10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2014

OR

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

For the transition period from __________ to __________

Commission File No. 0-54360

WINDSTREAM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Wyoming	98-0178621
(State or other jurisdiction	(IRS Employer
of incorporation)	Identification No.)

819 Buckeye Street

North Vernon, Indiana 47265

(Address of principal executive offices)

(812) 953-1481

(Registrant’s telephone number, including area code)

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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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 in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of August 9, 2014, there were 86,432,020 shares outstanding of the registrant’s common stock.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	13
Item 4.	Controls and Procedures.	13
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	14
Item 1A.	Risk Factors.	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3.	Defaults Upon Senior Securities.	14
Item 4.	Mine Safety Disclosures.	14
Item 5.	Other Information.	14
Item 6.	Exhibits.	15
Signatures		16

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

WINDSTREAM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2014			December 31, 2013
ASSETS
CURRENT ASSETS
Cash	$	525,770		$	203,534
Accounts receivable		417,351			401,549
Inventories		1,121,975			946,805
Prepaid expenses		269,484			187,341
Deferred financing costs		14,321			37,529
TOTAL CURRENT ASSETS		2,348,901			1,776,758
Property and equipment, net of accumulated depreciation		290,213			352,430
OTHER ASSETS
Deposits		7,500			7,500
TOTAL ASSETS	$	2,646,614		$	2,136,688
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable	$	1,109,707		$	742,482
Accrued liabilities		926,505			789,338
Short Term Convertible Notes Payable, net of discount of $386,465 and $219,979, respectively		363,535			330,021
Short term debt - related parties		221,000			187,500
Short term debt - third parties		1,546,490			900,000
Current maturities of note payable		174,087			224,087
TOTAL CURRENT LIABILITIES		4,341,324			3,173,428
LONG TERM LIABILITY
Note payable, non-current		1,175,913			1,175,913
TOTAL LIABILITIES		5,517,237			4,349,341
STOCKHOLDERS’ DEFICIT
Preferred stock, no par value, unlimited shares authorized, no shares issued and outstanding.		—			—
Common stock; $0.001 par value; unlimited shares authorized; 86,182,020 and 83,461,899 shares issued and outstanding, respectively		86,182			83,462
Additional paid in capital		9,583,286			8,184,557
Accumulated deficit		(12,540,091	)		(10,480,672	)
TOTAL STOCKHOLDERS’ DEFICIT		(2,870,623	)		(2,212,653	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,646,614		$	2,136,688

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

F-1

WINDSTREAM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the			For the			For the			For the
	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
SALES	$	214,363		$	198,874		$	452,260		$	555,623
COST OF GOODS SOLD		274,183			202,863			549,590			430,311
GROSS (LOSS) PROFIT		(59,820	)		(3,989	)		(97,330	)		125,312
OPERATING EXPENSES:
Research and development		13,878			177,375			36,451			177,375
Write down of inventory		111,000			-			111,000			-
General and administrative expenses		831,689			1,744,167			1,431,014			2,053,363
TOTAL OPERATING EXPENSES		956,567			1,921,542			1,578,465			2,230,738
LOSS FROM OPERATIONS		(1,016,387	)		(1,925,531	)		(1,675,795	)		(2,105,426	)
OTHER INCOME (EXPENSE)
Other expense		(800	)		(800	)		(800	)		(800	)
Interest expense, net		(250,066	)		(91,670	)		(382,824	)		(130,991	)
TOTAL OTHER INCOME (EXPENSE)		(250,866	)		(92,470	)		(383,624	)		(131,791	)
NET LOSS	$	(1,267,253	)	$	(2,018,001	)	$	(2,059,419	)	$	(2,237,217	)
Net Loss Per Share - Basic and Diluted	$	(0.02	)		(0.05	)	$	(0.02	)		(0.07	)
Weighted Average Shares Outstanding - Basic and Diluted		84,363,741			43,056,767			84,417,935			33,851,706

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

F-2

WINDSTREAM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the			For the
	Six Months			Six Months
	Ended			Ended
	June 30, 2014			June 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,059,419	)	$	(2,237,217	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		62,217			83,692
Interest expense converted into Common Stock		2,735			—
Stock option expense		82,228			79,796
Amortization of deferred financing costs		23,208			7,512
Stock based compensation		—			1,504,200
Write-down of inventory		111,000			—
Amortization of debt discount		233,514			42,071
Changes in operating Assets and Liabilities:
Accounts receivables		(15,802	)		(70,073	)
Inventory		(286,170	)		5,589
Prepaid expenses		(82,144	)		16,969
Accounts payable		367,225			(100,602	)
Accounts payable related parties		—			9,447
Accrued liabilities		141,854			227,559
Deferred rent		—			(61,098	)
Deferred revenue		—			(65,812	)
NET CASH USED IN OPERATING ACTIVITIES		(1,419,554	)		(557,967	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of fixed assets		—			(531	)
NET CASH USED BY INVESTING ACTIVITIES		—			(531	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash payments on deferred financing costs		—			(42,000	)
Borrowings on line of credit, net		446,490			90,000
Proceeds from short term debt		200,000			—
Proceeds from short term debt - related parties		50,000			62,000
Payments on short term debt - related parties		(16,500	)		(27,500	)
Proceeds from issuance of convertible debt		400,000			550,000
Principal payments on long term debt		(50,000	)		(25,000	)
Net proceeds from issuance of Common Stock and Warrants		711,800			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,741,790			607,500
NET INCREASE (DECREASE) IN CASH		322,236			49,002
CASH, Beginning of Period		203,534			4,022
CASH, End of Period	$	525,770		$	53,024
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	75,470		$	12,041
Income taxes		—			—
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock and paid in capital resulting from non-cash conversion of convertible notes including interest expense and accrued interest		207,500
Debt discount on warrants issued with convertible debt		400,000			528,058
Non-cash conversion of warrants issued for deferred financing to common stock		136			—
Warrants Issued for deferred financing costs		—			48,138
Fixed assets purchased on credit		—			5,686
Reclassification of debt related party debt to short term debt		—			100,000

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

F-3

NOTE 1 – BASIS OF PRESENTATION AND NATURE OF ORGANIZATION

Organization

The Company is engaged in the development and commercialization of wind driven electrical generation. The Company’s facilities are located in North Vernon, Indiana. The accompanying consolidated financial statements of WindStream Technologies Inc. (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and expressed in U.S. dollars. The Company’s fiscal year end is December 31.

On March 24, 2014, Windaus Global Energy, Inc. filed an Articles of Amendment with the Secretary of State of the State of Wyoming effecting a name change of Windaus Global Energy, Inc. to WindStream Technologies, Inc. (the “Name Change”). Windaus Global Energy, Inc. has notified the Financial Industry Regulatory Authority (“FINRA”) of the Name Change and a new trading symbol, “WSTI” was assigned effective March 27, 2014. The new CUSIP number for the Company’s common stock is 97382J102.

On October 26, 2013, the Company formed a 99.9% owned subsidiary company, in India, WindStream Energy Technologies India Private Limited, to perform various commercial activities including reselling, manufacturing, repairing, importing, exporting various types renewable energy sources including turbines, windmills, solar-wind hybrids and other devices. A Board of Directors was established consisting of the Chief Executive Officer of the Company and an Indian national. In July 2014, an office had been opened, but operations had not commenced as of June 30, 2014.

In December 2013, the Company filed documents to incorporate a 100% owned subsidiary in Peru, Windstream Technologies Latin America S.A (“the Peru subsidiary”). The Peru subsidiary has appointed a temporary board of directors as required by local regulation, but the Peru subsidiary has had no operations, has entered into no contracts, opened no bank accounts and has not begun any business activity. As of June 30, 2014, operations have not yet commenced.

Basis of Presentation

The accompanying unaudited interim financial statements of WindStream Technologies, Inc. and Subsidiaries (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K originally filed with the SEC on April 11, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.

Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company’s financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

F-4

Consolidations

The consolidated financial statements include the accounts of WindStream Technologies, Inc., WindStream Energy Technologies India Private Limited and Windstream Technologies Latin America S. A. All material intercompany balances have been eliminated in consolidation.

Concentration of Credit Risk

The Company sells primarily to companies and governmental entities across the globe. Receivables arising from those sales domestically are not collateralized; however, credit risk is minimized by continuing to diversify the customer base. International sales typically take place under the auspices of the Export Import Bank, a U.S. government entity, and are guaranteed by that entity under the terms of an insurance policy with a limit of $4 million. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of the specific customers, historical trends and other information.

As of June 30, 2014 and December 31, 2013, two and four customers represented 93% and 94% of outstanding accounts receivable balances, respectively. For the three months ended June 30, 2014 and 2013, one customer represented approximately 92% and 98% of revenue, respectively. For the six months ended June 30, 2014 and 2013, one and two customers represented approximately 93% and 87% of revenue, respectively.

For the three months ended June 30, 2014 and 2013, three vendors represented approximately 50% and 57% of total cost of goods sold, respectively. For the six months ended June 30, 2014 and 2013, three vendors represented approximately 41% and 55% of total cost of goods sold, respectively.

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

The Company had an accumulated deficit of approximately $12,540,000 and $10,481,000 at June 30, 2014 and December 31, 2013, respectively, and has a history of recurring net losses and working capital deficits. These matters among others raise substantial doubt about our ability to continue as a going concern.

While the Company is attempting to increase operations and generate additional revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. The Company will continue to pursue additional equity and/or debt financing while managing cash flows from operations in an effort to provide funds to meet its obligations on a timely basis and to support future business development. There is no assurance that these efforts will be successful. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise the additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plans and generate additional revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

F-5

Segment Information

The Company operates in two segments in accordance with accounting guidance FASB ASC Topic 280, Segment Reporting. Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. See additional discussion at Note 15.

Recently Adopted Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 2 – REVERSE MERGER

Effective May 22, 2013, Windaus Global Energy, Inc. entered into a Share Exchange Agreement with WindStream Technologies, Inc., pursuant to which, the Company agreed to exchange the outstanding common and preferred stock of WindStream held by the WindStream Shareholders for shares of common stock of the Company on a 1:25.808 basis. At the Closing, there were approximately 955,000 shares of WindStream common stock and 581,961 shares of WindStream preferred stock outstanding. Pursuant to the Share Exchange Agreement, the shares of WindStream common stock and preferred stock were exchanged for 39,665,899 (24,646,646 for the WindStream common shares and 15,019,253 for the WindStream preferred shares) new shares of the Company’s common stock, par value of $0.001 per share. At the closing of the agreement, Windaus Global Energy, Inc. had approximately 24,000,000 shares of common stock issued outstanding and no preferred stock. The Company has retroactively restated the common shares outstanding and weighted average shares outstanding for prior years pursuant to the reverse merger share exchange ratio of 1:25.808.

For accounting purposes, this transaction is being accounted for as a reverse merger and has been treated as a recapitalization of Windaus Global Energy, Inc., with WindStream Technologies, Inc. considered the accounting acquirer, and the financial statements of the accounting acquirer became the financial statements of the registrant. The Company did not recognize goodwill or any intangible assets in connection with the transaction. The 39,665,899 shares issued to the shareholder of WindStream Technologies, Inc., and its designees in conjunction with the share exchange transaction have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented.

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of:

	June 30, 2014		December 31, 2013
Accounts Receivable – EXIM insured	$	389,337	$	379,195
Accounts Receivable – not insured	$	28,014	$	22,354
	$	417,351	$	401,549

Under the terms of a revolving line of credit agreement with the Export Import Bank as discussed in Note 7, 95% of customer’s outstanding balances under the terms of the Export Import Bank are guaranteed by the Export Import Bank, an agency of the United States government.

F-6

NOTE 4 – INVENTORIES

Inventories consist of raw materials, work in process and finished goods. Inventory, consisting mostly of raw materials (which principally consist of components) are stated at the lower of cost or market on the first-in, first-out basis, or market. Inventories are classified as current assets.

Inventories consisted of the following as of:

	June 30, 2014		December 31, 2013
Raw Materials	$	768,203	$	517,842
Work in process		287,047		150,503
Finished goods		66,725		278,460
	$	1,121,975	$	946,805

During the three months ended June 30, 2014, the Company evaluated its inventory and wrote down inventory by approximately $111,000, which has been included in the accompanying condensed consolidated statements of operations.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

	June 30, 2014			December 31, 2013
Equipment	$	128,345		$	128,345
Factory equipment		15,800			15,800
Furniture and fixtures		7,888			7,888
Leasehold improvements		64,582			64,582
Tooling		473,893			473,893
Total		690,508			690,508
Less accumulated depreciation		(400,295	)		(338,078	)
Net property, plant and equipment	$	290,213		$	352,430

Depreciation expense for the periods ended as follows amounted to approximately:

	Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
Depreciation Expense	$	31,000	$	42,000	$	62,000	$	84,000

F-7

NOTE 6 – ACCRUED LIABILITIES

Accrued expenses consisted of the following as of:

	June 30, 2014		December 31, 2013
Accrued interest	$	242,257	$	162,214
Accrued payroll and other (liabilities)		481,206		477,467
Accrued warranty		63,000		63,000
Customer deposits		81,922		25,907
Deposit for future fundings		50,000		50,000
Accrued property taxes		8,120		10,750
Total	$	926,505	$	789,338

Customer deposits represents monies advanced by customers to secure future orders. Once the orders are invoiced, the liability is credited to the amount due from the customer.

