Royalty expense, initial	324,000
Royalty expense, quarter 1	60,000
Royalty expense, quarter 2	60,000
Royalty expense, quarter 3	100,000
Royalty expense, quarter 4	104,000
Royalty expense, thereafter	$ 240,000
Royalty payment rate	3.00%
Shares issued upon product purchase agreement	66,667
Total Debt	$ 11,089,927		11,089,927		7,983,631
SRFF [Member]
Loss contingency	180,036		180,036
Judgement amount	80,036		80,036
Johnson Associates [Member]
Loss contingency	$ 216,217		$ 216,217
Note interest rate	12.00%		12.00%
Judgement amount	$ 196,727		$ 196,727
GE Ionics [Member]
Loss contingency	11,239,437		11,239,437
Total Debt	2,100,000		2,100,000		$ 2,100,000
Weiner [Member]
Annual salary	180,000		180,000
Salary rate, monthly	15,000		15,000
DiFrancesco [Member]
Annual salary	144,000		144,000
Salary rate, monthly	12,000		12,000
Seabolt [Member]
Annual salary	96,000		96,000
Salary rate, monthly	8,000		8,000
Land and Building [Member]
Monthly rent payments			9,750
Option to purchase land and building	825,500		825,500
Trailer [Member]
Monthly rent payments			593
Capital lease obligation	25,388		$ 25,388
Capital lease interest rate			10.00%
Option to purchase land and building	0		$ 0
Machinery and Equipment [Member]
Monthly rent payments			505
Capital lease obligation	$ 30,438		$ 30,438
Capital lease interest rate			12.00%

XML

9. Commitments and Contingencies (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Future minimum lease payments
Future minimum lease payments, 2015	$ 65,088
Future minimum lease payments, 2016	130,176
Future minimum lease payments, 2017	125,960
Future minimum lease payments, 2018	117,000
Future minimum lease payments, Thereafter	204,750
Total future minimum lease payments, Capital Lease	642,974
Capital lease obligation	25,388	$ 20,362
Capital Lease Obligations [Member]
Future minimum lease payments
Future minimum lease payments, 2015	6,588
Future minimum lease payments, 2016	13,176
Future minimum lease payments, 2017	$ 8,960
Future minimum lease payments, Thereafter
Total future minimum lease payments, Capital Lease	$ 28,724
Less interest	3,336
Capital lease obligation	25,388
Less current portion	5,332
Long-term capital lease obligation	20,056
Operating Lease Expense [Member]
Future minimum lease payments
Future minimum lease payments, 2015	58,500
Future minimum lease payments, 2016	117,000
Future minimum lease payments, 2017	117,000
Future minimum lease payments, 2018	117,000
Future minimum lease payments, Thereafter	204,750
Total future minimum lease payments, Capital Lease	$ 614,250

XML

4. Notes Payable (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Total Debt	$ 11,089,927	$ 7,983,631
Less: Current Portion	(9,222,248)	(5,890,414)
Net long term portion notes payable	1,867,679	2,093,217
Current portion notes payable	9,222,248	5,890,414
Less: Unamortized loan discounts and loan fees	568,337	$ 20,930
Less: Discontinued operations	600,276
Total current portion of notes payable, net of discounts	8,053,635	$ 5,869,484
Equipment Contract [Member]
Total Debt	48,168
Equipment Contracts [Member]
Total Debt		110,000
CNotes 14% [Member]
Total Debt			$ 2,296,342
CNotes 12% [Member]
Total Debt	100,000	$ 100,000
Transfer 2015 Agmts [Member]
Total Debt	1,375,000
GE Ionics [Member]
Total Debt	2,100,000	$ 2,100,000
Deferred Comp Notes [Member]
Total Debt	279,095	279,095
Rev Part Notes [Member]
Total Debt	2,371,500	$ 2,337,500
Crown Financial Notes
Total Debt	620,459
Black Pearl Note [Member]
Total Debt	777,096
Dufrane Note [Member]
Total Debt	555,879	$ 725,000
Other Debt [Member]
Total Debt	55,000	$ 55,000
2015 Q2 Financing [Member]
Total Debt	$ 486,000
Discontinued Operations [Member]
Total Debt		$ (752,441)
Capital Lease Obligations [Member]
Total Debt	$ 25,388
Crown Financial [Member]
Total Debt		702,698
Capital Lease Obligation [Member]
Total Debt		$ 30,437

XML

8. Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Reconciliation of the carrying amounts of the major assets and liabilities

A summary of assets and liabilities of discontinued operations is as follows:

	June 30, 2015		December 31, 2014
	(Unaudited)
Carrying amounts of major classes of assets included as part of discontinued operations:
Cash	$	--	$	3,550
Accounts receivable, trade, net		112,979		216,262
Accounts receivable from related parties				511,809
Prepaid expenses and other current assets		36		111,604
Total Current Assets		113,015		843,225
Long Term Assets
Property and equipment, net		--		234,917
Total major classes of assets of the discontinued operations.	$	113,015	$	1,078,142

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Book overdraft	$	56,466	$	17,445
Accounts Payable		683,193		1,055,575
Payable to related parties:
Black Pearl Energy, LLC		6,709		94,717
Crown Financial, LLC		685		685
Current portion of notes payable, net of discounts		600,276		752,441
Sales and payroll taxes payable		514,237		474,075
Accrued expenses and interest		24,072		41,383
Accrued compensation		13,163		147,843
Total major classes of liabilities of the discontinued operations.	$	1,898,801	$	2,584,164

Reconciliation of the major classes of items constituting pre-tax loss

Loss from Discontinued Operations is as follows:

	Six Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:	$	504,699		$	4,011,025
Revenues
Cost of revenues		(719,103	)		(3,349,019	)
Operating expenses		(321,815	)		(941,884	)
Interest expense		(82,361	)		(83,889	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(733,389	)	$	(363,767	)

	Three Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:
Revenues	$	23,705		$	2,540,605
Cost of revenues		(126,117	)		(1,929,945	)
Operating expenses		(71,639	)		(549,994	)
Interest expense		(40,357	)		(45,715	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(329,217	)	$	14,951

XML

10. Segment Information (Details 1) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Segment Assets
Current Assets	$ 5,175,861	$ 5,527,039
Fixed assets	997,628	1,203,082
Segment Assets	6,173,489	6,730,121
Water Reclamation [Member]
Segment Assets
Current Assets	3,529,556	1,369,434
Fixed assets	484,217	837,602
Segment Assets	4,013,773	2,207,036
Oil and Gas Services [Member]
Segment Assets
Current Assets	1,203,281	2,831,798
Fixed assets	450,042	289,302
Segment Assets	1,653,323	3,121,100
Corporate Segment [Member]
Segment Assets
Current Assets	443,024	1,325,807
Fixed assets	63,369	76,178
Segment Assets	$ 506,393	$ 1,401,985

XML

7. Stockholders' Deficit (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Mar. 31, 2014	Jun. 30, 2015	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Shares authorized		10,000,000	10,000,000
Common stock shares authorized		191,666,667	191,666,667
Shares outstanding		14,036,978	14,036,978		14,442,977
Charitable contribution			$ 675,000	$ 558,157
Shares issued for services rendered		3,209,740	5,595,052
Value of shares issued for services rendered		$ 2,196,150	$ 4,335,434
Officers compensation, value of shares			$ 1,472,448	$ 1,655,444
Preferred Stock [Member]
Par value per share			$ 0.001
Common Stock Issuance 1 [Member]
Shares issued			62,500
Shares issued, unit price			$ 1.56
Stock issued, value			$ 97,500
Decrease debt			$ 43,750
Consultant [Member]
Shares issued			170,000
Shares issued, unit price			$ 1.40
Decrease debt			$ 91,800
Value of shares issued for services rendered			$ 238,000
Common Stock Issuance 2 [Member]
Shares issued			281,167
Stock issued, value			$ 209,825
Investor [Member]
Shares issued	15,385		158,335
Shares issued, unit price	$ 0.65
Stock issued, value			$ 225,128
Common Stock Issuance 3 [Member]
Shares issued			378,334
Stock issued, value			$ 344,101
Common Stock Issuance 4 [Member]
Shares issued			100,000
Shares issued, unit price			$ 0.68
Decrease debt			$ 68,000
Common Stock Issuance 5 [Member]
Shares issued			150,001
Value of shares issued for services rendered			$ 119,500
Common Stock Issuance 7 [Member]
Shares issued			225,000
Decrease debt			$ 187,000
Common Stock Issuance 8 [Member]
Shares issued			100,000
Shares issued, unit price			$ 0.81
Decrease debt			$ 81,000
Common Stock Issuance 9 [Member]
Shares issued			184,975
Shares issued, unit price			$ 0.65
Decrease debt			$ 120,233
Common Stock Issuance 10 [Member]
Shares issued			100,000
Shares issued, unit price			$ 0.85
Decrease debt			$ 85,000
Common Stock Issuance 11 [Member]
Shares issued			562,500
Shares issued, unit price			$ 0.80
Value of shares issued for services rendered			$ 450,000
Common Stock Issuance 12 [Member]
Shares issued			100,000
Shares issued, unit price			$ 0.65
Value of shares issued for services rendered			$ 65,000
Common Stock Issuance 13 [Member]
Shares issued			900,000
Shares issued, unit price			$ 0.80
Value of shares issued for services rendered			$ 720,000
Common Stock Issuance 14 [Member]
Shares issued			341,667
Value of shares issued for services rendered			$ 230,501
Common Stock Issuance 15 [Member]
Shares issued			26,000
Value of shares issued for services rendered			$ 18,610
Common Stock Issuance 16 [Member]
Shares issued			206,667
Value of shares issued for services rendered			$ 155,000
Common Stock Issuance 17 [Member]
Shares issued			500,000
Shares issued, unit price			$ 0.09
Decrease debt			$ 385,000
Value of additional issued			$ 280,000
Common Stock Issuance 18 [Member]
Shares issued			800,000
Value of shares issued for services rendered			$ 677,000
Common Stock Issuance 19 [Member]
Shares issued			183,334
Value of shares issued for services rendered			$ 137,501
Common Stock Issuance 20 [Member]
Shares issued			333,333
Value of shares issued for services rendered			$ 200,000
Common Stock Issuance 21 [Member]
Shares issued			578,927
Value of additional issued			$ 339,039
Common Stock Issuance 22 [Member]
Shares issued			346,158
Value of shares issued for services rendered			$ 225,000
Common Stock Issuance 23 [Member]
Shares issued			239,812
Value of shares issued for services rendered			$ 167,500

XML

5. Derivative Liability (Details 1) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Derivative Liabilities Details 1
Beginning Balance			$ 802,340	$ 1,630,985	$ 1,630,985
Value of derivative liability associated with JMJ note payable					$ 42,592
Value of derivative liability attributable to conversion feature of Transfer Agreements			$ 1,108,030
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)
Change in fair value	$ (1,353,429)	$ 456,809	$ (1,627,209)	$ 443,536	95,892
Ending Balance	$ 283,131		$ 283,131		$ 802,340

XML

9. Commitments and Contingencies (Details 1) - Royalty Arrangement [Member]	Jun. 30, 2015 USD ($)
2015	$ 140,000
2016	240,000
2017	240,000
2018	240,000
Thereafter	120,000
Total minimum royalty payments	$ 280,000

XML

2. Property, Plant and Equipment

6 Months Ended

Jun. 30, 2015

Deferred Revenue Disclosure [Abstract]

Property, Plant and Equipment

NOTE 2 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
Office furniture and equipment	$	29,467		$	29,467
Tools and yard equipment		673,942			621,995
Vehicles and construction equipment		477,187			635,220
Facilities and leasehold improvements		15,933			15,933
Total, cost		1,196,529			1,302,615
Accumulated Depreciation and Amortization		(198,901	)		(99,533	)
Property and equipment, net	$	997,628		$	1,203,082

Depreciation and amortization expense for the three and six month periods ended June 30, 2015 were $41,420 and $71,308, respectively. Depreciation and amortization expense for both the three and six month periods ended June 30, 2014 were $9,951 and $21,543, respectively.