NOTE 7 – SHORT TERM DEBT – THIRD PARTIES

On February 25, 2013, the Company entered into a working capital revolving line of credit with a bank, with a credit limit of $500,000, for use in financing overseas sales of the Company’s products. The Company’s draws under the line are transaction specific and the related receivables are guaranteed by the Export Import Bank, a U.S. government entity under the terms of an insurance policy with a limit of $4 million. Drawdowns on the line are used to meet the working capital needs of the Company to purchase materials and fund the labor and overhead to manufacture specific products for export to specific customers. The line, which accrues interest at a fixed rate of 6.6%, expired in April 26, 2014, was extended until June 26, 2014 at substantially similar terms, and then a commitment to extend the loan for another twelve months at substantially the same terms but with an increase in the current credit limit from $950,000 to $2,000,000 was received. The documents evidencing this renewed loan are currently being drafted.

For the six months ended June 30, 2014, there were total draws on the line of credit of $1,095,000 and repayments of $648,510. The outstanding balance as of June 30, 2014 and December 31, 2013 was $946,490 and $500,000, respectively, which has been included in the short term debt – third parties in the accompanying condensed consolidated balance sheets.

During 2013 and 2012, the Company has entered into other various notes with individuals at interest rates ranging from 5% to 8% and are due on demand. During the three months and six months ended June 30, 2014 and 2013, the Company made no repayments on these various notes. At June 30, 2014, these notes aggregated $400,000 and are included in the short term debt – third parties in the accompanying condensed consolidated balance sheets.

On April 15, 2014, the Company entered into a note payable for $200,000 with a term of one year and interest accruing at a rate of 8% which is accruing and due in full at the end of the note. At June 30, 2014, the outstanding balance on this note was $200,000 and is included in the short term debt – third parties in the accompanying condensed consolidated balance sheet along with the $946,490 line of credit and $400,000 in various notes payable to individuals above for a total of $1,546,490.

Interest expense for the short term debt for the three months and six months ended June 30, 2014 and 2013, was approximately $14,000 and $36,000 in 2014 and $17,000 and $32,000 in 2013, respectively.

F-8

NOTE 8 – CONVERTIBLE NOTES PAYABLE

On June 1, 2013, the Company entered into subscriptions agreements with five accredited investors for the issuance of convertible promissory notes in the aggregate principal amount of $550,000, which are convertible into shares of common stock of the Company at $0.25 per share, and warrants entitling the holder to purchase up to an aggregate of 1,600,000 of shares of common stock of the Company at $0.25 per share. The warrants have a term of three years and vested immediately. The notes bear interest at 8% and are due in one year.

On June 1, 2014, the Company entered into a subscription agreement with one accredited investor for the issuance of a convertible promissory note in the aggregate principal amount of $400,000, which is convertible into shares of common stock of the Company at $0.40 per share, and a warrant entitling the holder to purchase up to an aggregate of 50,000 of shares of common stock of the Company at $0.40 per share. The warrant has a term of three years and vested immediately. The note bears interest at 12% for the first ninety days of the term and then bears interest at 18% for the next nine months. The note is due in one year. In connection with this transaction, a major shareholder and a related party (the “Pledgor”) signed a pledge and security agreement, which grants a security interest in one million shares of the Company’s common stock owned by the Pledgor.

The Company evaluated the embedded conversion features within the convertible debt under ASC 815 “Derivatives and Hedging” and determined that neither the embedded conversion feature nor the warrants qualified for derivative accounting. Additionally, the instruments were evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. It was concluded that a beneficial conversion feature existed for the convertible debt due to the relative fair value of the warrants issued with the debt.

The total debt discount recorded on the note with the June 1, 2013 date of issuance was $528,058 (warrant relative fair value of approximately $253,000 and the beneficial conversion feature was approximately $275,000) which are being amortized to interest expense over the term of the note).

The total debt discount recorded on the note with the June 1, 2014 date of issuance was $400,000 (warrant relative fair value of approximately $42,000 and the beneficial conversion feature was approximately $358,000) which are being amortized to interest expense over the term of the note). The warrant and beneficial conversion feature was recorded as additional paid in capital.

The unamortized debt discount balance at June 30, 2014 and December 31, 2013 was approximately $386,000 and $220,000, respectively and is being netted against the total convertible promissory notes principal amount of $750,000 and $550,000, respectively, for presentation in the accompanying condensed balance sheets.

For the three months ended June 30, 2014 and 2013, the Company has amortized approximately $158,000 (including approximately $32,000 of debt discount related to notes converted to common stock, see below) and $42,000 in 2013 to interest expense in the accompanying condensed consolidated statement of operations.

For the six months ended June 30, 2014 and 2013, the Company amortized approximately $234,000 (including approximately $64,000 of debt discount related to notes converted to common stock, see below) in 2014 and $42,000 in 2013 to interest expense in the accompanying condensed consolidated statement of operations.

F-9

In connection with one of the five June 2013 debt issuances, the company paid finder’s fees of approximately $42,000 as well as 140,000 common stock warrants at $0.05 per share. The warrants vest immediately and have a three years term. The fair value of the warrants was determined to be approximately $48,000 based on the Black Scholes option pricing model using the same assumption as those used for the warrants above, except the exercise price was $0.05 per share. The combined value of the warrants and cash amounted to approximately $90,000, which was capitalized as a deferred financing cost and is being amortized to interest expense over the life of the notes.

In June 2014, holders of the warrants discussed above exercised warrants, on a cashless exercise basis pursuant to the agreement and the Company issued approximately 136,000 shares of common stock in a non-cash transaction.

As of June 30, 2014 and December 31, 2013, the deferred financing costs had an unamortized balance of approximately of $14,321 and $37,529, respectively.

Amortization of deferred financing costs, which has been included interest expense, for the three months and six months ended June 30, 2014 and 2013, was approximately $7,500 plus approximately $8,000 for the write off of the deferred financing costs associated with the conversion of the warrants discussed above and $23,000 in 2014 and $7,500 and $15,000 in 2013, respectively.

During the six months ended June 30, 2014, four investors converted their notes payable of $200,000 (plus approximately $7,500 in accrued interest) in aggregate into shares of common stock at the conversion price of $0.25 per share resulting in the Company issuing 829,689 shares of common stock to these four investors and amortized approximately $64,000 of the remaining debt discount associated with these notes immediately to interest expense in the accompanying condensed consolidated statement of operations.

Interest expense for the three months ended and six months ended June 30, 2014 and 2013 was approximately $32,000 and $63,000 and $0 and $0, respectively.

NOTE 9 – NOTE PAYABLE

In July 2011, the Company entered into a $1,400,000 note agreement with the City of North Vernon, Indiana. Interest accrues at 5.5% and the note matures on August 1, 2016. As of June 30, 2014 and December 31, 2013, the note had an outstanding balance of $1,350,000 and $1,400,000, respectively. The Company made a $50,000 principal payment during the period ended June 30, 2014,

The Company was unable to pay the interest and principal payments due on August 1, 2012 and was in default of such payment. The Company was able to negotiate payment terms with the City of North Vernon, Indiana, which allowed the Company to delay scheduled repayments of the loan.

During the three months and six months ended June 30, 2014 and 2013, the Company made no payments to the City of North Vernon for accrued interest.

Principal and interest payments are expected to be paid in each fiscal year follows at June 30, 2014:

	Principal		Interest		Total
2014	$	174,087	$	157,853	$	331,940
2015		107,838		126,464		234,302
2016		1,068,075		114,276		1,182,351
	$	1,350,000	$	398,593	$	1,748,593

Interest expense incurred and accrued on the note payable was approximately $19,000 and $38,000 for the three months and six months ended June 30, 2014 and approximately $19,000 and $38,000 for the three months and six months ended June 30, 2013, respectively.

F-10

NOTE 10 – RELATED PARTY TRANSACTIONS

Expenses Paid by President

From time to time, the President of the Company will pay for expenses on behalf of the Company, which are recorded as expenses in the accompanying consolidated statement of operations and as a liability to the President of the Company under accounts payable - related parties in the accompanying consolidated balance sheet.

As of June 30, 2014 and December 31, 2013, the Company owed $0 to the Company president for expenses incurred on behalf of the Company.

Short Term Debt – Related Parties

During the six months ended June 30, 2014 and 2013, the Company president advanced $50,000 and $62,000, respectively, to the Company to fund operations and the Company repaid $16,500 and $27,500 in 2014 and 2013, respectively.

As of June 30, 2014 and December 31, 2013, the outstanding balance of short-term debt – related parties was $221,000 and $187,500, respectively. The amounts accrue interest at 10% and are due on demand.

NOTE 11 – COMMON STOCK

During the six months ended June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 1,754,500 shares of common stock at prices ranging from $0.40 to $0.50 per share, for an aggregate purchase price of $711,800. One investor also received warrants to purchase 100,000 shares of common stock at $0.80 per share. The warrants vested immediately and have a term of three years.

During the six months ended June 30, 2014, four investors converted their notes payable of $200,000 in aggregate plus accrued interest of approximately $7,500 into shares of common stock at the conversion price of $0.25 per share resulting in the Company issuing 829,689 shares of common stock.

In June 2014, holders of the Company’s warrants exercised warrants, on a cashless exercise basis pursuant to an agreement with the Company and the Company issued approximately 136,000 shares of common stock in a non-cash transaction.

NOTE 12 – STOCK OPTIONS

During the six months ended June 30, 2014, the Company issued options to an employee, which allowed the employee to purchase 50,000 shares of the common stock at .05 per share. The options vest immediately and have a term of three years. These options have a fair value of approximately $2,500, which was calculated using the Black-Scholes option pricing model, which has been included in compensation expense during the three and six months ended June 30, 2014 and has been included in general and administrative expenses in the accompanying consolidated statement of operations for the three and six months ended June 30, 2014.

F-11

Stock option activity is presented in the table below:

	Number of Shares		Weighted average Exercise Price		Weight average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		10,110,640	$	0.08		3.43		—
Granted		50,000		0.05		3.00		—
Outstanding at March 31, 2014		10,160,640		0.08		2.75		—
Granted		—		—		—		—
Outstanding at June 30, 2014		10,160,640	$	0.08		2.50		—

The Company recognized stock compensation expense as follows:

Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
$	39,898	$	39,899	$	82,228	$	79,796

The total remainder of stock compensation expense to be recognized through the vesting period of the above options, at June 30, 2014, will be approximately $260,000.

The fair value of the options granted during the various periods was estimated at the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	2014
Year Options were granted
Market value of stock on grant date	$	.05
Risk-free interest rate		.61	%
Dividend Yield		0	%
Volatility Factor		300	%
Weighted average expected life		3 years
Expected forfeiture rate		0	%

F-12

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Legal

The Company is currently engaged in two cases, which are not expected to have a material effect on the Company’s operations. The first is a case between WindStream and a prior vendor that, at one time, supplied components for the Company’s products. As a result of this vendor’s disruption in the Company’s supply chain the Company has sought out and secured other, more reliable sources for the needed raw materials and has not seen a disruption in its final product output. The second case is a Trademark infringement issue that relates to the Company name, WindStream Technologies and prior use. Both of these cases are being, litigated by the Company’s attorneys and expect to be concluded shortly. While incapable of estimation, in the opinion of management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Leases

The Company leased various facilities under a non-cancelable operating lease, which expired on September 30, 2013. The current minimum monthly rental payment is $4,750 plus various expenses incidental to use of the property. The Company has an option to extend the lease for one twelve month period at slightly higher monthly rent. The Company is currently in discussions with the landlord regarding a potential extension or amendment to the existing lease, but nothing has been drafted or formalized at this point in time.

The Company also leased a research facility in New Albany, Indiana under a sixty-five month lease that was to expire on March 30, 2015. The Company evaluated the lease under FASB ASC 840-20 “Operating Leases” and notes that the lease qualifies as an escalating lease. Therefore, rent expense was calculated on a straight-line basis, and was determined to be $3,124 per month. In May 2013, the landlord terminated the lease and the company moved out of the related space. All past and future rent unpaid obligations under the lease were forgiven. The Company’s deferred rent liability at June 30, 2014 and 2013 was $0 and $0, respectively.

Rent expense for the three months and six months ended June 30, 2014 and 2013 was $18,219 and $37,467 in 2014 and $13,530 and $51,562 in 2013, respectively.

Sales

During the second quarter of 2014, the Company received two signed purchase orders from one customer, Jamaica’s National Utility company, Jamaica Public Service Co., for the delivery of the Company’s clean energy products as well as related energy storage, back-up emergency power equipment and custom energy monitoring, data collection and system analysis over the next eighteen to twenty four months. The purchase orders contain the Company’s customary terms regarding payment terms, return of products and return of products and are consistent with the Company’s terms with other customers.

Sales and Distribution Agreements

In the ordinary course of business, the Company enters into sales and distribution agreements with various parties in defined geographic areas around the world. The agreements are usually non-exclusive and contain general commercial terms, but no specific financial terms. It is the Company’s practice that such agreements do not contain performance related terms or favorable payment terms. These agreements are usually cancellable with written notice by either party and do not have terms greater than one year.

F-13

Investment Advisory Services

On April 1, 2014, the Company entered into an agreement with an investment banking firm which will provide advisory services in the area of corporate development, corporate finance and/or capital placement transactions. The agreement will expire twenty four months from the date the agreement was signed or the mutual written agreement of the Company and the investment banker. The Agreement specifies that all fees be on a “success” basis. If no debt or equity transaction is completed, the Company has no obligation under the terms of this agreement.

In the event of a successful transaction, the investment banking firm will earn fees based on a percentage of the aggregate consideration for an equity transaction as follows:

● 5% for Aggregate Consideration of less than USD $10,000,000, plus,

● 4% For Aggregate Consideration between USD $10,000,001 and USD $25,000,000, plus

● 3% For Aggregate Consideration between USD $25,000,001 and USD $50,000,000, plus

● 2% For Aggregate Consideration between USD $50,000,001 and USD $75,000,000, plus

● 1% For Aggregate Consideration above USD $75,000,001.

To date, no transaction has been consummated.

NOTE 14 – EARNINGS PER SHARE

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator denominator of the basic and diluted earnings (loss) per share (EPS) computations.

Basic earnings (loss) per share are computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares are dilutive.

As the Company has net losses, the Company had no potential dilutive securities for the six months ended June 30, 2014 and 2013, as they would be anti-dilutive. Therefore, there is no difference in the basic and dilutive earnings (loss) per share.

F-14

The following table sets for the computation of basic and diluted net income (loss) per share:

	For the			For the			For the			For the
	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Net loss attributable to common stockholders	$	(1,267,253	)	$	(2,018,001	)	$	(2,059,419	)	$	(2,237,217	)
Basic weighted average outstanding shares of common stock		84,363,741			43,056,767			84,417,935			33,851,706
Dilutive effect of common stock equivalents		—			—			—			—
Dilutive weighted average common stock equivalents		84,363,741			43,056,767			84,417,935			33,851,706
Net loss per share of voting and nonvoting common stock Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.02	)	$	(0.07	)

NOTE 15 – SEGMENT INFORMATION

The Company’s operations are classified into the sales of products within the United States and outside the United States. We determined our operating segments in accordance with FASB Topic 280, Segment Reporting. Results of the operating segments are as follows:

Three months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	214,363		$	214,363
Cost of goods sold		—		274,183			274,183
Gross profit	$	—	$	(59,820	)	$	(59,820	)
Accounts receivable	$	28,014	$	389,337		$	417,351

Three months ended June 30, 2013:

	Domestic		International			Total
Sales	$	3,104	$	195,770		$	198,874
Cost of goods sold		3,166		199,697			202,863
Gross profit	$	(62)	$	(3,927	)	$	(3,989	)

F-15

Six months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	452,260		$	452,260
Cost of goods sold		—		549,590			549,590
Gross profit	$	—	$	(97,330	)	$	(97,330	)

Six months ended June 30, 2013:

	Domestic			International		Total
Sales	$	3,104		$	552,519	$	555,623
Cost of goods sold		3,166			427,145		430,311
Gross profit	$	(62	)	$	125,374	$	125,312

NOTE 16 – INCOME TAXES

The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. Income taxes are computed using the asset and liability method in accordance with FASB ASC 740 under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred taxes are measured using provisions of currently enacted tax laws. A valuation allowance against deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. The Company has recorded a full valuation allowance against its net deferred tax assets as it is more likely than not that the benefit of the deferred tax assets will not be recognized in future periods. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates. The Company does not expect any significant unrecognized tax benefits to arise over the next twelve months and is fully reserved.

The Company’s provision for income taxes for continuing operations in interim periods is computed by applying its estimated annual effective rate against its loss before income tax (expense) benefit for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The effective tax rate for the three months and six months ended June 30, 2014 and 2013 was nil.

The Company has not had to accrue any interest and penalties related to unrecognized income tax benefits. However, when or if the situation occurs, the Company will recognize interest and penalties within the income tax expense (benefit) line in the accompanying Condensed Statements of Operations and within the related tax liability line in the Condensed Consolidated Balance Sheets.

NOTE 17 – SUBSEQUENT EVENTS

Subsequent to June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 250,000 shares of common stock at a price of $0.40 per share, for an aggregate purchase price of approximately $100,000.                  ..                 

F-16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report on Form 10-Q and other reports filed by WindStream Technologies, Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Basis of Presentation

The following management’s discussion and analysis is intended to provide additional information regarding the significant changes and trends which influenced our financial performance for the quarters ended June 30, 2014 and 2013 and the six months ended June 30, 2014 and 2013.

The comparability of our financial information is affected by our acquisition of WindStream in May of 2013. For further discussion of the acquisition see note 1 of the financial statements.

Overview

WindStream has designed and manufactures a patented small-wind (the TurboMill^®) and hybrid (wind and solar) (the SolarMill^®) renewable energy device that is suitable for on or off grid installations in the urban or rural setting. The Company operates out of its 50,000 sq. ft. facility in North Vernon, Indiana. It has secured an Export Insurance Policy from the Export Import Bank of the United States, (EXIM) allowing it to offer financing terms to its overseas buyers. The company is actively marketing and selling its products to customers all over the world.

3

Plan of Operations

WindStream has identified 2 significant markets for the sale of its products in the near term:

1.	Areas of the world where energy is inconsistent or non-existent (e.g., India, Africa, South Asia, Latin America and Asia)
2.	Areas of the world where energy costs are high, which includes Jamaica and throughout the Caribbean, South Asia and Europe. In many cases, available energy in a given region may be generated by running diesel generators in which case the displaced cost of energy include the upfront cost of the equipment as the ongoing operating cost of the generator and fuel.

These two drivers present a large percentage of the world’s population and as such, the Company is finding great success in penetrating these markets with its highly efficient, low cost devices. The Company has entered into various distribution partnerships with key companies and individuals in these markets in order to more quickly establish a presence and generate revenue from these territories and the Company will continue to use these types of arrangements to expand.

Revenues

We generate substantially all of our net sales from the sale of small wind and hybrid products, the TurboMill and SolarMill respectively. The Company is primarily selling the SolarMill to its customers who are looking for a more consistent energy generation device.

Cost of Sales

Our cost of sales includes the cost of raw material and components such as stamped metal parts contained in the turbine blades and generator housings, injection molded components, electronic circuitry, and other components. Other items contributing to our cost of sales are the direct assembly labor and manufactured overhead from our component suppliers. Overall, we currently expect our cost of sales per unit to decrease as we ramp production lots in the future to meet the product demands from our customers.

Gross Profit

Gross profit is affected by numerous factors, including our average selling prices, distributor discounts, foreign exchange rates, and our manufacturing costs. Another factor impacting gross profits is the ramp of production going forward. As a result of the above, gross profits may vary from quarter to quarter and year to year.

Research and Development.

Research and development expense consists primarily of salaries and personnel-related costs and the cost of products, materials and outside services used in our process and product research and development activities.

Selling, General and Administrative

Selling, general and administrative expense consists primarily of salaries and other personnel-related costs, professional fees, insurance costs, travel expense, other selling expenses as well as share based compensation expense relating to stock options. We expect these expenses to increase in the near term, both in absolute dollars and as a percentage of net sales, in order to support the growth of our business as we expand our sales and marketing efforts, improve our information processes and systems and implement the financial reporting, compliance and other infrastructure required by a public company. Over time, we expect selling, general and administrative expense to decline as a percentage of net sales as our net sales increase.

4

WindStream sells its products through distribution channels to reduce the direct sales cost incurred by the Company. In recent months, the Company has signed distribution agreements with Jamaica’s national utility company, Jamaica Public Service, (JPS) for Jamaica and throughout the Caribbean. In Malaysia, the Company has signed a distribution agreement with MY Windstream Energy, Sdn Bhd. In Africa, several agreements have been signed with the following distributors for sales throughout Africa: Suka Wind & Solar Ltd. in Ghana, one of the countries largest solar installers, Senan Liberia, Inc. in Liberia, Africa Energy Limited in Kenya and Viza Networks Limited Tanzania. In Turkey, the distributor is Meytek Group, a large installer of solar systems, and Key City Trading in the Netherlands and B.E.S.T. Ltd. in New Zealand. These are all non-exclusive agreements giving the distributor the right to sell the Company’s products and see in-market success prior to entering into exclusive sales agreements with success-based milestones.

While limiting the cost of sales by WindStream based sales staff there are costs involved in setting up these distribution agreements primarily in travel to vet the distributor and their capabilities. WindStream does require that the Distributor does attend training in the North Vernon facility for assembly and installation of the Company’s products.

Other Expenses

Interest expense, net of amounts capitalized, is incurred on various debt financings as well as the amount recorded for the derivative liability associated with convertible notes and warrants. Any interest income earned on our cash, cash equivalents and marketable securities is netted in other expenses, as it is immaterial.

Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, intangible assets, income taxes, warranty obligations, marketable securities valuation, derivative financial instrument valuation, end-of-life collection and recycling, contingencies and litigation and share based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

5

Recent Developments:

● Malaysia – Purchase order received for pilot installation in an Eco-Housing development.  Project scope 800 homes when fully deployed

● The Company has commissioned the world’s largest hybrid renewable energy project on the roof of the prominent law firm Myers, Fletcher & Gordon in Kingston, Jamaica. A video of the installation can be seen here: www.windstream-inc.com/installations/myers-fletcher-gordon.

● The Company has established an entity, WindStream Energy Technologies, India Pvt. Ltd. to facilitate manufacturing and sales throughout India and South Asia. In July 2014, the India office opened in Banjara Hills, Hyderabad India.

● The Company has secured an increase in its working capital line of credit from GBC International Bank.  The line of credit is now a revolving line up to $2 Million dollars.

● Jamaica Public Service (JPS) has issued a new purchase order to the Company for greater than $8 million dollars for continued rollout of the Company’s products bringing the total to over $22 million dollars.

● ACC Limited, South Asia’s largest cement manufacturer has agreed to an 8. PILOT APPROVED. 2-3 MW’s deployment of SolarMills on the 12 ACC sites are now being planned for commercial deployment

Results of Operations for the Three Months Ended June 30, 2014 and 2013:

	Three Months Ended
	June 30, 2014			June 30, 2013
Sales	$	214,363		$	198,874
Gross Profit (Loss)	$	(59,820	)	$	(3,989	)
Research and Development Expenses	$	13,878		$	177,375
Write down of Inventory	$	111,000		$	—
General and Administrative Expenses	$	831,689		$	1,744,167
Operating Expenses	$	956,567		$	1,921,542
Other Income (Expense)	$	(250,866	)	$	(92,470	)
Net Loss	$	(1,267,253	)	$	(2,018,001	)

For the three months ended June 30, 2014 and 2013, the Company reported a net loss of $1,267,253 and $2,018,001, respectively. The change in net loss between the three months ended June 30, 2014 and 2013 was primarily attributable to a slightly higher level of sales during a period of greater manufacturing activities, and thus greater costs, as well as increases in such expenses as wages and salaries, professional fees, product development and travel and entertainment expenses associated with the Company’s efforts to increase sales and improve production processes in 2014. The three months ended 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014.

Sales - Net sales for the three months ended June 30, 2014, were $214,363, compared to $198,874 for the three months ended June 30, 2013. The increase in sales is due to the efforts of the Company’s sales force in this quarter to focus on international customers.

Gross Profit/(Loss) - During the three months ended June 30, 2014, our gross loss as a percentage of sales was 27.9%, compared to a gross loss as a percentage of sales of 2% for the three months ended June 30, 2013. This decrease in gross profit percentage is primarily attributable to increased manufacturing costs, labor and overheads, during a period of lower sales. The Company has a positive gross margin on the cost of materials only compared to sales.

Operating Expenses –

Research and Development - Research and Development for the three months ended June 30, 2014, were $13,878, as compared to $177,375 for the three months ended June 30, 2013. The change is primarily attributable to the decrease of development activities as the Company concentrates on increasing sales of the Company’s existing products.

Write down of Inventory - During the three months ended June 30, 2014, the Company evaluated its inventory and wrote down inventory by approximately $111,000, which has been included in the accompanying condensed consolidated statements of operations. There was no such writedown in 2013.

6

General and Administrative Expenses - General and Administrative for the three months ended June 30, 2014, were $831,689, as compared to $1,744,167 for the three months ended June 30, 2013. The three months ended June 30, 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014. The increase, that is the change in expenses without the stock compensation expense in 2013, is attributable to the increases in such expenses as wages and salaries, professional fees, marketing, product development and travel and entertainment expenses associated with the Company’s efforts to increase sales and improve production processes in 2014.

Total Operating expenses for the three months ended June 30, 2014 were $956,567, as compared to $1,921,542 for the three months ended June 30, 2013. 

We anticipate that as our operations increase our research and development expenses may increase because we believe that maintaining state of the art products is a key to our continued success, however, we believe that such expenses will constitute a lower percentage of our operating budget as much of our initial development efforts have been completed. We expect to achieve economies of scale in our general and administrative expenses as our operations increase as much our administrative expenses are fixed costs, such as salaries of key personnel and rent. As a result, while we may need to hire additional personnel as operations increase, we believe that the increases in general and administrative expenses will be at a lower rate than the increase in revenues.

Other Income (Expense) - Other income (expense) for the three months ended June 30, 2014 was ($250,866), as compared to ($92,470) for the three months ended June 30, 2013. The increase is primarily attributable to the amortization of the debt discount and the amortization of deferred financing costs, totaling approximately $158,000, which are included in interest expense for the three months ended June 30, 2014, but started during the second quarter of 2013 and increased borrowings, and related interest costs, under the Company’s line of credit with the Export Import Bank in 2013 which started towards the end of the first quarter of 2013.

Results of Operations for the three months ended June 30, 2014 and 2013, Domestic

Sales - Net sales for the three months ended June 30, 2014, in the domestic segment were $0, compared to $3,104 for the three months ended June 30, 2013. The absence of domestic sales is due to the success of the Company’s efforts to obtain additional international customers in 2014 and 2013.

Cost of sales - During three months ended June 30, 2014, cost of sales in the domestic segment were $0 compared to $3,166 for the three months ended June 30, 2013. The dollars are lower due to reduced domestic sales.

Results of Operations for the three months ended June 30, 2014 and 2013, International

Sales - Net sales for the three months ended June 30, 2014, in the international segment were $214,363, compared to $195,770 for the three months ended June 30, 2013. The increase in sales is the result of the Company’s efforts to obtain international customers in 2014 versus 2013 as shown by the JPS orders, for example.

Cost of sales - During three months ended June 30, 2014, cost of sales in the international segment were $274,183 compared to $199,697 for the three months ended June 30, 2013. The dollars are higher due to due the ramping up of production and related costs to produce more products in 2014 compared to 2013.