XML

8. Discontinued Operations (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Carrying amounts of major classes of assets included as part of discontinued operations:
Cash		$ 3,550
Accounts receivable, trade, net	$ 112,979	216,262
Accounts receivable from related parties		511,809
Prepaid expenses and other current assets	$ 36	111,604
Total current assets	$ 113,015	843,225
Long term assets: Porperty and equipment, net		234,917
Total major classes of assets of the discontinued operations	$ 113,015	1,078,142
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Book overdraft	56,466	17,445
Accounts payable	683,193	1,055,575
Payable to Black Pearl Energy, LLC	6,709	94,717
Payable to Crown Financial, LLC	685	685
Current portion of notes payable, net of discounts	600,276	752,441
Sales and payroll taxes payable	514,237	474,075
Accrued expenses and interest	24,072	41,383
Accrued compensation	13,163	147,843
Total major classes of liabilities of the discontinued operations	$ 1,898,802	$ 2,584,164

XML

1. Nature of Business and Significant Accounting Policies (Details 1)	6 Months Ended
	Jun. 30, 2015
Computer Equipment [Member]
Useful lives of Property, Plant and Equipment	3 years
Furniture [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Minimum [Member]
Useful lives of Property, Plant and Equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Useful lives of Property, Plant and Equipment	5 years

XML

1. Nature of Business and Significant Accounting Policies (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Fair Value of Derivative Liability	$ 283,161	$ 802,340
Level 1 [Member]
Fair Value of Derivative Liability
Level 2 [Member]
Fair Value of Derivative Liability
FairValueInputsLevel3Member
Fair Value of Derivative Liability	$ 283,161	$ 802,340

XML

8. Discontinued Operations (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:
Revenues	$ 23,705	$ 2,540,605	$ 504,699	$ 4,011,025
Cost of revenues	(126,117)	(1,929,945)	(719,103)	(3,349,019)
Operating expenses	(71,639)	(549,994)	(321,815)	(941,884)
Interest expense	(40,357)	$ (45,715)	(82,361)	$ (83,889)
Loss on the sale of fixed assets	(114,809)		(114,809)
Total loss from operation of discontinued operations	$ (329,217)	$ 14,951	$ (733,389)	$ (363,767)

XML

1. Nature of Business and Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended	83 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2014	Jun. 25, 2013
Noncontrolling member interest					250000.00%	250000.00%	75.00%
Common stock issued	35,239,048		35,239,048		28,194,953	28,194,953
Preferred stock issued
Net loss attributable to non-controlling interest	$ 80,347		$ 161,380		$ 187,474
Net deficit interest in subsidiary held by non-controlling interest	(348,854)		(348,854)
Accumulated (Deficit)	(43,508,853)		(43,508,853)		$ (39,112,171)	$ (39,112,171)
Accrued sales and payroll taxes	(2,013,354)		(2,013,354)
Notes payable in default	$ 5,546,655		5,546,655
Raised net equity and debt financing						$ 21,000,000
Proceeds from issuance of notes			$ 2,119,000	$ 80,000
Common Stock equivalents outstanding	14,036,978		14,036,978		14,442,977	14,442,977
Revenues from service contracts	$ 468,601	$ 3,062,692	$ 4,518,097	5,193,052
Revenues from related parties	0	$ 17,104	354	$ 35,138
Stock subscriptions	$ 0		$ 10,000		$ 27,000
Shares to be issued					41,539	41,539
Subscription payable issued - shares	0		15,385
Remaining balance of subscription payable	$ 117,000
Remaining balance of subscription payable - shares	126,154
Shares issued in payment performance bonus	1,663,334		2,676,596
Fees payable in common stock, value	$ 191,724		$ 191,724
Fees payable in common stock, shares	391,306		391,306
Share based compensation, value	$ 991,801		$ 1,826,450
Shares issued for services rendered	3,209,740		5,595,052
Value of shares issued for services rendered	$ 2,196,150		$ 4,335,434
Property and equipment	997,628		997,628		$ 1,203,082	$ 1,203,082
Allowance for doubtful accounts	$ 0		$ 0		$ 6,773	$ 6,773
Accounts Payable [Member] | Customer One [Member]
Concentration risk			18.00%
Accounts Payable [Member] | Customer Two [Member]
Concentration risk			12.00%
Accounts Payable [Member] | Customer Three [Member]
Concentration risk			11.00%
Accounts Payable [Member] | Three Vendors [Member]
Concentration risk					20.00%
Purchases [Member] | Vendor 1 [Member]
Concentration risk	58.00%		63.00%
Purchases [Member] | Vendor 2 [Member]
Concentration risk	15.00%		18.00%
Purchases [Member] | Vendor 3 [Member]
Concentration risk	8.00%		8.00%
Purchases [Member] | Two Vendors [Member]
Concentration risk					69.00%
Accounts Receivable [Member] | Customer One [Member]
Concentration risk			34.00%		43.00%
Accounts Receivable [Member] | Customer Two [Member]
Concentration risk			33.00%		11.00%
Accounts Receivable [Member] | Customer Three [Member]
Concentration risk			13.00%		3.00%
Net Revenue [Member] | Customer One [Member]
Concentration risk	75.00%		74.00%		39.00%
Net Revenue [Member] | Customer Two [Member]
Concentration risk	12.00%		8.00%		11.00%
Net Revenue [Member] | Customer Three [Member]
Concentration risk	7.00%		8.00%		7.00%

XML

2. Property, Plant and Equipment (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Property Plant And Equipment Details
Office furniture and equipment	$ 29,467	$ 29,467
Tools and yard equipment	673,942	621,995
Vehicles and construction equipment	477,187	635,220
Leasehold improvements	15,933	15,933
Total, cost	1,196,529	1,302,615
Accumulated Depreciation and Amortization	(198,901)	(99,533)
Property and equipment, net	$ 997,628	$ 1,203,082

XML

1. Nature of the Business and Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of the Business and Significant Accounting Policies

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp and its subsidiaries (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. During the six months ended June 30, 2015, the Company decided to shut down the operations of its Energy and Oilfield businesses. Accordingly, some information included in our form 10-K may not be comparable to the information included in this form 10-Q. The December 31, 2014 condensed consolidated balance sheet was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015, see Reclassifications below.

History of the Company

STW Resources Holding Corp, 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.

Consolidation policy

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2015, include the accounts of the STW Resources Holding Corp and its wholly owned subsidiaries: STW Water Process & Technologies LLC and STW Pipeline Maintenance & Construction, LLC. The condensed consolidated financial statements for the three and six months ended  June 30, 2014, include STW Resources Holding Corp and STW Pipeline Maintenance & Construction, LLC as STW Water Process & Technologies, LLC was not established prior to the quarterly period ended June 30, 2014. All significant intercompany transactions and balances have been eliminated in consolidation.

STW Oilfield Construction LLC and the Company’s 75% owned subsidiary STW Energy, LLC have been reported as discontinued operations.

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. Additionally, the financial statements for June 30, 2014, December 31, 2014, and March 31, 2015 have been revised for the discontinued operations (See Note 8).

Non-Controlling interest

On June 25, 2013, the Company invested in a limited liability company (“LLC”) by obtaining a 75% interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2014, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a cumulative net loss attributable to non-controlling interests of $187,474 for the year ended December 31, 2014. During the three and six month period ended June 30, 2015, a net loss attributable to the non-controlling interest of $80,347 and $161,380, respectively, was incurred. As of June 30, 2015, the net deficit interest in the subsidiary held by the non-controlling interest is $348,854.

Going Concern

The Company’s condensed 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 $43,508,853 as of June 30, 2015, and as of that date was delinquent in payment of $2,013,354 of sales and payroll taxes. As of June 30, 2015, $5,546,655 of notes payable were in default. Since its inception in January 2008 through December 31, 2014, management had raised equity and debt financing of approximately $21,000,000 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 any at all.

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

Use of Estimates

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

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations. As of June 30, 2015 and December 31, 2014, the allowances for doubtful accounts were zero and $6,773, respectively.

Loan Discounts

The Company amortizes loan discounts over the term of the loan using the effective interest method.

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner per institution. At June 30, 2015, there were no account balances per institution that would have exceeded the $250,000 insurance limit.

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

As of June 30, 2015, three vendors accounted for 18%, 12% and 11% of total accounts payable. During the three months ended June 30, 2015, three vendors accounted for 58%, 15%, and 8% of total purchases. During the six months ended June 30, 2015, three vendors accounted for 63%, 18%, and 8% of total purchases. 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 June 30, 2015, three customers accounted for 34%, 33% and 13% of accounts receivable. During the three months ended June 30, 2015, three customers accounted for 75%, 12% and 7% of net revenues. During the six months ended June 30, 2015, three customers accounted for 74%, 8% and 8% of net revenues. 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.

Fair Value of Financial Instruments

“Fair value” is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments. Our derivative liabilities are recorded at fair value (see Note 5).

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

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

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

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

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

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

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

The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2015 and December 31, 2014.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2015	$	--	$	--	$	283,161		$	283,161
Fair value of Derivative Liability at December 31, 2014	$	--	$	--	$	802,340		$	802,340

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as a derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations in other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification to a liability are recorded at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, with anti-dilution provisions, and price protection features on outstanding common stock warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using the Black-Scholes model (see Note 5).

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

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

Long-lived Assets and Intangible Assets

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

The Company had no such asset impairments during the six months ending June 30, 2015 or 2014. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

During the year ended December 31, 2014, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. These MSAs authorize the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services. The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the three and six months ended June 30, 2015, the Company recognized $2,468,601and $4,518,097, respectively of revenues from these services contracts, which included zero and $354, respectively of revenues from related parties. During the three and six months ending June 30, 2014, the Company realized revenue of $3,062,692 and $5,193,052, respectively from services contracts, which included $17,104 and $35,138, respectively of the service revenue was from related parties.

Business Segments

The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note 10.

Income Taxes

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

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

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at June 30, 2015 and December 31, 2014, respectively.

Common Stock and Common Stock Warrants Issued to Employees

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

At June 30, 2015 and December 31, 2014, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

The basic net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive shares arising from debt or equity instruments. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2015 and December 31, 2014, the Company had 14,036,978 and 14,442,977 shares issuable upon conversion or exercise, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

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

Computer equipment and software	3 years
Furniture	3 years
Tools, equipment, and vehicles	3-5 years
Leasehold improvements	remaining life of lease

Stock Subscriptions Payable

The initial balance of stock subscriptions payable as of December 31, 2014, was $27,000 representing 41,539 shares to be issued. During the three and six months ended June 30, 2015, zero and $10,000, respectively of these stock subscriptions payable were issued representing zero and 15,385, respectively shares of common stock. The remaining balance of stock subscriptions payable as of June 30, 2015, is $117,000 representing 126,154 shares to be issued.

Fees Payable in Common Stock

During the three and six months ended June 30, 2015, the Company agreed to issue a net of 1,663,334 and 2,676,596 shares, respectively, valued at $991,801 and $1,826,450 in payment of performance bonuses, employment signing bonuses, consulting fees, and interest. During the three and six months ended June 30, 2015, the Company issued an aggregate of 3,209,740 and 5,595,052 shares, respectively, of its common stock, valued at $2,196,150 and $4,335,434, respectively, in payment of performance bonuses, employment signing bonuses, consulting fees, and interest which left a remaining balance in fees payable in common stock of $191,724, or 391,306 shares.

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

XML

2. Property, Plant and Equipment (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015
Notes to Financial Statements
Depreciation and Ammortization Expense	$ 9,951	$ 21,543

XML

7. Stockholders' Deficit (Details)	Jun. 30, 2015 $ / shares shares
Securities to acquire common stock outstanding	14,036,978
Warrant 1 [Member]
Securities to acquire common stock outstanding	250,000
Exercise price | $ / shares	$ .12
Warrant 3 [Member]
Securities to acquire common stock outstanding	666,666
Exercise price | $ / shares	$ 1.20
Warrant 4 [Member]
Securities to acquire common stock outstanding	33,333
Exercise price | $ / shares	$ 1.20
Warrant 5 [Member]
Securities to acquire common stock outstanding	84,205
Exercise price | $ / shares	$ 1.80
Warrant 6 [Member]
Securities to acquire common stock outstanding	333,333
Exercise price | $ / shares	$ 1.20
Warrant 8 [Member]
Securities to acquire common stock outstanding	2,328,542
Warrant 8 [Member] | Minimum [Member]
Exercise price | $ / shares	$ 1.20
Warrant 8 [Member] | Maximum [Member]
Exercise price | $ / shares	$ 1.50
Warrant 7 [Member]
Securities to acquire common stock outstanding	20,770
Exercise price | $ / shares	$ 1.50
Warrant 9 [Member]
Securities to acquire common stock outstanding	500,000
Exercise price | $ / shares	$ .59
Warrant Total [Member]
Securities to acquire common stock outstanding	3,991,850
Notes 1 [Member]
Securities to acquire common stock outstanding	1,454,053
Exercise price | $ / shares	$ .12
Notes 2 [Member]
Securities to acquire common stock outstanding	166,910
Exercise price | $ / shares	$ .72
Notes 3 [Member]
Securities to acquire common stock outstanding	6,231,244
Exercise price | $ / shares	$ .48
Notes 4 [Member]
Securities to acquire common stock outstanding	1,734,615
Exercise price | $ / shares	$ .65
Notes 5 [Member]
Securities to acquire common stock outstanding	117,000
Stock Fees [Member]
Securities to acquire common stock outstanding	341,306

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets
Cash	$ 28,030	$ 137,524
Accounts receivable, trade, net	$ 2,592,932	3,493,918
Accounts receivable from related parties		7,980
Deferred project costs	$ 1,994,245	480,000
Prepaid expenses and other current assets	447,639	329,475
Assets of discontinued operations	113,015	1,078,142
Total current assets	5,175,861	5,527,039
Long Term Assets
Property and equipment, net	997,628	1,203,082
Total Assets	6,173,489	$ 6,730,121
Current liabilities
Book overdraft	609,611
Accounts Payable	2,960,629	$ 3,467,690
Payable to related parties:
Black Pearl Energy, LLC	69,680	1,276,588
Crown Financial, LLC	1,592,252	$ 2,034,810
Dufrane Nuclear, Inc.	80,732
Accrued compensation - officers	948,380	$ 873,380
Current portion of notes payable, net of discounts, including $1,685,211 and $1,077,235 payable to related parties, respectively	8,053,635	5,869,484
Sales and payroll taxes payable	2,013,354	2,197,768
Insurance premium finance contract payable	330,198	208,271
Accrued expenses and interest	2,246,567	1,727,734
Deferred revenue	2,196,313	680,000
Accrued compensation	$ 436,875	495,934
Accrued board compensation		496,067
Fees payable in common stock	$ 191,724	2,783,711
Stock subscriptions payable	117,000	27,000
Liabilities of discontinued operations	1,898,802	2,584,164
Derivative liability	283,161	802,340
Total current liabilities	24,028,913	25,524,941
Notes payable, net of discount and current portion, $540,919 and $623,159 payable to related parties, respectively	1,867,679	2,093,217
Total liabilities	$ 25,896,592	$ 27,618,158
Stockholders' deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively
Common stock; $0.001 par value; 191,666,667shares authorized, 35,239,048 and 28,194,953 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	$ 35,242	$ 28,197
Additional paid-in capital	24,099,362	18,383,411
Accumulated deficit	(43,508,853)	(39,112,171)
Total Stockholders' Deficit of STW Resources Holding Corp.	(19,374,249)	(20,700,563)
Non-controlling interest in subsidiary	(348,854)	(187,474)
Total Stockholders' Deficit	(19,723,103)	(20,888,037)
Total Liabilities and Stockholders' Deficit	$ 6,173,489	$ 6,730,121

XML

8. Discontinued Operations (Details Narrative)	3 Months Ended
	Jun. 30, 2015 USD ($)
Discontinued Operations and Disposal Groups [Abstract]
(Loss) on sale of assets	$ (114,000)

XML

Condensed Consolidated Statement of Stockholders' Deficit - 6 months ended Jun. 30, 2015 - USD ($)	Common Stock	Additional Paid In Capital	Accumulated Deficit	Non-Controlling Interest	Total
Beginning Balance, Shares at Dec. 31, 2014	28,194,953
Beginning balance, Amount at Dec. 31, 2014	$ 28,197	$ 18,383,411	$ (39,112,171)	$ (187,474)	$ (20,888,037)
Shares issued to Employees from Fees Payable in Common Stock, Shares	2,192,834
Shares issued to Employees from Fees Payable in Common Stock, Amount	$ 2,194	1,748,732
Shares issued to Consultants from Fees Payable in Common Stock, Shares	2,102,456
Shares issued to Consultants from Fees Payable in Common Stock, Amount	$ 2,103	1,649,743
Shares issued as board of director fees, shares	908,658
Shares issued as board of director fees, amount	$ 909	674,091			675,000
Shares issued for subscriptions stock payable, shares	15,385
Shares issued for subscriptions stock payable, amount	$ 15	9,985
Shares issued upon conversion of notes payable and accrued interest, Shares	276,391
Shares issued upon conversion of notes payable and accrued interest, Amount	$ 276	355,684
Shares issued in connection with the 2015 Transfer Agreements origination fees, Shares	525,000
Shares issued in connection with the 2015 Transfer Agreements origination fees, Amount	$ 525	420,475
Shares issued for financing fees, shares	500,000
Shares issued for financing fees, amount	$ 500	279,500			280,000
Shares issued per Saltech & Black Pearl Energy Agreements, shares	523,371
Shares issued per Saltech & Black Pearl Energy Agreements, amount	$ 523	305,182			305,705
Value of warrants issued as debt issuance costs, amount		272,559			272,559
Net Loss			(4,396,682)	(161,380)	(3,824,673)
Ending Balance, Shares at Jun. 30, 2015	35,239,048
Ending Balance, Amount at Jun. 30, 2015	$ 35,242	$ 24,099,362	$ (43,508,853)	$ (348,854)	$ (19,723,103)

XML

4. Notes Payable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Warrants	3,991,850		3,991,850		3,634,350
Proceeds from notes payable			$ 2,119,000	$ 80,000
Increase in derivative liability	$ (1,353,429)	$ 456,809	(1,627,209)	443,536	$ 95,892
Total Debt amount	11,089,927		11,089,927		7,983,631
note payable to an accredited investor, amount			623,798	95,496
Interest expense, notes payable			2,595,741	8,616,616
Amortization of debt discount and debt issuance costs			1,354,148	58,328
CNotes 14% [Member]
Note payable		$ 2,296,342		$ 2,296,342	2,296,342
Common Stock issued during period		1,545,650		1,628,335
Common Stock issued during period, value		$ 927,390		$ 781,337
Principal converted		741,912		973,869
Repayment of accrued interest		$ 185,478		$ 192,532
Note interest rate		14.00%		14.00%
Total Debt amount		$ 2,296,342		$ 2,296,342
Total debt matured and in default		2,264,800		2,264,800
Notes payable to related parties		$ 171,892		$ 171,892	171,892
Short-term Financing [Member]
Proceeds from notes payable			450,000
Note discount	$ 73,500		$ 73,500
Common Stock issued during period			650,000
Common Stock issued during period, value			$ 340,000
Default shares			4,000,000
Default shares value			$ 1,600,000
Total Debt amount					0
Short-term Financing 2[Member]
Warrants	500,000		500,000
warrants exercise price	$ .59		$ .59
Common Stock issued during period			100,000
Common Stock issued during period, value			$ 80,000
CNotes 12% [Member]
Warrants	273,583		273,583
warrants exercise price	$ .12		$ .12
notes convertible into common stock share amount	1,454,053		1,454,053
Common Stock issued during period				1,137,417
Common Stock issued during period, value				$ 614,205
Principal converted				225,000
Repayment of accrued interest				116,225
Total note amount converted				341,225
Increase in derivative liability				$ 272,980
Note interest rate	12.00%		12.00%
Total Debt amount	$ 100,000		$ 100,000		100,000
Other Debt [Member]
Common Stock issued during period			171,667
Total Debt amount	55,000		$ 55,000		55,000
Loan facility amount outstanding	25,000		25,000
Notes payable to related parties	30,000		30,000		30,000
note payable to an accredited investor, amount			30,000
unsecured loan agreement, amount			$ 145,000
interest rate of debt			8.00%
GE Ionics [Member]
Total Debt amount	2,100,000		$ 2,100,000		2,100,000
Default note rate			10.00%
STW original debt with GE, amount	11,239,437		$ 11,239,437
Deferred Comp Notes [Member]
Total Debt amount	279,095		279,095		279,095
Rev Part Notes [Member]
Total Debt amount	$ 2,371,500		$ 2,371,500		2,337,500
ParticipationNote 5 [Member]
Note interest rate	15.00%		15.00%
Total Debt amount	$ 1,607,000		$ 1,607,000		1,573,000
Total debt matured and in default	502,760		502,760
Crown [Member]
Total Debt amount	1,000,000		1,000,000
Loan facility amount outstanding	$ 620,458		$ 620,458		$ 702,697
interest rate of debt			15.00%

XML

4. Notes Payable (Tables)

6 Months Ended

Jun. 30, 2015

Notes Payable Tables

Notes Payable

	June 30,			December 31,
Name	2015			2014
14% convertible notes	$	2,296,342		$	2,296,342
12% convertible notes		100,000			100,000
2015 transfer agreements		1,375,000			--
GE Ionics note		2,100,000			2,100,000
Deferred compensation notes		279,095			279,095
Revenue participation notes		2,371,500			2,337,500
Crown Financial note		620,459			702,698
Black Pearl note payable		777,096			--
Dufrane note payable		555,879			725,000
Other short-term debt		55,000			55,000
2015 Q2 short term financing		486,000			--
Discontinued operations L/T debt		--			(752,441	)
Equipment finance contracts		48,168			110,000
Capital lease obligations		25,388			30,437
Total notes payable		11,089,927			7,983,631
Less: current portion		(9,222,248	)		(5,890,414	)
Net long term portion notes payable	$	1,867,679		$	2,093,217
Current portion notes payable	$	9,222,248		$	5,890,414
Less items as follows:
Unamortized loan discounts and loan fees		568,337			20,930
Discontinued operations		600,276			--
Total current portion of notes payable, net of discounts	$	8,053,635		$	5,869,484

Revenue Participation Notes

	June 30,		December 31,
Name	2015		2014
2012 Revenue Participation Notes	$	165,000	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500		302,500
2013 Revenue Participation Notes - STW Energy		182,000		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		115,000		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,607,000		1,573,000
Total revenue participation notes	$	2,371,500	$	2,337,500

XML

5. Derivative Liability (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Annual dividend yield		0.00%	0.00%
Expected volatility	315.00%	315.00%	735.00%
FairValueInputsLevel3Member
Embedded conversion Options	$ 1,620,142	$ 1,620,142	$ 751,439
Warrants	16,448	16,448	50,901
Increase (Decrease) in fair value	$ 1,636,590	$ 1,636,590	$ 802,340
Minimum [Member]
Annual dividend yield			7600.00%
Expected life (years)		6 months	5 months 19 days
Risk-free interest rate		0.11%	0.11%
Maximum [Member]
Expected life (years)		4 days	7 months 6 days
Risk-free interest rate		0.25%	0.25%

XML

7. Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Securities to acquire common stock outstanding

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		25,000	0.12		2015
Warrants issued to Crown Financial, LLC		666,667	1.20		2016
Warrants issued on $20,000 short term loan		33,333	1.20		2015
Warrants associated with 2013 Revenue Participation Notes		84,205	1.80		2015
Warrants issued with 2013 Unit Share Offerings		333,333	1.20		2015
Warrants issued with 2014 Unit Share Offerings		2,328,542	1.20 – 1.50		2016
Warrants issued with 2013 and 2014 Unit Share Offerings		20,770	1.50		2017
Warrants issued with 2015 Q2 Financing		500,000	0.59		2017
Sub-total of Warrants outstanding		3,991,850
Common stock associated with the 12% Convertible Notes plus accrued interest		1,454,053	0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		166,910	0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		6,231,244	0.48		N/A
Common stock associated with 2015 Transfer Agreements		1,734,615	0. 65		N/A
Common stock associated with 2014 Unit Share Offerings		117,000	various		N/A
Common stock payable as fees		341,306	various		N/A
Total		14,036,978

Warrant activity

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2015		3,634,350		$	1.27	1.18	$	851,313
Issued		500,000			0.59	2.00
Exercised		--
Forfeited		--
Cancelled		--
Expired		(142,500	)		0.75
Outstanding at June 30, 2015		3,991,850		$	1.20	0.86	$	792,563
Exercisable		3,991,850		$	1.20	0.86	$	792,563