As a result of the foregoing, for the three months ended June 30, 2014 and 2013, the Company reported a net loss of $1,267,353 and $2,018,001, respectively. The change in net loss between the three months ended June 30, 2014 and 2013 was attributable to lower gross margin dollars on sales, the write down of obsolete inventory and increases in general and administrative expenses due to increased efforts to increase sales. The three months ended June 30, 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014.

7

Results of Operations for the Six Months Ended June 30, 2014 and 2013:

	Six Months Ended
	June 30, 2014			June 30, 2013
Sales	$	452,260		$	555,623
Gross Profit (Loss)	$	(97,330	)	$	125,312
Research and Development Expenses	$	36,451		$	177,375
Inventory	$	111,000		$	—
General and Administrative Expenses	$	1,431,014		$	2,053,363
Operating Expenses	$	1,578,465		$	2,230,738
Other Income (Expense)	$	(382,624	)	$	(131,791	)
Net Loss	$	(2,059,419	)	$	(2,237,217	)

For the six months ended June 30, 2014 and 2013, the Company reported a net loss of $2,059,419 and $2,237,217, respectively. The change in net loss between the six months ended June 30, 2014 and 2013 was primarily attributable to a slightly lower level of sales during a period of greater manufacturing activities, and thus greater costs, as well as increases in such expenses as wages and salaries, professional fees, product development and travel and entertainment expenses associated with the Company’s efforts to increase sales and improve production processes. The six months ended June 30, 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014.

Sales - Net sales for the six months ended June 30, 2014, were $452,260, compared to $555,623 for the six months ended June 30, 2013. The decrease in sales is due to the efforts of the Company’s sales force in this period to focus on larger volume customers for future periods.

Gross Profit/(Loss) - During the six months ended June 30, 2014, our gross loss as a percentage of sales was 21.5%, compared to a gross profit as a percentage of sales of 22.6% for the six months ended June 30, 2013. This decrease in gross profit percentage is primarily attributable to increased manufacturing costs, labor and overheads, during a period of lower sales. The Company has a positive gross margin on the cost of materials only compared to sales.

Operating Expenses –

Research and Development - Research and Development for the six months ended June 30, 2014, were $36,451, as compared to $177,375 for the six months ended June 30, 2013. The change is primarily attributable to the decrease of development activities as the Company concentrates on increasing sales of the Company’s existing products.

Write down of Inventory - During the six months ended June 30, 2014, the Company evaluated its inventory and wrote down inventory by approximately $111,000, which has been included in the accompanying condensed consolidated statements of operations. There was no such writedown in 2013.

8

General and Administrative Expenses – General and Administrative for the six months ended June 30, 2014, were $1,431,014, as compared to $2,053,363 for the six months ended June 30, 2013. The six months ended June 30, 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014. The increase, that is the change in expenses without the stock compensation expense in 2013, is attributable to the increases in such expenses as wages and salaries, professional fees, marketing, product development and travel and entertainment expenses associated with the Company’s efforts to increase sales and improve production processes.

Total Operating expenses for the six months ended June 30, 2014 were $1,578,465, as compared to $2,230,738 for the six months ended June 30, 2013.

We anticipate that as our operations increase our research and development expenses may increase because we believe that maintaining state of the art products is a key to our continued success, however, we believe that such expenses will constitute a lower percentage of our operating budget as much of our initial development efforts have been completed. We expect to achieve economies of scale in our general and administrative expenses as our operations increase as much our administrative expenses are fixed costs, such as salaries of key personnel and rent. As a result, while we may need to hire additional personnel as operations increase, we believe that the increases in general and administrative expenses will be at a lower rate than the increase in revenues.

Other Income (Expense) - Other income (expense) for the six months ended June 30, 2014 was ($382,824), as compared to ($131,791) for the six months ended June 30, 2013. The amortization of the debt discount and the amortization of deferred financing costs, totaling approximately $234,000, which are included in interest expense for the six months ended June 30, 2014, but occurred during only a portion of the six months in 2013 and increased borrowings, and related interest costs, under the Company’s line of credit with the Export Import Bank in 2014 which started towards the end of the first quarter of 2013.

Results of Operations for the six months ended June 30, 2014 and 2013, Domestic

Sales - Net sales for the six months ended June 30, 2014, in the domestic segment were $0, compared to $3,104 for the six months ended June 30, 2013. The decrease in sales is due to the results of the Company’s efforts to obtain international customers in 2014 versus 2013.

Cost of sales - During six months ended June 30, 2014, cost of sales in the domestic segment were $0 compared to $3,166 for the six months ended June 30, 2013. The dollars are lower due to reduced domestic sales.

Results of Operations for the six months ended June 30, 2014 and 2013, International

Sales - Net sales for the six months ended June 30, 2014, in the international segment were $452,260, compared to $552,519 for the six months ended June 30, 2013. The decrease in sales is due to the timing of new orders resulting from the Company’s efforts to obtain international customers in 2014 versus 2013.

Cost of sales - During six months ended June 30, 2014, cost of sales in the international segment were $549,590 compared to $427,145 for the six months ended June 30, 2013. The dollars are higher due to due the ramping up of production and related costs to produce more products in 2014 compared to 2013.

9

As a result of the foregoing, for the six months ended June 30, 2014 and 2013, the Company reported a net loss of $2,059,419 and $2,237,217, respectively. The change in net loss between the six months ended June 30, 2014 and 2013 was attributable to lower gross margin dollars on sales and increases in general and administrative expenses due to increased efforts to increase sales and improve manufacturing processes. The six months ended June 30, 2013 included $1.5 million in stock based compensation paid to several outside parties. There was no such transaction in 2014.

In its audited financial statements as of December 31, 2013 and 2012, the Company was issued an opinion by its auditors that raised substantial doubt about the ability of to continue as a going concern based on the Company’s current financial position. The Company’s ability to achieve and maintain profitability and a positive cash flow is dependent upon our ability to successfully develop and market our products and our ability to generate revenues.

The following table provides selected financial data about the Company as of June 30, 2014 and December 31, 2013. For detailed financial information, see the accompanying financial statements.

	June 30, 2014			December 31, 2013
Cash	$	525,770		$	203,534
Total assets		2,646,614			2,136,688
Total liabilities	$	5,517,237		$	4,349,341
Stockholder deficit	$	(2,870,623	)	$	(2,212,653	)

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at June 30, 2014 compared to December 31, 2013:

	June 30, 2014			December 31, 2013			Increase/(Decrease)
Current Assets	$	2,348,901		$	1,776,758		$	572,143
Current Liabilities	$	4,341,324		$	3,173,428		$	1,167,896
Working Capital	$	(1,992,423	)	$	(1,396,670	)	$	(595,753	)

As of June 30, 2014, we had negative working capital of $1,992,423, which was an increase as compared to negative working capital of $1,396,670 as of December 31, 2013. The increase was due primarily to an increase of debt.

The Company’s working capital revolving line of credit with a bank was extended loan for another twelve months at substantially the same terms but with an increase in the current credit limit from $950,000 to $2,000,000. The outstanding balance as of June 30, 2014 and December 31, 2013 was $946,490, which has been included in the short term debt – third parties in the accompanying condensed consolidated balance sheets.

On April 15, 2014, the Company entered into a note payable for $200,000 with a term of one year and interest accruing at a rate of 8% which is accruing and due in full at the end of the note. At June 30, 2014, the outstanding balance on this note was $200,000.

On June 1, 2014, the Company entered into a subscription agreement with one accredited investor for the issuance of a convertible promissory note in the aggregate principal amount of $400,000, which is convertible into shares of common stock of the Company at $0.40 per share, and a warrant entitling the holder to purchase up to an aggregate of 50,000 of shares of common stock of the Company at $0.40 per share. The warrant has a term of three years and vested immediately. The note bears interest at 12% for the first ninety days of the term and then bears interest at 18% for the next nine months. The note is due in one year. In connection with this transaction, a major shareholder and a related party (the “Pledgor”) signed a pledge and security agreement, which grants a security interest in one million shares of the Company’s common stock owned by the Pledgor.

10

During the six months ended June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 1,754,500 shares of common stock at prices ranging from $0.40 to $0.50 per share, for an aggregate purchase price of $711,800. One investor also received warrants to purchase 100,000 shares of common stock at $0.80 per share. The warrants vested immediately and have a term of three years.

Net cash used in operating activities for the six months ended June 30, 2014 and 2013 was $1,419,554 and $557,967 respectively. The increase in cash used in operating activities was primarily related to the sale of products in the first full year of the Company’s sales activities and the associated increases in related working capital.

Net cash in all investing activities for the six months ended June 30, 2014 and 2013 was $0 and $531 respectively. Company purchased machinery and equipment during the six months ended June 30, 2013.

Net cash obtained through all financing activities for the six months ended June 30, 2014 and 2013 was $1,741,790 and $607,500 respectively. The Company received proceeds from borrowings on the line of credit, short term debt and short term debt from related parties, the proceeds from issuance of convertible debt and the issuance of common stock in the six months ended June 30, 2014 and borrowings on the line of credit, proceeds from convertible debt and short term debt from related parties in the six months ended June 30, 2013. The estimated working capital requirement for the next 12 months is $1,000,000 with an estimated burn rate of $100,000 per month. As reflected in the accompanying financial statements, the Company had cash of $525,770 at June 30, 2014.

The ability of the Company to continue its operations is dependent on Management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future if it does not receive the anticipated additional funding. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements.

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

11

Our significant accounting policies are summarized in Note 2 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Principles of Consolidation

The consolidated financial statements include the accounts of WindStream Technologies, Inc. and its two subsidiaries, Windstream Energy Technologies India Private Limited and Windstream Technologies Latin America S.A. All material intercompany balances have been eliminated in consolidation.

Basic and Diluted Net Loss per Share

The Company computes loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using treasury stock method, and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. Common stock equivalents pertaining to the convertible debt, options, warrants and convertible preferred shares were not included in the computation of diluted net loss per common share because the effect would have been anti-dilutive due to the net loss for the three and six months ended June 30, 2014 and 2013, respectively.

Stock Based Payments

We account for share-based awards to employees in accordance with ASC 718 “Stock Compensation”. Under this guidance, stock compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the estimated service period (generally the vesting period) on the straight-line attribute method. Share-based awards to non-employees are accounted for in accordance with ASC 505-50 “Equity”, wherein such awards are expensed over the period in which the related services are rendered.

Deferred Financing Costs

Costs associated with the issuance of debt is capitalized as deferred financing costs and amortized into interest expense using the effective interest method over the life of the related debt. At June 30, 2014 and December 31, 2013, unamortized deferred financing costs incurred totaled $14,321 and $37,529, respectively. Amortization of deferred financing costs, which has been included interest expense, for the three months and six months ended June 30, 2014 and 2013, was approximately $15,000 and $23,000 in 2014 and approximately $7,500 and $15,000 in 2013.

12

Research and Development

Costs incurred in developing the ability to create and manufacture products for sale are included in research and development. Once a product is commercially feasible and starts to sell to third party customers, the classification of such costs as development costs stops and such costs are recorded as costs of production, which is included in cost of goods sold. Research and development costs are expensed when incurred.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party, which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

A summary of contractual debt obligations follows:

			Payments due by period:
			Less than					More than
Contractual Obligations:	Total		one year		1-3 years		3-5 years	5 years
Short term convertible notes payable	$	750,000	$	750,000
Short term debt - related party	$	221,000	$	221,000
Short term debt - third parties, includes:
Line of credit with a bank	$	946,490	$	946,490
Notes payable to various individuals	$	600,000	$	600,000
Total short term debt - third parties	$	1,546,490	$	1,546,490
Notes payable, including interest	$	1,748,593	$	331,940	$	1,416,653

Off Balance Sheet Arrangements:

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

13

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.

The Company is currently engaged in two cases, which do not have a material effect on the Company’s operations. The first is a case between WindStream and a prior vendor that, at one time, supplied components for the Company’s products. As a result of this vendor’s disruption in the Company’s supply chain, the Company has sought out and secured other, more reliable sources of the needed raw materials and has not seen a disruption in its final product output. The second case is a Trademark infringement issue that relates to the Company name, WindStream Technologies and prior use. Both of these cases are being litigated by the Company’s attorneys and are expected to be concluded shortly.

Item 1A. Risk Factors.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Current Report on Form 10K, filed with the SEC on April 11, 2014.

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

During the six months ended June 30, 2014, we have issued the following securities, which were not registered under the Securities Act. Unless otherwise indicated, all of the share issuances described below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for transactions not involving a public offering.

During the six months ended June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 1,754,500 shares of common stock at prices ranging from $0.40 to $0.50 per share, for an aggregate purchase price of $711,800. One investor also received warrants to purchase 100,000 shares of common stock at $0.80 per share. The warrants vested immediately and have a term of three years.

During the six months ended June 30, 2014, four investors converted their notes payable of $200,000 plus accrued interest of approximately $7,500 in aggregate into shares of common stock at $0.25 per share and the Company issued 829,689 common shares to these four investors.

In June 2014, holders of the Company’s warrants exercised warrants, on a cashless exercise basis pursuant to an agreement with the Company and the Company issued approximately 136,000 shares of common stock in a non-cash transaction.

Subsequent to June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 250,000 shares of common stock at a price of $0.40 per share, for an aggregate purchase price of approximately $100,000.

Item 3. Defaults Upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

There is no other information required to be disclosed under this item, which has not been previously disclosed.

14

Item 6. Exhibits.

Exhibit No.	Description
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 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 **
101.CAL	XBRL Taxonomy Extension Calculation Linkbase **
101.DEF	XBRL Taxonomy Extension Definition Linkbase **
101.LAB	XBRL Taxonomy Extension Label Linkbase **
101.PRE	XBRL Taxonomy Extension Presentation Linkbase **

* Filed herewith.

** In accordance with Regulation S-T, the XBRL-related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith and not “filed.”

15

SIGNATURES

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

	WINDSTREAM TECHNOLOGIES, INC.
Date: August 14, 2014	By:	/s/ Daniel Bates
	Name:	Daniel Bates
	Title:	Chief Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer)

16

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Daniel Bates, certify that:

1.	I have reviewed this Form 10-Q of WindStream Technologies, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15 (f) and 15d-15(f)) 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 report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s 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
d)	Disclosed in this report any change 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 annual 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 officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the 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 registrant’s 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 registrant’s internal control over financial reporting.

Date: August 14, 2014	By:	/s/ Daniel Bates
		Daniel Bates
		Principal Executive Officer
		WindStream Technologies, Inc.

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Ryan Keating, certify that:

1.	I have reviewed this Form 10-Q of WindStream Technologies, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15 (f) and 15d-15(f)) 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 report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s 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
d)	Disclosed in this report any change 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 annual 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 officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the 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 registrant’s 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 registrant’s internal control over financial reporting.

Date: August 14, 2014	By:	/s/ Ryan Keating
		Ryan Keating
		Principal Financial Officer
		WindStream Technologies, Inc.

EX-32.1

EXHIBIT 32.1

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

In connection with this Quarterly Report of Windstream Technologies, Inc. (the “Company”), on Form 10-Q for the period ended March 31, 2014, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Daniel Bates, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	Such Quarterly Report on Form 10-Q for the period ended June 30, 2014, 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 such Quarterly Report on Form 10-Q for the period ended June 30, 2014, fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2014	By:	/s/ Daniel Bates
		Daniel Bates
		Principal Executive Officer
		WindStream Technologies, Inc.

EX-32.2

EXHIBIT 32.2

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

In connection with this Quarterly Report of Windstream Technologies, Inc. (the “Company”), on Form 10-Q for the period ended March 31, 2014, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Ryan Keating, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	Such Quarterly Report on Form 10-Q for the period ended June 30, 2014, 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 such Quarterly Report on Form 10-Q for the period ended June 30, 2014, fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2014	By:	/s/ Ryan Keating
		Ryan Keating
		Principal Financial Officer
		WindStream Technologies, Inc.

XML

Property and Equipment - Schedule Depreciation Expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Property, Plant and Equipment [Abstract]
Depreciation Expense	$ 31,000	$ 42,000	$ 62,217	$ 83,692

XML

Segment Information - Schedule of Operating Segments (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Sales	$ 214,363	$ 198,874	$ 452,260	$ 555,623
Cost of goods sold	274,183	202,863	549,590	430,311
Gross profit	(59,820)	(3,989)	(97,330)	125,312
Accounts receivable	417,351		417,351		401,549
Domestic [Member]
Sales		3,104		3,104
Cost of goods sold		3,166		3,166
Gross profit		(62)		(62)
Accounts receivable	28,014		28,014
International [Member]
Sales	214,363	195,770	452,260	552,519
Cost of goods sold	274,183	199,697	549,590	427,145
Gross profit	(59,820)	(3,927)	(97,330)	125,374
Accounts receivable	$ 389,337		$ 389,337

XML

Stock Options - Schedule of Stock Option Activity (Details) (USD $)	3 Months Ended		12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of Shares, Outstanding, Beginning balance	10,160,640	10,110,640
Number of Shares, Granted		50,000
Number of Shares, Outstanding, Ending balance	10,160,640	10,160,640	10,110,640
Weighted average Exercise Price, Outstanding, Beginning balance	$ 0.08	$ 0.08
Weighted average Exercise Price, Granted		$ 0.05
Weighted average Exercise Price, Outstanding, Ending balance	$ 0.08	$ 0.08	$ 0.08
Weight average Contractual Term (years), Outstanding	2 years 6 months	2 years 9 months	3 years 5 months 5 days
Weight average Contractual Term (years), Granted		3 years
Aggregate Intrinsic Value, Outstanding

XML

Income Taxes (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 0		$ 0
Effective tax rate
Interest and penalties related to unrecognized income tax benefits	$ 0		$ 0

XML

Common Stock (Details Narrative) (USD $)	0 Months Ended		1 Months Ended	6 Months Ended
	Jun. 01, 2014	Jun. 01, 2013	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013
Warrants issued for purchase of common stock	50,000	1,600,000
Warrants expiration term		3 years		3 years
Common shares issued upon conversion				136
Conversion of debt				$ 207,500
Convertible debt, price per share	$ 0.40	$ 0.25
Number of common stock issued in a non cash transaction for exercised of warrants			136,000
Four Investors [Member]
Conversion of convertible debt				200,000
Common shares issued upon conversion				829,689
Conversion of debt				7,500
Convertible debt, price per share			$ 0.25	$ 0.25
Warrants [Member]
Common stock price per share				$ 0.80
Warrants expiration term	3 years
Convertible debt, price per share	$ 0.40	$ 0.25
Minimum [Member]
Common stock price per share				$ 0.40
Maximum [Member]
Common stock price per share				$ 0.50
Common Stock [Member]
Issuance of common stock, shares				1,754,500
Aggregate purchase price				$ 711,800
Warrants issued for purchase of common stock				100,000
Warrants expiration term				3 years

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Reverse Merger (Details Narrative) (USD $)

0 Months Ended

Jun. 30, 2014

Dec. 31, 2013

May 22, 2013

May 22, 2013

Common Stock [Member]

May 22, 2013

Preferred Stock [Member]

May 22, 2013

WindStream [Member]

Share exchange agreement, description

1:25.808 basis

Common stock outstanding

86,182,020

83,461,899

24,000,000

955,000

Preferred stock outstanding

581,961

Number of shares exchanged in share exchange agreement

39,665,899

Issued stock for acquisition

24,646,646

15,019,253

Common stock, par value

$ 0.001

$ 0.001

$ 0.001

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consisted of the following as of:

	June 30, 2014		December 31, 2013
Raw Materials	$	768,203	$	517,842
Work in process		287,047		150,503
Finished goods		66,725		278,460
	$	1,121,975	$	946,805

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Stock Options - Schedule of Fair Value of Stock Option (Details) (USD $)	6 Months Ended
	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Market value of stock on grant date	$ 0.05
Risk-free interest rate	0.61%
Dividend Yield	0.00%
Volatility Factor	300.00%
Weighted average expected life	3 years
Expected forfeiture rate	0.00%

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Convertible Note Payable (Details Narrative) (USD $)	0 Months Ended		1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 01, 2014	Jun. 01, 2013 Investor	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Apr. 15, 2014	Dec. 31, 2013
Number of accredited investors		5
Promissory notes to related parties	$ 400,000	$ 550,000				$ 400,000	$ 550,000
Convertible price per share	$ 0.40	$ 0.25
Warrants issued for purchase of common stock	50,000	1,600,000
Warrants expiration term		3 years				3 years
Percentage of Interest rate		8.00%	10.00%	10.00%		10.00%		8.00%
Note expiration period	1 year	1 year
Common stock shares owned for which security interest granted	1,000,000
Fair value of warrants		253,000				48,000
Beneficial conversion feature		275,000
Unamortized debt discount			386,000	386,000		386,000			220,000
Total convertible promissory notes principal amount			750,000	750,000		750,000			550,000
Amortized debt discount for interest expense				158,000	42,000	234,000	42,000
Debt discount related to notes converted to common stock				32,000		64,000
Debt issuance cost						42,000
Common stock warrants issued for consideration of finder's fees						140,000
Issuance of common stock warrant			0.05	0.05		0.05
Combined fair value of warrants and cash amount paid						90,000
Number of common stock issued in a non cash transaction for exercised of warrants			136,000
Deferred financing cost			14,321	14,321		14,321			37,529
Amortization of deferred financing cost				7,500	7,500	23,208	7,512
Write off of the deferred financing cost						8,000
Accrued interest			7,500	7,500		7,500
Interest expense				14,000	17,000	36,000	32,000
Common shares issued upon conversion						136
Convertible Notes Payable [Member]
Interest expense				32,000	63,000	0	0
Four Investors [Member]
Number of accredited investors						4
Convertible price per share			$ 0.25	$ 0.25		$ 0.25
Amortized debt discount for interest expense						64,000
Notes payable, conversion, original debt						200,000
Common shares issued upon conversion						829,689
Warrants [Member]
Convertible price per share	$ 0.40	$ 0.25
Warrants expiration term	3 years
Debt discount	400,000	528,058
Fair value of warrants	42,000
Beneficial conversion feature	$ 358,000
Warrants [Member] | First ninety days of term [Member]
Percentage of Interest rate	12.00%
Warrants [Member] | Next Nine Months of Term [Member]
Percentage of Interest rate	18.00%

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Inventories - Schedule of Inventories (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 768,203	$ 517,842
Work in process	287,047	150,503
Finished goods	66,725	278,460
Inventories	$ 1,121,975	$ 946,805

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Earnings Per Share (Details Narrative)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Potential dilutive securities	0	0

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Stock Options (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014
Options issued to employee, common stock	50,000
Issuance of options to purchase of common stock, price per share	$ 0.05
Option vesting period	3 years
Total remainder of stock compensation expense	$ 260,000
General and Administrative Expense [Member]
Fair value of stock option	$ 2,500

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Inventories

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventories

NOTE 4 – INVENTORIES

Inventories consist of raw materials, work in process and finished goods. Inventory, consisting mostly of raw materials (which principally consist of components) are stated at the lower of cost or market on the first-in, first-out basis, or market. Inventories are classified as current assets.

Inventories consisted of the following as of:

	June 30, 2014		December 31, 2013
Raw Materials	$	768,203	$	517,842
Work in process		287,047		150,503
Finished goods		66,725		278,460
	$	1,121,975	$	946,805

During the three months ended June 30, 2014, the Company evaluated its inventory and wrote down inventory by approximately $111,000, which has been included in the accompanying condensed consolidated statements of operations.

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Note Payable (Details Narrative) (USD $)	1 Months Ended	6 Months Ended		3 Months Ended		6 Months Ended
	Jul. 31, 2011	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Notes Payable [Member]	Jun. 30, 2013 Notes Payable [Member]	Jun. 30, 2014 Notes Payable [Member]	Jun. 30, 2013 Notes Payable [Member]	Jun. 30, 2014 City Of North Vernon [Member].	Jun. 30, 2013 City Of North Vernon [Member].
Note payable	$ 1,400,000
Percentage of accrued interest rate	5.50%
Debt instrument, maturity date	Aug. 01, 2016
Notes payable, outstanding		1,350,000	1,400,000
Notes, principal payment		1,350,000				50,000
Payments for accrued interest								0	0
Interest expense incurred and accrued on note payable				$ 19,000	$ 19,000	$ 38,000	$ 38,000

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Stock Options (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock Option Activity

Stock option activity is presented in the table below:

	Number of Shares		Weighted average Exercise Price		Weight average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		10,110,640	$	0.08		3.43		—
Granted		50,000		0.05		3.00		—
Outstanding at March 31, 2014		10,160,640		0.08		2.75		—
Granted		—		—		—		—
Outstanding at June 30, 2014		10,160,640	$	0.08		2.50		—

Schedule of Stock Compensation Expense

The Company recognized stock compensation expense as follows:

Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
$	39,898	$	39,899	$	82,228	$	79,796

Schedule of Fair Value of Stock Option

The fair value of the options granted during the various periods was estimated at the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	2014
Year Options were granted
Market value of stock on grant date	$	.05
Risk-free interest rate		.61	%
Dividend Yield		0	%
Volatility Factor		300	%
Weighted average expected life		3 years
Expected forfeiture rate		0	%

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Note Payable (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Schedule of Principal and Interest Payments

Principal and interest payments are expected to be paid in each fiscal year follows at June 30, 2014:

	Principal		Interest		Total
2014	$	174,087	$	157,853	$	331,940
2015		107,838		126,464		234,302
2016		1,068,075		114,276		1,182,351
	$	1,350,000	$	398,593	$	1,748,593

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Subsequent Events (Details Narrative) (Subsequent Event [Member], Accredited Investors [Member], USD $)	6 Months Ended
	Jun. 30, 2014
Subsequent Event [Member] | Accredited Investors [Member]
Number of shares issuable to accredited investors, shares	250,000
Share issuance range, per share	$ 0.40
Number of shares issuable to accredited investors, value	$ 100,000

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Note Payable - Schedule of Principal and Interest Payments (Details) (USD $)	6 Months Ended
	Jun. 30, 2014
Notes payable, Principal	$ 1,350,000
Notes payable, interest	398,593
Notes payable, total	1,748,593
2014 [Member]
Notes payable, Principal	174,087
Notes payable, interest	157,853
Notes payable, total	331,940
2015 [Member]
Notes payable, Principal	107,838
Notes payable, interest	126,464
Notes payable, total	234,302
2016 [Member]
Notes payable, Principal	1,068,075
Notes payable, interest	114,276
Notes payable, total	$ 1,182,351

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Net Income (Loss) Per Share

The following table sets for the computation of basic and diluted net income (loss) per share:

	For the			For the			For the			For the
	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Net loss attributable to common stockholders	$	(1,267,253	)	$	(2,018,001	)	$	(2,059,419	)	$	(2,237,217	)
Basic weighted average outstanding shares of common stock		84,363,741			43,056,767			84,417,935			33,851,706
Dilutive effect of common stock equivalents		—			—			—			—
Dilutive weighted average common stock equivalents		84,363,741			43,056,767			84,417,935			33,851,706
Net loss per share of voting and nonvoting common stock Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.02	)	$	(0.07	)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of Operating Segments

Results of the operating segments are as follows:

Three months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	214,363		$	214,363
Cost of goods sold		—		274,183			274,183
Gross profit	$	—	$	(59,820	)	$	(59,820	)
Accounts receivable	$	28,014	$	389,337		$	417,351

Three months ended June 30, 2013:

	Domestic		International			Total
Sales	$	3,104	$	195,770		$	198,874
Cost of goods sold		3,166		199,697			202,863
Gross profit	$	(62)	$	(3,927	)	$	(3,989	)

Six months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	452,260		$	452,260
Cost of goods sold		—		549,590			549,590
Gross profit	$	—	$	(97,330	)	$	(97,330	)

Six months ended June 30, 2013:

	Domestic			International		Total
Sales	$	3,104		$	552,519	$	555,623
Cost of goods sold		3,166			427,145		430,311
Gross profit	$	(62	)	$	125,374	$	125,312

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Accounts Receivable

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Accounts Receivables

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of:

	June 30, 2014		December 31, 2013
Accounts Receivable – EXIM insured	$	389,337	$	379,195
Accounts Receivable – not insured	$	28,014	$	22,354
	$	417,351	$	401,549

Under the terms of a revolving line of credit agreement with the Export Import Bank as discussed in Note 7, 95% of customer’s outstanding balances under the terms of the Export Import Bank are guaranteed by the Export Import Bank, an agency of the United States government.