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities - continuing operations
Net loss	$ (3,824,673)	$ (6,134,754)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	71,308	21,630
Change in fair value of derivative liability	(1,627,209)	443,536
Financing costs of notes payable	$ 606,089	42,592
Change in fair value of debt instruments converted to equity		(272,980)
Amortization of discount and debt issuance costs	$ 1,354,148	90,833
Share based compensation	1,472,448	1,655,444
Changes in working capital:
(Increase) Decrease in accounts receivable	788,007	$ (652,609)
(Increase) Decrease in deferred project costs	(1,514,245)
(Increase) Decrease in prepaid expenses and other current assets	(118,200)	$ (593,133)
Increase (Decrease) in accounts payable	232,599	1,192,132
Increase (Decrease) in sales and payroll taxes payable	329,823	$ 1,657,246
Increase (Decrease) in deferred revenue	1,516,313
Increase (Decrease) in accrued expenses and interest	542,905	$ 871,573
Increase (Decrease) in accrued compensation	(45,896)	$ 306,164
Increase (Decrease) in accrued board compensation	178,933
Net cash used in operating activities	(37,650)	$ (1,372,326)
Cash flows used in investing activities - continuing operations
Purchases of equipment, net of equipment loans	(170,035)	(107,431)
Net cash used in investing activities	(170,035)	(107,431)
Cash flows from financing activities - continuing operations
Book overdraft	609,611	(8,211)
Stock subscriptions payable	100,000	540,000
Related party accounts receivables	7,980	12,471
Related party accounts payables, credit facilities, notes, and advances	(631,537)	1,156,036
Increase (Decrease) in insurance premium finance contract payable	121,927	526,462
Proceeds from notes payable	2,119,000	80,000
Principal payments of notes payable	$ (623,798)	(95,496)
Proceeds from issuance of common stock		$ 122,500
Debt issuance costs	$ (131,000)
Net cash provided by financing activities	1,572,183	$ 2,333,762
Net increase in cash - continuing operations	1,364,498	854,005
Net loss	(733,389)	(363,767)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation of discontinued activities	18,681	$ 94,857
Loss on disposition of property and equipment of discontinued entities	114,809
Change in working capital:
(Increase) Decrease in assets of discontinued operations	1,184,582	$ (1,585,872)
Increase (Decrease) in liabilities of discontinued operations held for sale	(2,005,981)	1,660,622
Net increase in cash - discontinued operations	(1,421,298)	$ (194,160)
Principal payments of notes payable of discontinued operations	(52,694)
Net cash provided by financing activities - discontinued operations	(52,694)
Net increase in cash - discontinued operations	(1,473,992)	$ (194,160)
Net increase (decrease) in cash	(109,494)	659,845
Cash at beginning of period	137,524	4,699
Cash at end of period	28,030	664,544
Supplemental cash flow information:
Cash paid for interest	$ 84,708	$ 12,679
Cash paid for income taxes
Non-cash investing and financing activities:
Shares issued from common stock subscriptions payable	$ 10,000	$ 150,000
Value of shares issued to employees as compensation	1,750,926	301,625
Value of shares issued to consultants	1,651,846	352,175
Value of shares issued as board fees	$ 675,000	558,157
Value of shares issued in connection with extension of notes payable		67,354
Value of shares issued in payment of accrued PIK interest		510,769
Value of shares issued upon conversion of notes payable and accrued interest	$ 355,960	$ 1,588,074
Shares issued for 2015 Transfer Agreement origination fees	421,000
Shares issued for financing fees	$ 280,000
Value of shares issued as charitable contributions		$ 110,000
Shares issued per Saltech & Black Pearl Energy Agreements	$ 305,705
Value of warrants issued as debt issuance costs	$ 272,559
Value of conversion feature of JMJ convertible note payable		$ 50,000
Value of derivative associated with convertible note payable		$ 715,981

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current liabilities
Notes payable to related parties	$ 1,685,211	$ 1,077,235
Shareholders' equity (deficit)
Preferred stock, par value	$ 0.001
Preferred stock, authorized shares	10,000,000
Preferred stock, issued shares
Preferred stock, outstanding shares
Common stock, par value	$ 0.001	$ .001
Common stock, authorized shares	191,666,667
Common stock, issued shares	35,239,048	28,194,953
Common stock, outstanding shares	35,239,048	28,194,953

XML

10. Segment Information

6 Months Ended

Jun. 30, 2015

Segment Information

Segment Information

NOTE 10 – 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 supplies, analysis, design, evaluation, implementation and operations.

Oil and Gas Services

Our subsidiary, STW Pipeline Maintenance & Construction, LLC, offers a wide a range of oilfield, 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 expenses include senior management salaries and benefits, accounting and finance, legal, business development, and other general corporate operating expenses.

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

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

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

Segment Operations

	Six months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	267,770		$	4,518,097	$	--		$	4,785,867
Costs of revenues		271,963			2,733,022		--			3,004,985
Operating expenses		931,725			1,039,647		2,665,651			4,637,023
Other income (expense)		--			--		(968,532	)		(968,532	)
Segment income (loss)	$	(935,918	)	$	745,428	$	(3,634,183	)	$	(3,824,673	)

	Three months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	118,859		$	2,468,601	$	--		$	2,587,460
Costs of revenues		126,437			1,591,269		--			1,717,706
Operating expenses		397,208			493,754		1,223,284			2,114,246
Other income (expense)		--			--		(64,728	)		(64,728	)
Segment income (loss)	$	(404,786	)	$	383,578	$	(1,288,012	)	$	(1,309,220	)

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,193,051		$	--		$	5,203,102
Costs of revenues		--			5,108,280			--			5,108,280
Operating expenses		219,584			1,006,691			3,698,149			4,924,424
Other income (expense)		--			--			(1,305,152	)		(1,305,152	)
Segment income (loss)	$	(209,533	)	$	(921,920	)	$	(5,003,301	)	$	(6,134,754	)

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	3,062,692		$	--		$	3,072,743
Costs of revenues		--			3,346,112			--			3,346,112
Operating expenses		88,036			662,802			2,115,525			2,866,363
Other income (expense)		--			--			(918,997	)		(918,997	)
Segment income (loss)	$	(77,985	)	$	(946,222	)	$	(3,034,522	)	$	(4,058,729	)

Segment Assets

	June 30, 2015
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	3,529,556	$	1,203,281	$	443,024	$	5,175,861
Fixed assets		484,217		450,042		63,369		997,628
Other assets		--		--		--		--
Segment Assets	$	4,013,773	$	1,653,323	$	506,393	$	6,173,489

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	2,831,798	$	1,325,807	$	5,527,039
Fixed assets		837,602		289,302		76,178		1,203,082
Other assets		--		--		--		--
Segment Assets	$	2,207,036	$	3,121,100	$	1,401,985	$	6,730,121

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Oct. 06, 2015
Document And Entity Information
Entity Registrant Name	STW RESOURCES HOLDING CORP.
Entity Central Index Key	0001357838
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		35,844,548
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015

XML

11. Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 11 – SUBSEQUENT EVENTS

Shares Issued

On July 9, 2015, the Company issued 355,500 shares of common stock to forty-three employees for performance bonuses, valued at $71,100.

On July 22, 2015, the Company issued 200,000 shares of common stock to a qualified investor pursuant to the terms of the loan payoff, valued at $40,000.

On July 28, 2015, the Company issued 50,000 shares of common stock to a consultant for services rendered, valued at $32,500.

Other Events

In August 2015, STW Water Process & Technologies, LLC (STW Water) entered into a lease agreement with MRK Development, LLC (MRK) for the rights to collect, process, and sell the water located on and below the surface of properties owned by MRK. The lease calls for the initial payment of $10,000 in cash and the issuance of 100,000 shares of common stock of STW Resources Holding Corp. The lease is for a period of 30 years with automatic renewals on a year by year basis unless terminated by either party with a 60 day notice. There are additional ‘bonus’ payments of cash and stock when certain levels of Gallon per Day (GPD) are met. Additionally, there is a Royalty based on a received price of the water sold on a ‘per 1,000 gallons’ basis. The percentage of the royalty escalates from 10% to 15% dependent on the GPD.

On August 20, 2015, Alan Murphy was appointed to the Company’s Board of Directors. Pursuant to the agreement with Mr. Murphy, the Company agreed to pay him the following compensation: (a) 33,334 shares of the Company’s common stock upon the execution of the agreement; (b) a fee at the rate of $75,000 per year ($27,329 for the partial year 2015), which shall be paid solely at the Company’s discretion in cash or in shares of the Company’s stock; (c) a cash payment of $1,000.00 for each day of attendance at meetings of the Company’s Board of Directors or any other meeting called by the Company and attended by Mr. Murphy; and (d) reimbursement of all reasonable costs of travel, lodging, and entertainment reasonably necessary for Mr. Murphy to carry out his duties, so long as any such expense in excess of $100 is approved in advance by the Company.

In the month of August 2015 the Company agreed to act as the intermediary agent to an agreement in which two of the current officers of the Company are selling their share of a related party company Black Pearl Energy, LLC, (BPE), to the third owner and withdrawing from BPE. In addition to the Company acting as an intermediary, it entered into an agreement reconciling payments between the Company and the related party company, for which the Company’s Management does not anticipate it having any financial risk or benefit.

On August 17, 2015, management entered into a short term financing with a lender for $375,000. The note contained a $75,000 (or 20%) original issue discount and a legal fee for $5,000. The note will bear interest at 8%. The lender will be granted 250,000 shares of common stock. The Company received $295,000 from the investor.

On August 21, 2015, the Board of Directors approved an agreement with MDM Worldwide Solutions, Inc. (MDM) to handle investor relations for the Company commencing July 15, 2015 and running for six months. Upon acceptance of the agreement the Company will issue 100,000 shares of common stock to MDM. Fees for the service include a monthly retainer of $20,000.

On September 14, 2015, the Board of Directors authorized management to inter into short term financing with three separate lenders for a total of $598,000, $198,000 from each lender. The notes will bear interest at 5% and contains a 10% original issue discount. The notes will be convertible at $0.65 per common share, or 60% of the lowest daily closing bid price for the 10 day period preceding the conversion. In addition each lender will be granted 225,000 shares of common stock. The Company will reserve 2,566,000 shares of common stock with the transfer agent to facilitate the conversion. To-date we have received $100,000 each from two of the investors.

Since June 30, 2015, there has been two new litigations instituted against the Company.

Dufrane Nuclear Shielding, Inc. Counterclaims. On July 16, 2015, Dufrane Nuclear Shielding, Inc., Dufrane Construction, LLC (collectively “Dufrane”) and Joshua C. Brooks filed a counterclaim against STW and its subsidiaries in Case No. CV-50864, pending in the 238th District Court of Midland County, Texas, styled STW Resources Holding Corp., et al. v. Felipe Sanchez, et al. (the “Dufrane Counterclaims”). Dufrane is suing STW over a $725,000 promissory note and an equipment rental agreement, and Joshua C. Brooks is suing STW alleging he was not released from certain guaranty obligations with equipment providers. STW and its subsidiaries filed a general denial and the parties have been working together on an agreed accounting of payments made and the allocations of those payments, with a view towards settling the Dufrane Counterclaims.

Seaboard International, Inc. Lawsuit. On July 07, 2015, Seaboard International, Inc. (“Seaboard”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 112th Judicial District in Pecos County, Texas, styled Seaboard International, Inc. v. Case Drilling & Pump, LLC, et al., Cause No. P-11813-112-CV (the “Seaboard Lawsuit”). Seaboard provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $80,685.01related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay Seaboard; therefore, Seaboard filed the Seaboard Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. Seaboard seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to Seaboard. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against Seaboard for wrongfully placing a lien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, Seaboard.  The Company will vigorously defend this lawsuit and does not expect significant liability from this matter. Based on the Company counsel’s legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

Default on Note Payable

On July 24, 2015, the Company defaulted on a note payable in the principal amount of $423,500.  The Company had 15 days to cure the default but failed to cure the default within this time frame. The note payable provided for a reserve of 4,000,000 shares of the Company’s common stock as security on the note. Upon the Company’s failure to cure the default the 4,000,000 shares of the Company’s restricted common stock was to be released to the note holder.

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues
Water treatment services	$ 118,859	$ 10,051	$ 267,770	$ 10,051
Energy and construction services	$ 2,468,601	3,045,588	4,517,743	5,157,913
Related parties services revenue		17,104	354	35,138
Net revenues	$ 2,587,460	3,072,743	4,785,867	5,203,102
Costs of Revenues	1,717,706	3,346,112	3,004,985	5,108,280
Gross Profit	869,754	(273,369)	1,780,882	94,822
Operating Expenses
Research and Development	1,310	56,465	7,435	151,955
Sales and marketing	39,547	144,335	265,860	215,816
General and administrative	2,031,969	2,655,612	4,292,420	4,535,110
Depreciation and amortization	41,420	9,951	71,308	21,543
Total operating expenses	2,114,246	2,866,363	4,637,023	4,924,424
Loss from operations	(1,244,492)	(3,139,732)	(2,856,141)	(4,829,602)
Interest expense, including related party interest of $38,318 and $54,164 for the three months ended June 30, 2015 and 2014, respectively, and $68,202 and $96,883 for the six months ended June 30, 2015 and 2014, respectively.	(1,418,157)	(462,188)	(2,595,741)	(861,616)
Change in derivative liability	1,353,429	(456,809)	1,627,209	(443,536)
Loss from continuing operations	(1,309,220)	(4,058,729)	(3,824,673)	(6,134,754)
(Loss) income from operations of discontinued entities	(329,217)	14,951	(733,389)	(363,767)
Net Loss	(1,638,437)	(4,043,778)	(4,558,062)	(6,498,521)
Share of net income (loss) of subsidiary attributable to non-controlling interest	(80,347)	10,641	(161,380)	(30,928)
Net Loss of STW Resources Holding Corp.	$ (1,558,090)	$ (4,054,419)	$ (4,396,682)	$ (6,467,593)
Loss per common share - basic and diluted	$ (0.05)	$ (0.17)	$ (0.14)	$ (0.29)
Weighted average shares outstanding - basic and diluted	32,151,614	23,611,937	31,090,024	22,094,923

XML

5. Derivative Liability

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Derivative Liability

NOTE 5 - DERIVATIVE LIABILITY

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

From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments.