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Basis of Presentation and Nature of Organization (Details Narrative) (USD $)						3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Oct. 26, 2013	Jun. 30, 2014 Two And Four Customers [Member]	Dec. 31, 2013 Two And Four Customers [Member]	Jun. 30, 2014 One Customer [Member]	Jun. 30, 2013 One Customer [Member]	Jun. 30, 2014 One And Two Customers [Member]	Jun. 30, 2013 One And Two Customers [Member]	Jun. 30, 2014 Three Vendors [Member]	Jun. 30, 2013 Three Vendors [Member]	Jun. 30, 2014 Three Vendors [Member]	Jun. 30, 2013 Three Vendors [Member]
Insurance policy limit	$ 4,000,000
Percentage of formed owned subsidiary		100.00%	99.90%
Percentage of outstanding accounts receivable				93.00%	94.00%
Percentage of revenue from customers						92.00%	98.00%	93.00%	87.00%
Percentage of cost of goods sold during period										50.00%	57.00%	41.00%	55.00%
Accumulated deficit	$ 12,540,091	$ 10,480,672

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Accrued Liabilities - Schedule of Accrued Expenses (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Payables and Accruals [Abstract]
Accrued interest	$ 242,257	$ 162,214
Accrued payroll and other (liabilities)	481,206	477,467
Accrued warranty	63,000	63,000
Customer deposits	81,922	25,907
Deposit for future fundings	50,000	50,000
Accrued property taxes	8,120	10,750
Total	$ 926,505	$ 789,338

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Earnings Per Share - Schedule of Computation of Basic and Diluted Net Income (Loss) Per Share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net loss attributable to common stockholders	$ (1,267,253)	$ (2,018,001)	$ (2,059,419)	$ (2,237,217)
Basic weighted average outstanding shares of common stock	84,363,741	43,056,767	84,417,935	33,851,706
Dilutive effect of common stock equivalents
Dilutive weighted average common stock equivalents	84,363,741	43,056,767	84,417,935	33,851,706
Net loss per share of voting and nonvoting common stock Basic and Diluted	$ (0.02)	$ (0.05)	$ (0.02)	$ (0.07)

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Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
CURRENT ASSETS
Cash	$ 525,770	$ 203,534
Accounts receivable	417,351	401,549
Inventories	1,121,975	946,805
Prepaid expenses	269,484	187,341
Deferred financing costs	14,321	37,529
TOTAL CURRENT ASSETS	2,348,901	1,776,758
Property and equipment, net of accumulated depreciation	290,213	352,430
OTHER ASSETS
Deposits	7,500	7,500
TOTAL ASSETS	2,646,614	2,136,688
CURRENT LIABILITIES
Accounts payable	1,109,707	742,482
Accrued liabilities	926,505	789,338
Short Term Convertible Notes Payable, net of discount of $386,465 and $219,979, respectively	363,535	330,021
Short term debt - related parties	221,000	187,500
Short term debt - third parties	1,546,490	900,000
Current maturities of note payable	174,087	224,087
TOTAL CURRENT LIABILITIES	4,341,324	3,173,428
LONG TERM LIABILITY
Note payable, non-current	1,175,913	1,175,913
TOTAL LIABILITIES	5,517,237	4,349,341
STOCKHOLDERS' DEFICIT
Preferred stock, no par value, unlimited shares authorized, no shares issued and outstanding.
Common stock; $0.001 par value; unlimited shares authorized; 86,182,020 and 83,461,899 shares issued and outstanding, respectively	86,182	83,462
Additional paid in capital	9,583,286	8,184,557
Accumulated deficit	(12,540,091)	(10,480,672)
TOTAL STOCKHOLDERS' DEFICIT	(2,870,623)	(2,212,653)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 2,646,614	$ 2,136,688

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Related Party Transaction (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Apr. 15, 2014	Dec. 31, 2013	Jun. 01, 2013
Related Party Transactions [Abstract]
Due to president for expenses paid by himself	$ 0			$ 0
Advances from president for fund operations	50,000	62,000
Repayment of advances received from president	16,500	27,500
Short term debt to related parties	$ 221,000			$ 187,500
Interest accrued percentage	10.00%		8.00%		8.00%

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Basis of Presentation and Nature of Organization

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation and Nature of Organization

NOTE 1 – BASIS OF PRESENTATION AND NATURE OF ORGANIZATION

Organization

The Company is engaged in the development and commercialization of wind driven electrical generation. The Company’s facilities are located in North Vernon, Indiana. The accompanying consolidated financial statements of WindStream Technologies Inc. (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and expressed in U.S. dollars. The Company’s fiscal year end is December 31.

On March 24, 2014, Windaus Global Energy, Inc. filed an Articles of Amendment with the Secretary of State of the State of Wyoming effecting a name change of Windaus Global Energy, Inc. to WindStream Technologies, Inc. (the “Name Change”). Windaus Global Energy, Inc. has notified the Financial Industry Regulatory Authority (“FINRA”) of the Name Change and a new trading symbol, “WSTI” was assigned effective March 27, 2014. The new CUSIP number for the Company’s common stock is 97382J102.

On October 26, 2013, the Company formed a 99.9% owned subsidiary company, in India, WindStream Energy Technologies India Private Limited, to perform various commercial activities including reselling, manufacturing, repairing, importing, exporting various types renewable energy sources including turbines, windmills, solar-wind hybrids and other devices. A Board of Directors was established consisting of the Chief Executive Officer of the Company and an Indian national. In July 2014, an office had been opened, but operations had not commenced as of June 30, 2014.

In December 2013, the Company filed documents to incorporate a 100% owned subsidiary in Peru, Windstream Technologies Latin America S.A (“the Peru subsidiary”). The Peru subsidiary has appointed a temporary board of directors as required by local regulation, but the Peru subsidiary has had no operations, has entered into no contracts, opened no bank accounts and has not begun any business activity. As of June 30, 2014, operations have not yet commenced.

Basis of Presentation

The accompanying unaudited interim financial statements of WindStream Technologies, Inc. and Subsidiaries (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K originally filed with the SEC on April 11, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.

Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company’s financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Consolidations

The consolidated financial statements include the accounts of WindStream Technologies, Inc., WindStream Energy Technologies India Private Limited and Windstream Technologies Latin America S. A. All material intercompany balances have been eliminated in consolidation.

Concentration of Credit Risk

The Company sells primarily to companies and governmental entities across the globe. Receivables arising from those sales domestically are not collateralized; however, credit risk is minimized by continuing to diversify the customer base. International sales typically take place under the auspices of the Export Import Bank, a U.S. government entity, and are guaranteed by that entity under the terms of an insurance policy with a limit of $4 million. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of the specific customers, historical trends and other information.

As of June 30, 2014 and December 31, 2013, two and four customers represented 93% and 94% of outstanding accounts receivable balances, respectively. For the three months ended June 30, 2014 and 2013, one customer represented approximately 92% and 98% of revenue, respectively. For the six months ended June 30, 2014 and 2013, one and two customers represented approximately 93% and 87% of revenue, respectively.

For the three months ended June 30, 2014 and 2013, three vendors represented approximately 50% and 57% of total cost of goods sold, respectively. For the six months ended June 30, 2014 and 2013, three vendors represented approximately 41% and 55% of total cost of goods sold, respectively.

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

The Company had an accumulated deficit of approximately $12,540,000 and $10,481,000 at June 30, 2014 and December 31, 2013, respectively, and has a history of recurring net losses and working capital deficits. These matters among others raise substantial doubt about our ability to continue as a going concern.

While the Company is attempting to increase operations and generate additional revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. The Company will continue to pursue additional equity and/or debt financing while managing cash flows from operations in an effort to provide funds to meet its obligations on a timely basis and to support future business development. There is no assurance that these efforts will be successful. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise the additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plans and generate additional revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Segment Information

The Company operates in two segments in accordance with accounting guidance FASB ASC Topic 280, Segment Reporting. Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. See additional discussion at Note 15.

Recently Adopted Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

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Accounts Receivable - Schedule of Accounts Receivable by Major Categories (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Accounts receivable	$ 417,351	$ 401,549
Accounts Receivable - EXIM Insured [Member]
Accounts receivable	389,337	379,195
Accounts Receivable - Not Insured [Member]
Accounts receivable	$ 28,014	$ 22,354

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

NOTE 17 – SUBSEQUENT EVENTS

Subsequent to June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 250,000 shares of common stock at a price of $0.40 per share, for an aggregate purchase price of approximately $100,000.

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Inventories (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Inventory Disclosure [Abstract]
Write down of inventory	$ 111,000		$ 111,000

XML

Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Schedule of Accounts Receivable by Major Categories

Accounts receivable consisted of the following as of:

	June 30, 2014		December 31, 2013
Accounts Receivable – EXIM insured	$	389,337	$	379,195
Accounts Receivable – not insured	$	28,014	$	22,354
	$	417,351	$	401,549

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Reverse Merger

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Reverse Merger

NOTE 2 – REVERSE MERGER

Effective May 22, 2013, Windaus Global Energy, Inc. entered into a Share Exchange Agreement with WindStream Technologies, Inc., pursuant to which, the Company agreed to exchange the outstanding common and preferred stock of WindStream held by the WindStream Shareholders for shares of common stock of the Company on a 1:25.808 basis. At the Closing, there were approximately 955,000 shares of WindStream common stock and 581,961 shares of WindStream preferred stock outstanding. Pursuant to the Share Exchange Agreement, the shares of WindStream common stock and preferred stock were exchanged for 39,665,899 (24,646,646 for the WindStream common shares and 15,019,253 for the WindStream preferred shares) new shares of the Company’s common stock, par value of $0.001 per share. At the closing of the agreement, Windaus Global Energy, Inc. had approximately 24,000,000 shares of common stock issued outstanding and no preferred stock. The Company has retroactively restated the common shares outstanding and weighted average shares outstanding for prior years pursuant to the reverse merger share exchange ratio of 1:25.808.

For accounting purposes, this transaction is being accounted for as a reverse merger and has been treated as a recapitalization of Windaus Global Energy, Inc., with WindStream Technologies, Inc. considered the accounting acquirer, and the financial statements of the accounting acquirer became the financial statements of the registrant. The Company did not recognize goodwill or any intangible assets in connection with the transaction. The 39,665,899 shares issued to the shareholder of WindStream Technologies, Inc., and its designees in conjunction with the share exchange transaction have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Short term convertible notes payable, discount	$ 386,465	$ 219,979
Preferred stock, par value
Preferred stock, shares authorized
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized
Common stock, shares issued	86,182,020	83,461,899
Common stock, shares outstanding	86,182,020	83,461,899

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Stock Options

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options

NOTE 12 – STOCK OPTIONS

During the six months ended June 30, 2014, the Company issued options to an employee, which allowed the employee to purchase 50,000 shares of the common stock at .05 per share. The options vest immediately and have a term of three years. These options have a fair value of approximately $2,500, which was calculated using the Black-Scholes option pricing model, which has been included in compensation expense during the three and six months ended June 30, 2014 and has been included in general and administrative expenses in the accompanying consolidated statement of operations for the three and six months ended June 30, 2014.

Stock option activity is presented in the table below:

	Number of Shares		Weighted average Exercise Price		Weight average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		10,110,640	$	0.08		3.43		—
Granted		50,000		0.05		3.00		—
Outstanding at March 31, 2014		10,160,640		0.08		2.75		—
Granted		—		—		—		—
Outstanding at June 30, 2014		10,160,640	$	0.08		2.50		—

The Company recognized stock compensation expense as follows:

Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
$	39,898	$	39,899	$	82,228	$	79,796

The total remainder of stock compensation expense to be recognized through the vesting period of the above options, at June 30, 2014, will be approximately $260,000.

The fair value of the options granted during the various periods was estimated at the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	2014
Year Options were granted
Market value of stock on grant date	$	.05
Risk-free interest rate		.61	%
Dividend Yield		0	%
Volatility Factor		300	%
Weighted average expected life		3 years
Expected forfeiture rate		0	%

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 09, 2014
Document And Entity Information
Entity Registrant Name	Windstream Technologies, Inc.
Entity Central Index Key	0001439133
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		86,432,020
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Legal

The Company is currently engaged in two cases, which are not expected to have a material effect on the Company’s operations. The first is a case between WindStream and a prior vendor that, at one time, supplied components for the Company’s products. As a result of this vendor’s disruption in the Company’s supply chain the Company has sought out and secured other, more reliable sources for the needed raw materials and has not seen a disruption in its final product output. The second case is a Trademark infringement issue that relates to the Company name, WindStream Technologies and prior use. Both of these cases are being, litigated by the Company’s attorneys and expect to be concluded shortly. While incapable of estimation, in the opinion of management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Leases

The Company leased various facilities under a non-cancelable operating lease, which expired on September 30, 2013. The current minimum monthly rental payment is $4,750 plus various expenses incidental to use of the property. The Company has an option to extend the lease for one twelve month period at slightly higher monthly rent. The Company is currently in discussions with the landlord regarding a potential extension or amendment to the existing lease, but nothing has been drafted or formalized at this point in time.