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

During the first quarter of 2015, the Company computed a historical volatility of 315% using daily pricing observations for recent periods. We applied a historical volatility rate of 315% during the period ended June 30, 2015, and future periods, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these embedded conversion features.

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

The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of June 30, 2015 and December 31, 2014:

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Annual dividend yield		0	%		0	%
Expected life (years)		0.50 – 0.01			0.60 - 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		315	%		735	%

	June 30, 2015		December 31, 2014
Embedded conversion features	$	279,011	$	751,439
Warrants		4,152		50,901
	$	283,161	$	802,340

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

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Balance beginning	$	802,340		$	1,630,985
Value of derivative liability associated with JMJ note payable		--			42,592
Value of derivative liability attributable to conversion feature of transfer agreements		1,108,030			--
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	)
Change in fair value		(1,627,209	)		95,892
Balance ending	$	283,131		$	802,340

The increase in fair value of the derivative liability is largely attributable to the derivative liability associated with the conversion feature of the transfer agreement convertible notes payable. The change in the fair value of the derivative liability is attributable to the expiration of some of the warrants that were outstanding.

XML

4. Notes Payable

6 Months Ended

Jun. 30, 2015

Notes Payable [Abstract]

Notes Payable

NOTE 4 – NOTES PAYABLE

The Company’s notes payable at June 30, 2015 and December 31, 2014, consisted of the following:

	June 30,			December 31,
Name	2015			2014
14% convertible notes	$	2,296,342		$	2,296,342
12% convertible notes		100,000			100,000
2015 transfer agreements		1,375,000			--
GE Ionics note		2,100,000			2,100,000
Deferred compensation notes		279,095			279,095
Revenue participation notes		2,371,500			2,337,500
Crown Financial note		620,459			702,698
Black Pearl note payable		777,096			--
Dufrane note payable		555,879			725,000
Other short-term debt		55,000			55,000
2015 Q2 short term financing		486,000			--
Discontinued operations L/T debt		--			(752,441	)
Equipment finance contracts		48,168			110,000
Capital lease obligations		25,388			30,437
Total notes payable		11,089,927			7,983,631
Less: current portion		(9,222,248	)		(5,890,414	)
Net long term portion notes payable	$	1,867,679		$	2,093,217
Current portion notes payable	$	9,222,248		$	5,890,414
Less items as follows:
Unamortized loan discounts and loan fees		568,337			20,930
Discontinued operations		600,276			--
Total current portion of notes payable, net of discounts	$	8,053,635		$	5,869,484

14% Convertible Notes

As of June 30, 2015 and December 31, 2014, the aggregate principal balances of the 14% convertible notes are $2,296,342 and $2,296,342, respectively. During the six month period ended June 30, 2015, the Company had no activity on these notes. As of June 30, 2015, the total of outstanding 14% convertible notes was $2,296,342 of which $2,264,800 matured on or before June 30, 2015 and were in default, however, as of October 6, 2015, none of the note holders have declared the notes in default. During the six month period ended June 30, 2014, the Company converted principal and accrued interest of $973,869 in exchange for 1,628,335 shares of the Company’s common stock. The value of the stock issued was $781,337 resulting in additional interest expense of $192,532 upon the conversion of convertible debt. During the three month period ended June 30, 2014, the Company converted principal and accrued interest of $741,912 in exchange for 1,545,650 shares of the Company’s common stock. The value of the stock issued was $927,390 resulting in additional interest expense of $185,478 upon the conversion of convertible debt. At June 30, 2014, the total of outstanding 14% convertible notes was $2,326,517 of which $294,752 matured on November 30, 2013 and was in default; however, none of the note holders had declared the notes in default. During the six month period ended June 30, 2013, the Company converted principal of $25,000. The Company did not convert any principal or accrued interest of the 14% convertible notes during the three months ending June 30, 2013.

As of June 30, 2015 and 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% convertible notes payable to accredited investors that matured on November 30, 2011 and are currently in default. At June 30, 2015, the remaining balance was $100,000. In connection with the issuance of the 12% convertible notes, the Company also issued 273,583 warrants to purchase common stock at an exercise price of $0.12 per share that expire at various dates through 2015. The 12% convertible notes are convertible into 1,454,053 shares of the Company’s common stock.

During the three and six months ended June 30, 2015, the Company has had no activity on the 12% convertible notes. The notes are currently in default, however, as of October 6, 2015, 2015, the note holders have not declared the notes in default. During the three and six months ended June 30, 2014, the Company had no activity and issued 1,137,417 shares of its common stock valued at $614,205 in payment of $225,000 of principal and $116,225 of accrued interest (total of $341,225), respectively. 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.

Other Short-Term Debt

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 matured on January 1, 2015. The balance of the note payable as of June 30, 2015 and December 31, 2014, was $30,000. It is currently in default, however, as of October 6, 2015, MKM capital has not declared the note in default.

In September 2014, the Company entered into short term loan agreements with seven accredited investors for short term notes of $145,000 to be used to sustain daily operating activities. The notes matured in October 2014 with 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 171,667 shares of common stock. These shares were included in the "Fees Payable in Common Stock" and were expensed as interest in the current period. As of June 30, 2015 and December 31, 2014, all but $25,000 of the delinquent loans had been repaid, but as of October 6, 2015, the remaining lender has not declared a default on the payment of his note.

GE Ionics

On August 31, 2010, the Company entered into a Settlement Agreement with GE Ionics (“GE”) relating to a $2,100,000 note payable that was amended on October 30, 2011 (“GE Note”). On May 7, 2012, GE informed the Company that the Company 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 GE 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 Ionics, Inc. ("GE") filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the "GE Lawsuit"). Although the lawsuit arises out of STW's obligations to GE under its Settlement Agreement with GE entered into on August 31, 2010, upon which STW owed GE $2.1 million plus interest. GE elected to forgo suit on the settlement amount and sued STW for the original debt of $11,239,437, plus interest and attorneys' fees (the "Original Debt"). STW filed its Answer asserting that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE had, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote. The lawsuit is currently in the discovery phase of litigation and the parties are exploring settlement. (See Note 9)

Deferred Compensation Notes

As of June 30, 2015, and December 31, 2014, the Company had a balance of $279,095 and $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in house counsel. The notes matured on December 31, 2012, and the notes are in default, however, as of October 6, 2015, none of the note holders have declared the notes in default.

Revenue Participation Notes

As of June 30, 2015 and December 31, 2014, the Company had an outstanding balance of $2,371,500 and $2,337,500, respectively, of Revenue Participation Notes comprised as follows:

	June 30,		December 31,
Name	2015		2014
2012 Revenue Participation Notes	$	165,000	$	165,000
2013 Revenue Participation Notes - STW Resources Salt Water Remediation		302,500		302,500
2013 Revenue Participation Notes - STW Energy		182,000		182,000
2013 Convertible Revenue Participation Notes - STW Pipeline		115,000		115,000
2014 Revenue Participation Notes, Upton Project – STW Water		1,607,000		1,573,000
Total revenue participation notes	$	2,371,500	$	2,337,500

These notes are more fully described in the notes to the consolidated financial statements for the year ended December 31, 2014, which were included in the Company’s Annual Report on Form 10-K as filed with the SEC on April 3, 2015.

2014 Revenue Participation Notes – STW Resources Upton Project

On September 30, 2014, the Company issued its first note for the new Upton Project. The financing is a senior secured master note (“Master Note”) with a 15% coupon and a maturity of 18 months. According to the terms of the Master Note, the Company should pay interest only in the first three months of the issuance, and commencing on the fourth month of the issuance, the Company should pay equal monthly payment of principal and accrued interest through the maturity date of the Master Note with revenue participation interest. Additionally, the Master Note carries 5% royalty to be distributed based on pro rata ownership by investors in the Master Note. Payments for principal and interest will come solely from 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 Master Note. As of June 30, 2015, the total principal amount of this financing was $1,607,000. At June 30, 2015, $502,760 of the principal payments was in default. As of the date of this Report, the investors have not declared a default on the payment of the Master Note.

Note payable to Crown Financial, LLC, a related party

On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in our subsidiary: STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of June 30, 2015 and December 31, 2014, the Company had drawn down $620,458 and $702,697, respectively, of this loan facility. This loan is part of the discontinued operations.

Black Pearl Energy, LLC, a related party

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 the Company’s CEO, Stan Weiner, former COO, Lee Maddox, and one of our directors and General Counsel, Grant Seabolt. Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, of which $1,054,944 had been advanced as of December 31, 2014. The credit was issued in the form of a promissory note (the "Note"). On February 26, 2015, the open balance of the credit line and accrued interest were converted into a note payable, described in more details in the Black Pearl note payable herein below, and the credit line was dissolved.

On February 26, 2015, the Company negotiated an extension on the note payable to Black Pearl for the outstanding balance of $1,079,944 plus $105,363 of accrued interest under the Credit Agreement. The note is to be paid on a monthly basis of $12,000 per month for 48 months and the rest of the payment will become due in February 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and reduced the principal and accrued interest to approximately $805,863 and $67,000, respectively. Additionally, we would issue 75,000 shares of common stock to Black Pearl to cure the default and 131,704 shares of common stock in consideration of the extension. These stock awards were accrued as fees payable in common stock when the awards were vested.

As of June 30, 2015 and December 31, 2014, the Company had $777,096 of related party notes payables and zero, respectively, to Black Pearl.

Dufrane Nuclear, Inc. , a related party

As of June 30, 2015 and December 31, 2014, the Company has a related party note payable of $555,879 and $725,000, respectively, to Dufrane Nuclear, Inc. a company controlled by Mr. Joshua Brooks, the Company’s Former Chief Operating Officer. During the six months ended June 30, 2015 and 2014, the Company made payments on the note of $169,121 and zero, respectively, in principal.

2015 Transfer Agreement Convertible Notes Payable

During the six months ended June 30, 2015, the Company issued $1,375,000 of convertible transfer agreements to four (4) accredited investors. The transfer agreements bear interest at 5% and mature at various dates through October 17, 2015. The transfer agreements are convertible, including accrued interest, into 2,141,827 shares at a conversion price of $0.65 per share. In the event of default, the transfer agreements are convertible at a price equal to the lower of (a) $0.65 or (b) 60% multiplied by the lowest closing trade price of the common shares for the ten (10) trading days immediately prior to the applicable conversion date.

The conversion feature of the 2015 transfer agreements meet the definition of a derivative due to the reset provision to occur upon the issuance of equity based instruments at below $0.65 per share or upon default of the notes and is accounted for as a derivative liability. The Company has determined the value of the conversion feature upon default of this note using the Black-Scholes pricing model to be $1,108,030 as of the date of issuance, of which $479,877 was recorded as a financing cost in the condensed consolidated statement of operations and $628,153 was recorded as a loan discount. In connection with these transfer agreements, the Company issued 525,000 shares of its common stock to the investors valued at $470,500. The Company also incurred third party loan fees of $151,347 on these notes. The value of the conversion feature of $628,153 and $746,847 will be amortized as interest expense over the term of the note under the straight line method, which we believe approximates the effective interest method due to their short term nature. The effective interest rate of these transfer agreements was determined to be 102.5%.

2015  Short Term Financing

In the second quarter of 2015, the Company obtained short term loans from three qualified investors totaling $450,000. As part of the short term loans, one investor was given a discount on two notes totaling $73,500 and awarded 650,000 shares of common stock at various prices valued at $340,000 plus 4,000,000 shares, to be issued only in the event of a default, valued at $1,600,000. Another investor was awarded 100,000 shares of common stock at various prices valued at $80,000 plus 500,000 warrants at an exercise price of $0.59 per share.  These costs in excess of the stated value were written off as current expenses due to the short term nature of the loans and others were deferred and will be expensed over the life of the short term loans as interest expense.

For the six months ended June 30, 2015 and 2014, interest expense on all notes payable (including related parties in Note 6) described above was $2,595,741 and $861,616, respectively, which included $1,354,148 and $58,328, respectively, of amortization of debt discount and debt issuance costs.

XML

5. Derivative Liability (Tables)

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Warrants and embedded conversion options which have no observable market data

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Annual dividend yield		0	%		0	%
Expected life (years)		0.50 – 0.01			0.60 - 0.47
Risk-free interest rate		0.11% - 0.25	%		0.11% - 0.25	%
Expected volatility		315	%		735	%

	June 30, 2015		December 31, 2014
Embedded conversion features	$	279,011	$	751,439
Warrants		4,152		50,901
	$	283,161	$	802,340

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

	For the six months ended June 30, 2015			For the year ended December 31, 2014
Balance beginning	$	802,340		$	1,630,985
Value of derivative liability associated with JMJ note payable		--			42,592
Value of derivative liability attributable to conversion feature of transfer agreements		1,108,030			--
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	)
Change in fair value		(1,627,209	)		95,892
Balance ending	$	283,131		$	802,340

XML

1. Nature of the Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

Basis of presentation

The accompanying condensed consolidated financial statements of STW Resources Holding Corp and its subsidiaries (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2015, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. During the six months ended June 30, 2015, the Company decided to shut down the operations of its Energy and Oilfield businesses. Accordingly, some information included in our form 10-K may not be comparable to the information included in this form 10-Q. The December 31, 2014 condensed consolidated balance sheet was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015, see Reclassifications below.