The Company also leased a research facility in New Albany, Indiana under a sixty-five month lease that was to expire on March 30, 2015. The Company evaluated the lease under FASB ASC 840-20 “Operating Leases” and notes that the lease qualifies as an escalating lease. Therefore, rent expense was calculated on a straight-line basis, and was determined to be $3,124 per month. In May 2013, the landlord terminated the lease and the company moved out of the related space. All past and future rent unpaid obligations under the lease were forgiven. The Company’s deferred rent liability at June 30, 2014 and 2013 was $0 and $0, respectively.

Rent expense for the three months and six months ended June 30, 2014 and 2013 was $18,219 and $37,467 in 2014 and $13,530 and $51,562 in 2013, respectively.

Sales

During the second quarter of 2014, the Company received two signed purchase orders from one customer, Jamaica’s National Utility company, Jamaica Public Service Co., for the delivery of the Company’s clean energy products as well as related energy storage, back-up emergency power equipment and custom energy monitoring, data collection and system analysis over the next eighteen to twenty four months. The purchase orders contain the Company’s customary terms regarding payment terms, return of products and return of products and are consistent with the Company’s terms with other customers.

Sales and Distribution Agreements

In the ordinary course of business, the Company enters into sales and distribution agreements with various parties in defined geographic areas around the world. The agreements are usually non-exclusive and contain general commercial terms, but no specific financial terms. It is the Company’s practice that such agreements do not contain performance related terms or favorable payment terms. These agreements are usually cancellable with written notice by either party and do not have terms greater than one year.

Investment Advisory Services

On April 1, 2014, the Company entered into an agreement with an investment banking firm which will provide advisory services in the area of corporate development, corporate finance and/or capital placement transactions. The agreement will expire twenty four months from the date the agreement was signed or the mutual written agreement of the Company and the investment banker. The Agreement specifies that all fees be on a “success” basis. If no debt or equity transaction is completed, the Company has no obligation under the terms of this agreement.

In the event of a successful transaction, the investment banking firm will earn fees based on a percentage of the aggregate consideration for an equity transaction as follows:

● 5% for Aggregate Consideration of less than USD $10,000,000, plus,

● 4% For Aggregate Consideration between USD $10,000,001 and USD $25,000,000, plus

● 3% For Aggregate Consideration between USD $25,000,001 and USD $50,000,000, plus

● 2% For Aggregate Consideration between USD $50,000,001 and USD $75,000,000, plus

● 1% For Aggregate Consideration above USD $75,000,001.

To date, no transaction has been consummated.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Statement [Abstract]
SALES	$ 214,363	$ 198,874	$ 452,260	$ 555,623
COST OF GOODS SOLD	274,183	202,863	549,590	430,311
GROSS (LOSS) PROFIT	(59,820)	(3,989)	(97,330)	125,312
OPERATING EXPENSES:
Research and development	13,878	177,375	36,451	177,375
Write down of inventory	111,000		111,000
General and administrative expenses	831,689	1,744,167	1,431,014	2,053,363
TOTAL OPERATING EXPENSES	956,567	1,921,542	1,578,465	2,230,738
LOSS FROM OPERATIONS	(1,016,387)	(1,925,531)	(1,675,795)	(2,105,426)
OTHER INCOME (EXPENSE)
Other expense	(800)	(800)	(800)	(800)
Interest expense, net	(250,066)	(91,670)	(382,824)	(130,991)
TOTAL OTHER INCOME (EXPENSE)	(250,866)	(92,470)	(383,624)	(131,791)
NET LOSS	$ (1,267,253)	$ (2,018,001)	$ (2,059,419)	$ (2,237,217)
Net Loss Per Share - Basic and Diluted	$ (0.02)	$ (0.05)	$ (0.02)	$ (0.07)
Weighted Average Shares Outstanding - Basic and Diluted	84,363,741	43,056,767	84,417,935	33,851,706

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Short Term Debt-Third Parties

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Short Term Debt-Third Parties

NOTE 7 – SHORT TERM DEBT – THIRD PARTIES

On February 25, 2013, the Company entered into a working capital revolving line of credit with a bank, with a credit limit of $500,000, for use in financing overseas sales of the Company’s products. The Company’s draws under the line are transaction specific and the related receivables are guaranteed by the Export Import Bank, a U.S. government entity under the terms of an insurance policy with a limit of $4 million. Drawdowns on the line are used to meet the working capital needs of the Company to purchase materials and fund the labor and overhead to manufacture specific products for export to specific customers. The line, which accrues interest at a fixed rate of 6.6%, expired in April 26, 2014, was extended until June 26, 2014 at substantially similar terms, and then a commitment to extend the loan for another twelve months at substantially the same terms but with an increase in the current credit limit from $950,000 to $2,000,000 was received. The documents evidencing this renewed loan are currently being drafted.

For the six months ended June 30, 2014, there were total draws on the line of credit of $1,095,000 and repayments of $648,510. The outstanding balance as of June 30, 2014 and December 31, 2013 was $946,490 and $500,000, respectively, which has been included in the short term debt – third parties in the accompanying condensed consolidated balance sheets.

During 2013 and 2012, the Company has entered into other various notes with individuals at interest rates ranging from 5% to 8% and are due on demand. During the three months and six months ended June 30, 2014 and 2013, the Company made no repayments on these various notes. At June 30, 2014, these notes aggregated $400,000 and are included in the short term debt – third parties in the accompanying condensed consolidated balance sheets.

On April 15, 2014, the Company entered into a note payable for $200,000 with a term of one year and interest accruing at a rate of 8% which is accruing and due in full at the end of the note. At June 30, 2014, the outstanding balance on this note was $200,000 and is included in the short term debt – third parties in the accompanying condensed consolidated balance sheet along with the $946,490 line of credit and $400,000 in various notes payable to individuals above for a total of $1,546,490.

Interest expense for the short term debt for the three months and six months ended June 30, 2014 and 2013, was approximately $14,000 and $36,000 in 2014 and $17,000 and $32,000 in 2013, respectively.

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Accrued Liabilities

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Accrued Liabilities

NOTE 6 – ACCRUED LIABILITIES

Accrued expenses consisted of the following as of:

	June 30, 2014		December 31, 2013
Accrued interest	$	242,257	$	162,214
Accrued payroll and other (liabilities)		481,206		477,467
Accrued warranty		63,000		63,000
Customer deposits		81,922		25,907
Deposit for future fundings		50,000		50,000
Accrued property taxes		8,120		10,750
Total	$	926,505	$	789,338

Customer deposits represents monies advanced by customers to secure future orders. Once the orders are invoiced, the liability is credited to the amount due from the customer.

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Basis of Presentation and Nature of Organization (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Organization

Organization

The Company is engaged in the development and commercialization of wind driven electrical generation. The Company’s facilities are located in North Vernon, Indiana. The accompanying consolidated financial statements of WindStream Technologies Inc. (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and expressed in U.S. dollars. The Company’s fiscal year end is December 31.

On March 24, 2014, Windaus Global Energy, Inc. filed an Articles of Amendment with the Secretary of State of the State of Wyoming effecting a name change of Windaus Global Energy, Inc. to WindStream Technologies, Inc. (the “Name Change”). Windaus Global Energy, Inc. has notified the Financial Industry Regulatory Authority (“FINRA”) of the Name Change and a new trading symbol, “WSTI” was assigned effective March 27, 2014. The new CUSIP number for the Company’s common stock is 97382J102.

On October 26, 2013, the Company formed a 99.9% owned subsidiary company, in India, WindStream Energy Technologies India Private Limited, to perform various commercial activities including reselling, manufacturing, repairing, importing, exporting various types renewable energy sources including turbines, windmills, solar-wind hybrids and other devices. A Board of Directors was established consisting of the Chief Executive Officer of the Company and an Indian national. In July 2014, an office had been opened, but operations had not commenced as of June 30, 2014.

In December 2013, the Company filed documents to incorporate a 100% owned subsidiary in Peru, Windstream Technologies Latin America S.A (“the Peru subsidiary”). The Peru subsidiary has appointed a temporary board of directors as required by local regulation, but the Peru subsidiary has had no operations, has entered into no contracts, opened no bank accounts and has not begun any business activity. As of June 30, 2014, operations have not yet commenced.

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim financial statements of WindStream Technologies, Inc. and Subsidiaries (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K originally filed with the SEC on April 11, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company’s financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Consolidations

Consolidations

The consolidated financial statements include the accounts of WindStream Technologies, Inc., WindStream Energy Technologies India Private Limited and Windstream Technologies Latin America S. A. All material intercompany balances have been eliminated in consolidation.

Concentration of Credit Risk

Concentration of Credit Risk

The Company sells primarily to companies and governmental entities across the globe. Receivables arising from those sales domestically are not collateralized; however, credit risk is minimized by continuing to diversify the customer base. International sales typically take place under the auspices of the Export Import Bank, a U.S. government entity, and are guaranteed by that entity under the terms of an insurance policy with a limit of $4 million. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of the specific customers, historical trends and other information.

As of June 30, 2014 and December 31, 2013, two and four customers represented 93% and 94% of outstanding accounts receivable balances, respectively. For the three months ended June 30, 2014 and 2013, one customer represented approximately 92% and 98% of revenue, respectively. For the six months ended June 30, 2014 and 2013, one and two customers represented approximately 93% and 87% of revenue, respectively.

For the three months ended June 30, 2014 and 2013, three vendors represented approximately 50% and 57% of total cost of goods sold, respectively. For the six months ended June 30, 2014 and 2013, three vendors represented approximately 41% and 55% of total cost of goods sold, respectively.

Going Concern

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

The Company had an accumulated deficit of approximately $12,540,000 and $10,481,000 at June 30, 2014 and December 31, 2013, respectively, and has a history of recurring net losses and working capital deficits. These matters among others raise substantial doubt about our ability to continue as a going concern.

While the Company is attempting to increase operations and generate additional revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. The Company will continue to pursue additional equity and/or debt financing while managing cash flows from operations in an effort to provide funds to meet its obligations on a timely basis and to support future business development. There is no assurance that these efforts will be successful. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise the additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plans and generate additional revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Segment Information

Segment Information

The Company operates in two segments in accordance with accounting guidance FASB ASC Topic 280, Segment Reporting. Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. See additional discussion at Note 15.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 14 – EARNINGS PER SHARE

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator denominator of the basic and diluted earnings (loss) per share (EPS) computations.

Basic earnings (loss) per share are computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares are dilutive.

As the Company has net losses, the Company had no potential dilutive securities for the six months ended June 30, 2014 and 2013, as they would be anti-dilutive. Therefore, there is no difference in the basic and dilutive earnings (loss) per share.

The following table sets for the computation of basic and diluted net income (loss) per share:

	For the			For the			For the			For the
	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Net loss attributable to common stockholders	$	(1,267,253	)	$	(2,018,001	)	$	(2,059,419	)	$	(2,237,217	)
Basic weighted average outstanding shares of common stock		84,363,741			43,056,767			84,417,935			33,851,706
Dilutive effect of common stock equivalents		—			—			—			—
Dilutive weighted average common stock equivalents		84,363,741			43,056,767			84,417,935			33,851,706
Net loss per share of voting and nonvoting common stock Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.02	)	$	(0.07	)

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 10 – RELATED PARTY TRANSACTIONS

Expenses Paid by President

From time to time, the President of the Company will pay for expenses on behalf of the Company, which are recorded as expenses in the accompanying consolidated statement of operations and as a liability to the President of the Company under accounts payable - related parties in the accompanying consolidated balance sheet.

As of June 30, 2014 and December 31, 2013, the Company owed $0 to the Company president for expenses incurred on behalf of the Company.

Short Term Debt – Related Parties

During the six months ended June 30, 2014 and 2013, the Company president advanced $50,000 and $62,000, respectively, to the Company to fund operations and the Company repaid $16,500 and $27,500 in 2014 and 2013, respectively.

As of June 30, 2014 and December 31, 2013, the outstanding balance of short-term debt – related parties was $221,000 and $187,500, respectively. The amounts accrue interest at 10% and are due on demand.

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Convertible Notes Payable

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Convertible Notes Payable

NOTE 8 – CONVERTIBLE NOTES PAYABLE

On June 1, 2013, the Company entered into subscriptions agreements with five accredited investors for the issuance of convertible promissory notes in the aggregate principal amount of $550,000, which are convertible into shares of common stock of the Company at $0.25 per share, and warrants entitling the holder to purchase up to an aggregate of 1,600,000 of shares of common stock of the Company at $0.25 per share. The warrants have a term of three years and vested immediately. The notes bear interest at 8% and are due in one year.

On June 1, 2014, the Company entered into a subscription agreement with one accredited investor for the issuance of a convertible promissory note in the aggregate principal amount of $400,000, which is convertible into shares of common stock of the Company at $0.40 per share, and a warrant entitling the holder to purchase up to an aggregate of 50,000 of shares of common stock of the Company at $0.40 per share. The warrant has a term of three years and vested immediately. The note bears interest at 12% for the first ninety days of the term and then bears interest at 18% for the next nine months. The note is due in one year. In connection with this transaction, a major shareholder and a related party (the “Pledgor”) signed a pledge and security agreement, which grants a security interest in one million shares of the Company’s common stock owned by the Pledgor.

The Company evaluated the embedded conversion features within the convertible debt under ASC 815 “Derivatives and Hedging” and determined that neither the embedded conversion feature nor the warrants qualified for derivative accounting. Additionally, the instruments were evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. It was concluded that a beneficial conversion feature existed for the convertible debt due to the relative fair value of the warrants issued with the debt.