History of the Company

History of the Company

STW Resources Holding Corp, 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.

Consolidation Policy

Consolidation policy

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2015, include the accounts of the STW Resources Holding Corp and its wholly owned subsidiaries: STW Water Process & Technologies LLC and STW Pipeline Maintenance & Construction, LLC. The condensed consolidated financial statements for the three and six months ended  June 30, 2014, include STW Resources Holding Corp and STW Pipeline Maintenance & Construction, LLC as STW Water Process & Technologies, LLC was not established prior to the quarterly period ended June 30, 2014. All significant intercompany transactions and balances have been eliminated in consolidation.

STW Oilfield Construction LLC and the Company’s 75% owned subsidiary STW Energy, LLC have been reported as discontinued operations.

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Reclassifications

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. Additionally, the financial statements for June 30, 2014, December 31, 2014, and March 31, 2015 have been revised for the discontinued operations (See Note 8).

Non-Controlling Interest

Non-Controlling interest

On June 25, 2013, the Company invested in a limited liability company (“LLC”) by obtaining a 75% interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2014, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a cumulative net loss attributable to non-controlling interests of $187,474 for the year ended December 31, 2014. During the three and six month period ended June 30, 2015, a net loss attributable to the non-controlling interest of $80,347 and $161,380, respectively, was incurred. As of June 30, 2015, the net deficit interest in the subsidiary held by the non-controlling interest is $348,854.

Going Concern

Going Concern

The Company’s condensed 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 $43,508,853 as of June 30, 2015, and as of that date was delinquent in payment of $2,013,354 of sales and payroll taxes. As of June 30, 2015, $5,546,655 of notes payable were in default. Since its inception in January 2008 through December 31, 2014, management had raised equity and debt financing of approximately $21,000,000 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 any at all.

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

Use of Estimates

Use of Estimates

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

Accounts Receivable

Accounts Receivable

Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations. As of June 30, 2015 and December 31, 2014, the allowances for doubtful accounts were zero and $6,773, respectively.

Loan Discounts

Loan Discounts

The Company amortizes loan discounts over the term of the loan using the effective interest method.

Concentration of Credit Risk

Concentration of Credit Risk

A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner per institution. At June 30, 2015, there were no account balances per institution that would have exceeded the $250,000 insurance limit.

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

As of June 30, 2015, three vendors accounted for 18%, 12% and 11% of total accounts payable. During the three months ended June 30, 2015, three vendors accounted for 58%, 15%, and 8% of total purchases. During the six months ended June 30, 2015, three vendors accounted for 63%, 18%, and 8% of total purchases. 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 June 30, 2015, three customers accounted for 34%, 33% and 13% of accounts receivable. During the three months ended June 30, 2015, three customers accounted for 75%, 12% and 7% of net revenues. During the six months ended June 30, 2015, three customers accounted for 74%, 8% and 8% of net revenues. 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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

“Fair value” is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s financial instruments consist of cash, accounts receivable, notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments. Our derivative liabilities are recorded at fair value (see Note 5).

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

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

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

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

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

Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5).

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

The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2015 and December 31, 2014.

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2015	$	--	$	--	$	283,161		$	283,161
Fair value of Derivative Liability at December 31, 2014	$	--	$	--	$	802,340		$	802,340

Accounting for Derivatives Liabilities

Accounting for Derivatives Liabilities

The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as a derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations in other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification to a liability are recorded at the fair value of the instrument on the reclassification date.

Certain of the Company’s embedded conversion features on debt, with anti-dilution provisions, and price protection features on outstanding common stock warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using the Black-Scholes model (see Note 5).

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

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

Long-lived Assets and Intangible Assets

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

The Company had no such asset impairments during the six months ending June 30, 2015 or 2014. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets.

Revenue Recognition

Revenue Recognition

During the year ended December 31, 2014, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. These MSAs authorize the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services. The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the three and six months ended June 30, 2015, the Company recognized $2,468,601and $4,518,097, respectively of revenues from these services contracts, which included zero and $354, respectively of revenues from related parties. During the three and six months ending June 30, 2014, the Company realized revenue of $3,062,692 and $5,193,052, respectively from services contracts, which included $17,104 and $35,138, respectively of the service revenue was from related parties.

Business Segments

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 10.

Income Taxes

Income Taxes

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

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

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at June 30, 2015 and December 31, 2014, respectively.

Common Stock and Common Stock Warrants Issued to Employees

Common Stock and Common Stock Warrants Issued to Employees

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

At June 30, 2015 and December 31, 2014, the Company had no grants of employee common stock options or warrants outstanding.

Loss per Share

Loss per Share

The basic net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive shares arising from debt or equity instruments. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of June 30, 2015 and December 31, 2014, the Company had 14,036,978 and 14,442,977 shares issuable upon conversion or exercise, respectively, which have been excluded as their effect is anti-dilutive.

Property and Equipment

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
Tools, equipment, and vehicles	3-5 years
Leasehold improvements	remaining life of lease

Stock Subscriptions Payable

Stock Subscriptions Payable

The initial balance of stock subscriptions payable as of December 31, 2014, was $27,000 representing 41,539 shares to be issued. During the three and six months ended June 30, 2015, zero and $10,000, respectively of these stock subscriptions payable were issued representing zero and 15,385, respectively shares of common stock. The remaining balance of stock subscriptions payable as of June 30, 2015, is $117,000 representing 126,154 shares to be issued.

Fees Payable in Common Stock

Fees Payable in Common Stock

During the three and six months ended June 30, 2015, the Company agreed to issue a net of 1,663,334 and 2,676,596 shares, respectively, valued at $991,801 and $1,826,450 in payment of performance bonuses, employment signing bonuses, consulting fees, and interest. During the three and six months ended June 30, 2015, the Company issued an aggregate of 3,209,740 and 5,595,052 shares, respectively, of its common stock, valued at $2,196,150 and $4,335,434, respectively, in payment of performance bonuses, employment signing bonuses, consulting fees, and interest which left a remaining balance in fees payable in common stock of $191,724, or 391,306 shares.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

XML

8. Discontinued Operations

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations

NOTE 8 – DISCONTINUED OPERATIONS

During the three months ended June 30, 2015, the Company discontinued the operations of STW Energy, LLC and STW Oilfield Construction, LLC. These business units have ceased operations and the Company is in process of disposing of assets and settling liabilities. Because of continued losses, the Company made the decision to close STW Energy, LLC and STW Oilfield Construction, LLC. In the three month period ending June 30, 2015, the company sold or transferred all remaining fixed assets to STW Pipeline Maintenance & Construction, LLC and incurred a loss on the sale of assets of $114,000. No further significant losses are expected.

A summary of assets and liabilities of discontinued operations is as follows:

	June 30, 2015		December 31, 2014
	(Unaudited)
Carrying amounts of major classes of assets included as part of discontinued operations:
Cash	$	--	$	3,550
Accounts receivable, trade, net		112,979		216,262
Accounts receivable from related parties				511,809
Prepaid expenses and other current assets		36		111,604
Total Current Assets		113,015		843,225
Long Term Assets
Property and equipment, net		--		234,917
Total major classes of assets of the discontinued operations.	$	113,015	$	1,078,142

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Book overdraft	$	56,466	$	17,445
Accounts Payable		683,193		1,055,575
Payable to related parties:
Black Pearl Energy, LLC		6,709		94,717
Crown Financial, LLC		685		685
Current portion of notes payable, net of discounts		600,276		752,441
Sales and payroll taxes payable		514,237		474,075
Accrued expenses and interest		24,072		41,383
Accrued compensation		13,163		147,843
Total major classes of liabilities of the discontinued operations.	$	1,898,801	$	2,584,164

Loss from Discontinued Operations is as follows:

	Six Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:	$	504,699		$	4,011,025
Revenues
Cost of revenues		(719,103	)		(3,349,019	)
Operating expenses		(321,815	)		(941,884	)
Interest expense		(82,361	)		(83,889	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(733,389	)	$	(363,767	)

	Three Month Periods Ended June 30:
		2015			2014
Major classes of line items constituting pre-tax loss from operation of discontinued operations:
Revenues	$	23,705		$	2,540,605
Cost of revenues		(126,117	)		(1,929,945	)
Operating expenses		(71,639	)		(549,994	)
Interest expense		(40,357	)		(45,715	)
Loss on the sale of fixed assets		(114,809	)		--
Total loss from operation of discontinued operations	$	(329,217	)	$	14,951

XML

6. Related Party Transactions

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Related Party Transactions

NOTE 6 – RELATED PARTY TRANSACTIONS

Officers’ Compensation

During the six months ended June 30, 2015 and 2014, we incurred $87,500 and $75,000, respectively, in officers’ compensation due to our Director, Chairman, and CEO, Mr. Stanley Weiner. During the three month periods ended June 30, 2015 and 2014, we incurred $45,000 and $37,500, respectively, in officers’ compensation. During the six months ended June 30, 2015 and 2014, Mr. Weiner was paid $22,500 and zero, respectively. During the three months ended June 30, 2015 and 2014 Mr. Weiner was paid $22,500 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $478,083 and $413,083, respectively, were payable to Mr. Weiner for his compensation.

During the six months ended June 30, 2015 and 2014, we incurred zero and $75,000, respectively, in officers’ compensation due to one of our former Directors and former Chief Operating Officer, Mr. Lee Maddox. During the three months ended June 30, 2015 and 2014, we incurred zero and $37,500, respectively, in officers’ compensation due to Mr. Maddox. During the six months ended June 30, 2015 and 2014, the Company paid Mr. Maddox $30,000 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $190,500 and $220,500, respectively, were payable to Mr. Maddox for his compensation.

During the six months ended June 30, 2015 and 2014, we incurred $60,000 and zero, respectively, in officers’ compensation due to one of our Directors and Officer, Mr. Paul DiFrancesco. During the three months ended June 30, 2015 and 2014, we incurred $36,000 and zero, respectively, in officers’ compensation due to Mr. DiFrancesco. During the six months ended June 30, 2015 and 2014, the Company paid Mr. DiFrancesco $52,500 and zero, respectively. As of June 30, 2015 and December 31, 2014, the balances of $7,500 and zero, respectively, were payable to Mr. DiFrancesco for his salary.

During the six months ended June 30, 2015 and 2014, we incurred $47,500 and $45,000, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. During the three months ended June 30, 2015 and 2014, we incurred $24,000 and $22,500, respectively, in general counsel services fees expense with Seabolt Law Group. During the six months ended June 30, 2015 and 2014, the Company paid Mr. Seabolt $15,000 and $15,000, respectively. As of June 30, 2015 and December 31, 2014, the balances of $212,297 and $179,797, respectively, were payable to Seabolt Law Group for their services.

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. There has been no additional activity during the six months ending June 30, 2015. The balance in the accrued officer’s compensations for our former COO, Mr. Brooks, was $60,000 at both June 30, 2015 and December 31, 2014.

During six months ended June 30, 2015 and 2014, we incurred $96,436 and $317,118, respectively, in CFO, audit preparation, tax, and SEC compliance services fees expense with Miranda CFO Services, Inc. and Miranda & Associates, a Professional Accountancy Corporation, firms owned by our Chief Financial Officer, Mr. Robert J. Miranda. During three months ended June 30, 2015 and 2014, we incurred $45,688 and $168,520, respectively, in CFO, audit preparation, tax, and SEC compliance services fees expense with Miranda CFO Services, Inc. and Miranda & Associates. As of June 30, 2015 and December 31, 2014, the balances of $67,207 and $219,271, respectively, were payable to Miranda & Associates for these services.

During six month periods ended June 30, 2015 and 2014, we incurred $100,000 and $100,000, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC, Mr. Jennings. During three month periods ended June 30, 2015 and 2014, we incurred $50,000 and $50,000, respectively, in officers’ salary due to Mr. Jennings. During the six month period ended June 30, 2014, we incurred with Mr. Jennings a signing bonus comprised of 50,000 shares of the Company’s common stock valued at $21,000. As of June 30, 2015 and December 31, 2014, the balance of zero and $121,000, was payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards were accrued as fees payable in common stock the awards are vested.

During six month periods ended June 30, 2015 and 2014, we incurred $100,000 and none, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Water Process and Technologies, LLC, Mr. Murphy. During three month periods ended June 30, 2015 and 2014, we incurred $50,000 and none, respectively, in officers’ salary due to Mr. Murphy. In the second quarter of 2014, we incurred with Mr. Murphy a signing bonus comprised of 333,333 shares of the Company’s common stock valued at $200,000. As of June 30, 2015 and December 31, 2014, the balance of zero and $200,000, was payable to Mr. Murphy for the value of signing bonuses due under his employment agreement. These stock awards were accrued as fees payable in common stock the awards are vested.

Board and Advisory Board Compensation

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

Pursuant to 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.

For the six months ended June 30, 2015 and 2014, the Company incurred director fees of $225,000 and $337,500, respectively. During the six months ended June 30, 2015 and 2014, the Company issued 908,658 and 930,261 shares of its common stock in payment of director fees, valued at $675,000 and $558,167, respectively. For the three months ended June 30, 2015 and 2014, the Company incurred director fees of $112,500 and $168,750, respectively. During the three months ended June 30, 2015 and 2014, the Company issued 346,158 and 930,261 shares of its common stock in payment of these fees, valued at $225,000 and $558,167, respectively. As of June 30, 2015 and December 31, 2014, the Company has accrued compensation due to its directors (both current and former) of zero and $496,067, respectively.

Related Party Notes Payable

For a more complete discussion of the notes to Black Pearl Energy, LLC and Dufrane Nuclear see Note 4 – Notes Payable.

Related Party Sales

During the six months ended June 30, 2015 and 2014, the Company had related party sales of $354 and $35,138, respectively. During three months ended June 30, 2015 and 2014, the Company had related party sales of zero and $17,104, respectively. Related party sales are a combination of sales to three companies, Black Pearl Energy, LLC, Dufrane Construction, and Dufrane Nuclear Shielding Inc.

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 June 30, 2015 and December 31, 2014, the Company had a related party payable of $1,592,252 and $2,034,810, respectively to Crown Financial.

XML

7. Stockholders' Deficit

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Stockholders' Deficit

NOTE 7 – STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock with a par value of $0.001 per share. As of June 30, 2015, no preferred shares were issued or outstanding and the Company does not currently have any plans to issue any preferred shares

Common Stock

The Company is authorized to issue up to 191,666,667 shares of common stock with a par value of $0.001 per share. During the six months ended June 30, 2015, the Company issued common shares as follows:

On January 15, 2015, the Company issued 62,500 shares of common stock to an investor, at a per share price of $1.56, in payment of interest on a short term loan for a value of $97,500 and an additional 170,000 shares of common stock, at a per share 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 per share prices, valued at $209,825 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 per share prices, to 7 investors valued at $225,128 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 per share prices, valued at $344,100 to 4 employees pursuant to their employment contracts.

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

On February 3, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.68, to an accredited investor for $68,000 in loan origination fees.

On February 6, 2015, the Company issued 150,001 shares of fully vested common stock, at various per share prices, to 3 consultants valued at $119,500 in payment of services rendered in 2014, previously accrued, and the renewal of a 2015 contract.

On February 6, 2015, the Company issued 225,000 shares of common stock, at various per share prices, to 3 accredited investors for $187,000 in loan origination fees.

On February 17, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.81, to an accredited investor for $81,000 in loan origination fees.

On February 18, 2015, the Company issued 184,975 shares of common stock to an investment group, at a per share price of $0.65, valued at $120,233 for services rendered in procuring investors for the company.

On February 19, 2015, the Company issued 100,000 shares of common stock, at a per share price of $0.85, to an accredited investor for $85,000 in loan origination fees.

On February 23, 2015, the Company issued 562,500 shares of common stock to 6 directors, at a per share 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 per share 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 1 employee and 2 consultants for services performed in 2014. They were issued at a per share price of $0.80 per common share at a total value of $720,000.

On May 14, 2015, the Company issued 341,667 shares of common stock to two consultants valued at $230,501.

On May 15, 2015, the Company issued 26,000 shares of common stock to two consultants valued at $18,610.

On May 18, 2015, the Company issued 206,667 shares of common stock to two consultants valued at $155,000.

On June 12, 2015,the Company issued 500,000 shares of its common stock and warrants to purchase up to 500,000 shares of the Company’s common stock at $0.59 per share to an accreditor investor who provided the Company with a $385,000 original issue discount bridge note, which yielded net proceeds of $350,000 to the Company. The shares were valued at $280,000.

On June 26, 2015 the Company issued 800, 000 shares of common stock to six employees for accrued signing bonuses valued at $677,000. The Company also issued 183,334 shares of common stock to two consultants valued at $137,501.

On June 30, 2015 the Company issued 333, 333 shares of common stock to one employee for an accrued signing bonus valued at $200,000. The Company issued 578,927 shares of common stock valued at $339,039 to satisfy an obligation to Salttech, its contracts with Black Pearl Energy, and a financial obligation to an investor. The Company also issued 346,158 shares of common stock to members of the Board of Directors valued at $225,000. Additionally, the Company issued 239,812 shares of common stock to two consultants valued at $167,500.

As of June 30, 2015, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding:

	Number of
	Underlying
	Common		Exercise
Security	Shares		Price	Expire
Warrants associated with the 12% Convertible Notes		25,000	0.12		2015
Warrants issued to Crown Financial, LLC		666,667	1.20		2016
Warrants issued on $20,000 short term loan		33,333	1.20		2015
Warrants associated with 2013 Revenue Participation Notes		84,205	1.80		2015
Warrants issued with 2013 Unit Share Offerings		333,333	1.20		2015
Warrants issued with 2014 Unit Share Offerings		2,328,542	1.20 – 1.50		2016
Warrants issued with 2013 and 2014 Unit Share Offerings		20,770	1.50		2017
Warrants issued with 2015 Q2 Financing		500,000	0.59		2017
Sub-total of Warrants outstanding		3,991,850
Common stock associated with the 12% Convertible Notes plus accrued interest		1,454,053	0.12		N/A
Common stock associated with Pipeline Convertible Revenue Participation notes		166,910	0.72		N/A
Common stock associated with 14% convertible notes plus accrued interest		6,231,244	0.48		N/A
Common stock associated with 2015 Transfer Agreements		1,734,615	0. 65		N/A
Common stock associated with 2014 Unit Share Offerings		117,000	various		N/A
Common stock payable as fees		341,306	various		N/A
Total		14,036,978

Warrants

A summary of the Company’s warrant activity and related information during the six months ended June 30, 2015 follows:

	Number of Shares			Weighted- Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2015		3,634,350		$	1.27	1.18	$	851,313
Issued		500,000			0.59	2.00
Exercised		--
Forfeited		--
Cancelled		--
Expired		(142,500	)		0.75
Outstanding at June 30, 2015		3,991,850		$	1.20	0.86	$	792,563
Exercisable		3,991,850		$	1.20	0.86	$	792,563

XML

9. Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Commitments and Contingencies

NOTE 9 – 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 2014, 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 June 30, 2015 and December 31, 2014, the principal balances on these capital leases totaled $25,388 and $30,438, respectively.

Future minimum lease payments under the capital lease and operating lease as of June 30, 2015, are as follows:

Years ending December 31:	Capital Lease		Operating Lease		Totals
2015	$	6,588	$	58,500	$	65,088
2016		13,176		117,000		130,176
2017		8,960		117,000		125,960
2018		--		117,000		117,000
Thereafter		--		204,750		204,750
Total minimum lease payments		28,724		614,250		642,974
Less interest		3,336
Capital lease obligation		25,388
Less current portion		5,332
Long-term capital lease obligation	$	20,056

During the six months ended June 30, 2015 and 2014, rental expense for all property, including equipment rentals cost of sales, and equipment operating leases was $736,527 and $1,076,926, respectively, which includes over $645,071 and $1,015,516, respectively, of equipment rental used on projects and reflected in cost of revenues. Related party rental expense during the six months ended June 30, 2015 and 2014, was $604 and zero, respectively.

During the three months ended June 30, 2015 and 2014, rental expense for all property, including equipment rentals cost of sales, and equipment operating leases was $408,637 and $688,751, respectively, which includes over $361,923 and $670,458, respectively, of equipment rental used on projects and reflected in cost of revenues. Related party rental expense during the three months ended June 30, 2015 and 2014, was zero for both.

Product Purchase and Manufacturing License Agreement

On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Saltech B.V (“Saltech”), a company based in the Netherlands. The agreement provides exclusive rights to purchase Saltech’s DyVaR devices which are used to remove salinity from brackish/brine water streams. The agreement grants 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 was $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. These stock awards were accrued as fees payable in common stock as the awards are vested and was settled upon the issuance of the shares in June 2015.  During the three and six months ended June 30, 2015, the company paid $100,000 and $100,000, respectively in royalties to Salttech.

As of June 30, 2015, the minimum royalty obligation payable under this agreement is as follows:

Years ending December 31:	Minimum Royalty Obligation
2015	$	140,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments	$	980,000

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

STW Pipeline Maintenance & Construction, LLC, has an employment agreement with Adam Jennings that expired on September 22, 2014, but is renewable by mutual consent of the Company and Mr. Jennings. The employment agreement for Mr. Jennings has been renewed.

Stanley T. Weiner is employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary is $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 could be rewarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 400,000 fully vested shares of the Company’s common stock. He will also be awarded quarterly bonuses equal to 50,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Paul DiFrancesco is employed as Head of Finance for a three year term effective February 1, 2015. His base salary is $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 could be rewarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 fully vested shares of the Company’s common stock. He will also be awarded quarterly bonuses equal to 50,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Grant Seabolt is employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary is $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 could be awarded an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 200,000 fully vested shares of the Company’s common stock. He will be awarded quarterly bonuses equal to 25,000 shares of the Company’s common stock. He would also receive a twelve month severance award in the event of termination.

Contingencies

The Company is subject to various claims and contingencies in the normal course of business that arise from litigation, business transactions, or employee-related matters. The Company establishes reserves when it believes a loss is probable and is able to estimate its potential exposure. For reasonably possible loss contingencies, the Company discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. While actual losses may differ from the amounts recorded and the ultimate outcome of our pending actions is generally not yet determinable, the Company does not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on its business, financial position, results of operations, or cash flows. In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. All items, whereby the Company agrees with the amount of the claim, have been recorded in the current period and are reflected in accounts payable.

GE Ionics, Inc. Lawsuit. On May 22, 2013, GE Ionics, Inc. ("GE") filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the "GE Lawsuit"). Although the lawsuit arises out of STW's obligations to GE under its Settlement Agreement with GE entered into on August 31, 2010, upon which STW owed GE $2.1 million plus interest. GE elected to forgo suit on the settlement amount and sued STW for the original debt of $11,239,437, plus interest and attorneys' fees (the "Original Debt"). STW filed its Answer asserting that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE had, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because management has determined the probability of recovery is remote. The lawsuit is currently in the discovery phase of litigation and the parties are exploring settlement. The Company has a note payable of $2,100,000 recorded as its estimated loss on this matter.

Sichenzia and Ross Lawsuit. On June 13, 2014, Sichenzia Ross Friedman Ference LLP (“Sichenzia Ross”) filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $80,036.22 in legal fees and expenses from the Company. The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters. 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 Judgment by Confession with the Court. This has been fully accrued for.

Bob J. Johnson & Associates Lawsuit. Since June 30, 2014, 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 238^th 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 St. 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 some initial discovery from the Company; however, the Company’s counsel is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction. The Company continues to vigorously defend this lawsuit and Management does not expect to incur any liability beyond its costs of defense.

Arbitration Judgment

Viewpoint Securities, LLC Arbitration. On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP") who entered into an engagement agreement, dated March 9, 2008 (as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010), with STW whereby the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company. The demand alleged breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement. VP seeks, among other things, $216,217 and a warrant to purchase 566,667 shares of the Company's common stock, payment of a $15,000 promissory note plus 3+ years of interest at 12%, attorneys' fees of $18,000.00 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 $196,727.77 on Viewpoint's claim for $216,217 in fees and expenses, plus $5,541.46 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commending April 1, 2014. The Arbitrator denied Viewpoint's claims related to the Company's warrants, a $15,000 promissory note plus 12% interest and for $18,000 in attorneys' fees. The Award was final on April 01, 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. Subsequent to June 30, 2015, on July 07, 2015, STW and Viewpoint signed a “Payment and Standstill Agreement, wherein the parties agreed that the total Arbitration Award with interest totaled $228,170.92, that Viewpoint would not seek post Award attorneys’ fees from STW, and that so long as STW made bi-weekly payments of $2,000.00, beginning on July 10, 2015, Viewpoint would stay any efforts to collect on the Arbitration Award, and when fully paid, would fully release STW from the Arbitration Award. The Company has made all scheduled payments to date.

United Drilling, Inc. Lawsuit. On May 06, 2015, United Drilling, Inc. (“United Drilling”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 83rd Judicial District in Pecos County, Texas, styled United Drilling, Inc. v. STW Resources Holding Corp. et al., Cause No. P-7405-83-CV (the “United Lawsuit”). United Drilling provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $1,577,883.33 related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay United Drilling; therefore, United Drilling filed the United Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. United Drilling seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to United Drilling. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against United Drilling for wrongfully placing a lien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, United Drilling. STW and United Drilling have participated in substantive settlement discussions and have a definitive settlement agreement prepared awaiting execution. Based on the Company counsel’s legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

Dufrane Nuclear Shielding, Inc. Counterclaims. On July 16, 2015, Dufrane Nuclear Shielding, Inc., Dufrane Construction, LLC (collectively “Dufrane”) and Joshua C. Brooks filed a counterclaim against STW and its subsidiaries in Case No. CV-50864, pending in the 238th District Court of Midland County, Texas, styled STW Resources Holding Corp., et al. v. Felipe Sanchez, et al. (the “Dufrane Counterclaims”). Dufrane is suing STW over a $725,000 promissory note and an equipment rental agreement, and Joshua C. Brooks is suing STW alleging he was not released from certain guaranty obligations with equipment providers. STW and its subsidiaries filed a general denial and the parties have been working together on an agreed accounting of payments made and the allocations of those payments, with a view towards settling the Dufrane Counterclaims.

Seaboard International, Inc. Lawsuit. On July 07, 2015, Seaboard International, Inc. (“Seaboard”) filed a lawsuit against STW and Case Drilling and Pump Service, LLC pending in the District Court of the 112th Judicial District in Pecos County, Texas, styled Seaboard International, Inc. v. Case Drilling & Pump, LLC, et al., Cause No. P-11813-112-CV (the “Seaboard Lawsuit”). Seaboard provided water well drilling services as a subcontractor to Case Drilling in the amount alleged to be $80,685.01related to Case Drilling providing drilling services to STW Water Process & Technologies, LLC (a wholly owned subsidiary of STW) for Capitan Reef Test Well No. 1, located in Pecos County, Texas (the “Test Well”). Case Drilling did not pay Seaboard; therefore, Seaboard filed the Seaboard Lawsuit to attempt to foreclose on an alleged statutory lien on STW’s water lease with the City of Fort Stockton, Texas, on which the Test Well was located. Seaboard seeks any monies owed by STW to Case Drilling for the Test Well to be paid to United Drilling. STW has asserted that it had a “turn-key” contract with Case Drilling, which required Case Drilling to deliver a producing water well, which it did not. Accordingly, STW alleges that since it owed nothing to Case Drilling, correspondingly, it owes nothing to Seaboard. In addition to STW filing its Answer and Affirmative Defenses to United Drilling’s claims, it has also filed a counterclaim against Seaboard for wrongfully placing alien on STW’s Fort Stockton water lease, and STW has cross-claimed Case Drilling for breach of contract and indemnity related to Case Drilling’s alleged failure to pay its subcontractor, Seaboard. The Company will vigorously defend this lawsuit and does not expect significant liability from this matter. Based on the Company counsel's legal opinions regarding the invalidity of United Drilling’s lien, the Company does not expect to incur any substantial liability from this matter.

XML

4. Notes Payable (Details 1) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Revenue Participation notes	$ 11,089,927	$ 7,983,631
ParticipationNote 1 [Member]
Revenue Participation notes	165,000	165,000
ParticipationNote 2 [Member]
Revenue Participation notes	302,500	302,500
ParticipationNote 3 [Member]
Revenue Participation notes	182,000	182,000
ParticipationNote 4 [Member]
Revenue Participation notes	115,000	115,000
ParticipationNote 5 [Member]
Revenue Participation notes	1,607,000	1,573,000
Rev Part Notes [Member]
Revenue Participation notes	$ 2,371,500	$ 2,337,500

XML

10. Segment Information (Details Narrative)	3 Months Ended
	Jun. 30, 2015
Segment Information Details Narrative
Reportable segments	3

XML

2. Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2015

Property Plant And Equipment Tables

Property, Plant and Equipment

	June 30, 2015			December 31, 2014
Office furniture and equipment	$	29,467		$	29,467
Tools and yard equipment		673,942			621,995
Vehicles and construction equipment		477,187			635,220
Facilities and leasehold improvements		15,933			15,933
Total, cost		1,196,529			1,302,615
Accumulated Depreciation and Amortization		(198,901	)		(99,533	)
Property and equipment, net	$	997,628		$	1,203,082

XML

9. Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

Restatements Tables

Future minimum lease payments

Years ending December 31:	Capital Lease		Operating Lease		Totals
2015	$	6,588	$	58,500	$	65,088
2016		13,176		117,000		130,176
2017		8,960		117,000		125,960
2018		--		117,000		117,000
Thereafter		--		204,750		204,750
Total minimum lease payments		28,724		614,250		642,974
Less interest		3,336
Capital lease obligation		25,388
Less current portion		5,332
Long-term capital lease obligation	$	20,056

Minimum royalty obligation payable

Years ending December 31:	Minimum Royalty Obligation
2015	$	140,000
2016		240,000
2017		240,000
2018		240,000
Thereafter		120,000
Total minimum lease payments	$	980,000

XML

10. Segment Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Operations
Revenues	$ 2,587,460	$ 3,072,743	$ 4,785,867	$ 5,203,102
Cost of revenues	1,717,706	3,346,112	3,004,985	5,108,280
Operating expenses	2,114,246	2,866,363	4,637,023	4,924,424
Other income (expense)	(64,728)	(918,997)	(968,532)	(1,305,152)
Net income (loss)	(1,309,220)	(4,058,729)	(3,824,673)	(6,134,754)
Water Reclamation [Member]
Segment Operations
Revenues	118,859	$ 10,051	267,770	$ 10,051
Cost of revenues	126,437		271,963
Operating expenses	$ 397,208	$ 88,036	$ 931,725	$ 219,584
Other income (expense)
Net income (loss)	$ (404,786)	$ (77,985)	$ (935,918)	$ (209,533)
Oil and Gas Services [Member]
Segment Operations
Revenues	2,468,601	3,062,692	4,518,097	5,193,051
Cost of revenues	1,591,269	3,346,112	2,733,022	5,108,280
Operating expenses	$ 493,754	$ 662,802	$ 1,039,647	$ 1,006,691
Other income (expense)
Net income (loss)	$ 383,578	$ (946,222)	$ 745,428	$ (921,920)
Corporate Segment [Member]
Segment Operations
Revenues
Cost of revenues
Operating expenses	$ 1,223,284	$ 2,115,525	$ 2,665,651	$ 3,698,149
Other income (expense)	(64,728)	(918,997)	(968,532)	(1,305,152)
Net income (loss)	$ (1,288,012)	$ (3,034,522)	$ (3,634,183)	$ (5,003,301)

XML

7. Stockholders' Deficit (Details 1)	6 Months Ended
	Jun. 30, 2015 USD ($) $ / shares shares
Number of Shares Under Warrants
Warrants outstanding at beginning of period	3,634,350
Warrants Issued	500,000
Warrants Exercised
Warrants Forfeited
Warrants Cancelled
Warrants Expired	(142,500)
Warrants outstanding at end of period	3,991,850
Warrants exercisable at end of period	3,991,850
Weighted Average Exercise Price
Warrants outstanding at beginning of period | $ / shares	$ 1.27
Warrants Issued | $ / shares	$ .59
Warrants Exercised | $ / shares
Warrants Forfeited | $ / shares
Warrants Cancelled | $ / shares
Warrants Expired | $ / shares	$ .75
Warrants outstanding at end of period | $ / shares	1.20
Warrants exercisable at end of period | $ / shares	$ 1.20
Remaining Contractual Life (Years)
Warrants outstanding at beginning of period	1 year 2 months 3 days
Warrants Issued	2 years
Warrants outstanding at end of period	10 months 9 days
Warrants exercisable at end of period	10 months 9 days
Aggregate Intrinsic Value
Warrants outstanding at beginning of period | $	$ 851,313
Warrants outstanding at end of period | $	792,563
Warrants exercisable at end of period | $	$ 792,563

XML

Condensed Consolidated Statements of Operations (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Related party interest	$ 38,318	$ 54,164	$ 68,202	$ 96,883

XML

3. Receivable from Factor, Net of Unapplied Customer Credits

6 Months Ended

Jun. 30, 2015

Receivable From Factor Net Of Unapplied Customer Credits

Receivable from Factor, Net of Unapplied Customer Credits

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

Accounts Purchase Agreement – Crown Financial, LLC

On June 21, 2013, STW Energy entered into an Accounts Purchase Agreement (the “Accounts Purchase Agreement”) with Crown Financial, LLC (“Crown Financial”) under the Texas Finance Code, pursuant to which Crown Financial might, at its sole discretion, purchase certain of the STW Energy’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown would 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 should pay STW Energy on the related invoice less fess and prior advances. Each account receivable purchased by Crown would 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 would 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. As of the date of this report there were no accounts in default.

The Accounts Purchase Agreement shall remain valid 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. As of June 30, 2015 and December 31, 2014, respectively, there were no accounts receivables subject to recourse due to nonpayment of the purchased accounts.

XML

10. Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Information Tables

Segment Operations and Assets

Segment Operations

	Six months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	267,770		$	4,518,097	$	--		$	4,785,867
Costs of revenues		271,963			2,733,022		--			3,004,985
Operating expenses		931,725			1,039,647		2,665,651			4,637,023
Other income (expense)		--			--		(968,532	)		(968,532	)
Segment income (loss)	$	(935,918	)	$	745,428	$	(3,634,183	)	$	(3,824,673	)

	Three months ended June 30, 2015
	Water Reclamation			Oil & Gas Services		Corporate Operations			Consolidated Totals
Revenues	$	118,859		$	2,468,601	$	--		$	2,587,460
Costs of revenues		126,437			1,591,269		--			1,717,706
Operating expenses		397,208			493,754		1,223,284			2,114,246
Other income (expense)		--			--		(64,728	)		(64,728	)
Segment income (loss)	$	(404,786	)	$	383,578	$	(1,288,012	)	$	(1,309,220	)

	Six months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	5,193,051		$	--		$	5,203,102
Costs of revenues		--			5,108,280			--			5,108,280
Operating expenses		219,584			1,006,691			3,698,149			4,924,424
Other income (expense)		--			--			(1,305,152	)		(1,305,152	)
Segment income (loss)	$	(209,533	)	$	(921,920	)	$	(5,003,301	)	$	(6,134,754	)

	Three months ended June 30, 2014
	Water Reclamation			Oil & Gas Services			Corporate Operations			Consolidated Totals
Revenues	$	10,051		$	3,062,692		$	--		$	3,072,743
Costs of revenues		--			3,346,112			--			3,346,112
Operating expenses		88,036			662,802			2,115,525			2,866,363
Other income (expense)		--			--			(918,997	)		(918,997	)
Segment income (loss)	$	(77,985	)	$	(946,222	)	$	(3,034,522	)	$	(4,058,729	)

Segment Assets

	June 30, 2015
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	3,529,556	$	1,203,281	$	443,024	$	5,175,861
Fixed assets		484,217		450,042		63,369		997,628
Other assets		--		--		--		--
Segment Assets	$	4,013,773	$	1,653,323	$	506,393	$	6,173,489

	December 31, 2014
	Water Reclamation		Oil & Gas Services		Corporate Operations		Consolidated Totals
Current Assets	$	1,369,434	$	2,831,798	$	1,325,807	$	5,527,039
Fixed assets		837,602		289,302		76,178		1,203,082
Other assets		--		--		--		--
Segment Assets	$	2,207,036	$	3,121,100	$	1,401,985	$	6,730,121

XML

5. Derivative Liability (Details Narrative) - shares	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Derivative Liability Details Narrative
Common stock, authorized shares	191,666,667	191,666,667
Convertible debt interest rate	14.00%	14.00%
Volatility rate to value derivative instruments	315.00%	315.00%	735.00%

XML

1. Nature of the Business and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fair Value of Derivative Liability

	Level 1		Level 2		Level 3		Total
Fair value of Derivative Liability at June 30, 2015	$	--	$	--	$	283,161		$	283,161
Fair value of Derivative Liability at December 31, 2014	$	--	$	--	$	802,340		$	802,340

Estimated useful life of property and equipment

	June 30, 2015			December 31, 2014
Office furniture and equipment	$	29,467		$	29,467
Tools and yard equipment		673,942			621,995
Vehicles and construction equipment		477,187			635,220
Facilities and leasehold improvements		15,933			15,933
Total, cost		1,196,529			1,302,615
Accumulated Depreciation and Amortization		(198,901	)		(99,533	)
Property and equipment, net	$	997,628		$	1,203,082