The total debt discount recorded on the note with the June 1, 2013 date of issuance was $528,058 (warrant relative fair value of approximately $253,000 and the beneficial conversion feature was approximately $275,000) which are being amortized to interest expense over the term of the note).

The total debt discount recorded on the note with the June 1, 2014 date of issuance was $400,000 (warrant relative fair value of approximately $42,000 and the beneficial conversion feature was approximately $358,000) which are being amortized to interest expense over the term of the note). The warrant and beneficial conversion feature was recorded as additional paid in capital.

The unamortized debt discount balance at June 30, 2014 and December 31, 2013 was approximately $386,000 and $220,000, respectively and is being netted against the total convertible promissory notes principal amount of $750,000 and $550,000, respectively, for presentation in the accompanying condensed balance sheets.

For the three months ended June 30, 2014 and 2013, the Company has amortized approximately $158,000 (including approximately $32,000 of debt discount related to notes converted to common stock, see below) and $42,000 in 2013 to interest expense in the accompanying condensed consolidated statement of operations.

For the six months ended June 30, 2014 and 2013, the Company amortized approximately $234,000 (including approximately $64,000 of debt discount related to notes converted to common stock, see below) in 2014 and $42,000 in 2013 to interest expense in the accompanying condensed consolidated statement of operations.

In connection with one of the five June 2013 debt issuances, the company paid finder’s fees of approximately $42,000 as well as 140,000 common stock warrants at $0.05 per share. The warrants vest immediately and have a three years term. The fair value of the warrants was determined to be approximately $48,000 based on the Black Scholes option pricing model using the same assumption as those used for the warrants above, except the exercise price was $0.05 per share. The combined value of the warrants and cash amounted to approximately $90,000, which was capitalized as a deferred financing cost and is being amortized to interest expense over the life of the notes.

In June 2014, holders of the warrants discussed above exercised warrants, on a cashless exercise basis pursuant to the agreement and the Company issued approximately 136,000 shares of common stock in a non-cash transaction.

As of June 30, 2014 and December 31, 2013, the deferred financing costs had an unamortized balance of approximately of $14,321 and $37,529, respectively.

Amortization of deferred financing costs, which has been included interest expense, for the three months and six months ended June 30, 2014 and 2013, was approximately $7,500 plus approximately $8,000 for the write off of the deferred financing costs associated with the conversion of the warrants discussed above and $23,000 in 2014 and $7,500 and $15,000 in 2013, respectively.

During the six months ended June 30, 2014, four investors converted their notes payable of $200,000 (plus approximately $7,500 in accrued interest) in aggregate into shares of common stock at the conversion price of $0.25 per share resulting in the Company issuing 829,689 shares of common stock to these four investors and amortized approximately $64,000 of the remaining debt discount associated with these notes immediately to interest expense in the accompanying condensed consolidated statement of operations.

Interest expense for the three months ended and six months ended June 30, 2014 and 2013 was approximately $32,000 and $63,000 and $0 and $0, respectively.

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Note Payable

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Note Payable

NOTE 9 – NOTE PAYABLE

In July 2011, the Company entered into a $1,400,000 note agreement with the City of North Vernon, Indiana. Interest accrues at 5.5% and the note matures on August 1, 2016. As of June 30, 2014 and December 31, 2013, the note had an outstanding balance of $1,350,000 and $1,400,000, respectively. The Company made a $50,000 principal payment during the period ended June 30, 2014,

The Company was unable to pay the interest and principal payments due on August 1, 2012 and was in default of such payment. The Company was able to negotiate payment terms with the City of North Vernon, Indiana, which allowed the Company to delay scheduled repayments of the loan.

During the three months and six months ended June 30, 2014 and 2013, the Company made no payments to the City of North Vernon for accrued interest.

Principal and interest payments are expected to be paid in each fiscal year follows at June 30, 2014:

	Principal		Interest		Total
2014	$	174,087	$	157,853	$	331,940
2015		107,838		126,464		234,302
2016		1,068,075		114,276		1,182,351
	$	1,350,000	$	398,593	$	1,748,593

Interest expense incurred and accrued on the note payable was approximately $19,000 and $38,000 for the three months and six months ended June 30, 2014 and approximately $19,000 and $38,000 for the three months and six months ended June 30, 2013, respectively.

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Common Stock

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Common Stock

NOTE 11 – COMMON STOCK

During the six months ended June 30, 2014, the Company entered into subscription agreements with accredited investors for the issuance of 1,754,500 shares of common stock at prices ranging from $0.40 to $0.50 per share, for an aggregate purchase price of $711,800. One investor also received warrants to purchase 100,000 shares of common stock at $0.80 per share. The warrants vested immediately and have a term of three years.

During the six months ended June 30, 2014, four investors converted their notes payable of $200,000 in aggregate plus accrued interest of approximately $7,500 into shares of common stock at the conversion price of $0.25 per share resulting in the Company issuing 829,689 shares of common stock.

In June 2014, holders of the Company’s warrants exercised warrants, on a cashless exercise basis pursuant to an agreement with the Company and the Company issued approximately 136,000 shares of common stock in a non-cash transaction.

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Accounts Receivable (Details Narrative)	6 Months Ended
	Jun. 30, 2014
Receivables [Abstract]
Percentage of debt outstanding under line of credit	95.00%

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Commitments and Contingencies (Details Narrative) (USD $)

3 Months Ended

6 Months Ended

6 Months Ended

Jun. 30, 2014

Investor

Jun. 30, 2013

Jun. 30, 2014

Jun. 30, 2013

Apr. 02, 2014

Apr. 02, 2014

Apr. 02, 2014

Apr. 02, 2014

Apr. 02, 2014

Jun. 30, 2014

New Albany, Indiana [Member]

Non-cancelable operating lease, expiration term

Sep. 30, 2013

Mar. 30, 2015

Monthly rental payment under operating lease

$ 4,750

$ 3,124

Lease term description

extend the lease for one twelve month period at slightly higher monthly rent.

Rent expense was calculated on a straight-line basis.

Lease, term

65 months

Deferred rent liability

0

0

0

0

Rent expense

18,219

13,530

37,467

51,562

Number of signed purchase order

2

Number of customer

1

Percentage of aggregate consideration for equity transaction

5.00%

4.00%

3.00%

2.00%

1.00%

Aggregate consideration for equity transaction, lower limit amount

10,000,001

25,000,001

50,000,001

75,000,001

Aggregate consideration for equity transaction, upper limit amount

$ 10,000,000

$ 25,000,000

$ 50,000,000

$ 75,000,000

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 16 – INCOME TAXES

The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. Income taxes are computed using the asset and liability method in accordance with FASB ASC 740 under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred taxes are measured using provisions of currently enacted tax laws. A valuation allowance against deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. The Company has recorded a full valuation allowance against its net deferred tax assets as it is more likely than not that the benefit of the deferred tax assets will not be recognized in future periods. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates. The Company does not expect any significant unrecognized tax benefits to arise over the next twelve months and is fully reserved.

The Company’s provision for income taxes for continuing operations in interim periods is computed by applying its estimated annual effective rate against its loss before income tax (expense) benefit for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The effective tax rate for the three months and six months ended June 30, 2014 and 2013 was nil.

The Company has not had to accrue any interest and penalties related to unrecognized income tax benefits. However, when or if the situation occurs, the Company will recognize interest and penalties within the income tax expense (benefit) line in the accompanying Condensed Statements of Operations and within the related tax liability line in the Condensed Consolidated Balance Sheets.

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consisted of the following as of:

	June 30, 2014			December 31, 2013
Equipment	$	128,345		$	128,345
Factory equipment		15,800			15,800
Furniture and fixtures		7,888			7,888
Leasehold improvements		64,582			64,582
Tooling		473,893			473,893
Total		690,508			690,508
Less accumulated depreciation		(400,295	)		(338,078	)
Net property, plant and equipment	$	290,213		$	352,430

Schedule Depreciation Expense

Depreciation expense for the periods ended as follows amounted to approximately:

	Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
Depreciation Expense	$	31,000	$	42,000	$	62,000	$	84,000

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Stock Options - Schedule of Stock Compensation Expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock compensation expense	$ 39,898	$ 39,899	$ 82,228	$ 79,796

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Short Term Debt-Third Parties (Details Narrative) (USD $)	0 Months Ended	3 Months Ended		6 Months Ended
	Apr. 15, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 01, 2013	Feb. 25, 2013	Dec. 31, 2012
Line of credit, maximum borrowing capacity								$ 500,000
Insurance policy limit		4,000,000		4,000,000
Percentage of accrued interest								6.60%
Line of credit, expiration date				Jun. 26, 2014
Line of credit withdrawals				1,095,000
Line of credit repayments				648,510
Line of credit outstanding		946,490		946,490		500,000
Short term variable interest rate						5.00%			8.00%
Repayment of notes		0	0	0	0
Short term debt aggregate amount				400,000
Notes payable	200,000	200,000		200,000
Interest rate accrued	8.00%	10.00%		10.00%			8.00%
Notes payable maturity term	1 year
Line of credit facility, total		1,546,490		1,546,490
Interest expense		14,000	17,000	36,000	32,000
Minimum [Member]
Increase in line of credit, maximum borrowing capacity								950,000
Maximum [Member]
Increase in line of credit, maximum borrowing capacity								$ 2,000,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,059,419)	$ (2,237,217)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	62,217	83,692
Interest expense converted into common stock	2,735
Stock option expense	82,228	79,796
Amortization of deferred financing costs	23,208	7,512
Stock based compensation		1,504,200
Write down of inventory	111,000
Amortization of debt discount	233,514	42,071
Changes in operating Assets and Liabilities:
Accounts receivables	(15,802)	(70,073)
Inventory	(286,170)	5,589
Prepaid expenses	(82,144)	16,969
Accounts payable	367,225	(100,602)
Accounts payable related parties		9,447
Accrued liabilities	141,854	227,559
Deferred rent		(61,098)
Deferred revenue		(65,812)
NET CASH USED IN OPERATING ACTIVITIES	(1,419,554)	(557,967)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of fixed assets		(531)
NET CASH USED BY INVESTING ACTIVITIES		(531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash payments on deferred financing costs		(42,000)
Borrowings on line of credit, net	446,490	90,000
Proceeds from short term debt	200,000
Proceeds from short term debt - related parties	50,000	62,000
Payments on short term debt - related parties	(16,500)	(27,500)
Proceeds from issuance of convertible debt	400,000	550,000
Principal payments on long term debt	(50,000)	(25,000)
Net proceeds from issuance of Common Stock and Warrants	711,800
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,741,790	607,500
NET INCREASE (DECREASE) IN CASH	322,236	49,002
CASH, Beginning of Period	203,534	4,022
CASH, End of Period	525,770	53,024
Cash paid during the year for:
Interest	75,470	12,041
Income taxes
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock and paid in capital resulting from non-cash conversion of convertible notes including interest expense and accrued interest	207,500
Debt discount on warrants issued with convertible debt	400,000	528,058
Non-cash conversion of warrants issued for deferred financing to common stock	136
Warrants Issued for deferred financing costs		48,138
Fixed assets purchased on credit		5,686
Reclassification of debt related party debt to short term debt		$ 100,000

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Property and Equipment

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Property and Equipment

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

	June 30, 2014			December 31, 2013
Equipment	$	128,345		$	128,345
Factory equipment		15,800			15,800
Furniture and fixtures		7,888			7,888
Leasehold improvements		64,582			64,582
Tooling		473,893			473,893
Total		690,508			690,508
Less accumulated depreciation		(400,295	)		(338,078	)
Net property, plant and equipment	$	290,213		$	352,430

Depreciation expense for the periods ended as follows amounted to approximately:

	Three months ended June 30, 2014		Three months ended June 30, 2013		Six months ended June 30, 2014		Six months ended June 30, 2013
Depreciation Expense	$	31,000	$	42,000	$	62,000	$	84,000

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Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Schedule of Accrued expenses

Accrued expenses consisted of the following as of:

	June 30, 2014		December 31, 2013
Accrued interest	$	242,257	$	162,214
Accrued payroll and other (liabilities)		481,206		477,467
Accrued warranty		63,000		63,000
Customer deposits		81,922		25,907
Deposit for future fundings		50,000		50,000
Accrued property taxes		8,120		10,750
Total	$	926,505	$	789,338

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Property and Equipment - Schedule of Property and Equipment (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Property, plant and equipment gross	$ 690,508	$ 690,508
Less accumulated depreciation	(400,295)	(338,078)
Net property, plant and equipment	290,213	352,430
Equipment [Member]
Property, plant and equipment gross	128,345	128,345
Factory Equipment [Member]
Property, plant and equipment gross	15,800	15,800
Furniture And Fixtures [Member]
Property, plant and equipment gross	7,888	7,888
Leasehold Improvements [Member]
Property, plant and equipment gross	64,582	64,582
Tooling [Member]
Property, plant and equipment gross	$ 473,893	$ 473,893

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Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

NOTE 15 – SEGMENT INFORMATION

The Company’s operations are classified into the sales of products within the United States and outside the United States. We determined our operating segments in accordance with FASB Topic 280, Segment Reporting. Results of the operating segments are as follows:

Three months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	214,363		$	214,363
Cost of goods sold		—		274,183			274,183
Gross profit	$	—	$	(59,820	)	$	(59,820	)
Accounts receivable	$	28,014	$	389,337		$	417,351

Three months ended June 30, 2013:

	Domestic		International			Total
Sales	$	3,104	$	195,770		$	198,874
Cost of goods sold		3,166		199,697			202,863
Gross profit	$	(62)	$	(3,927	)	$	(3,989	)

Six months ended June 30, 2014:

	Domestic		International			Total
Sales	$	—	$	452,260		$	452,260
Cost of goods sold		—		549,590			549,590
Gross profit	$	—	$	(97,330	)	$	(97,330	)

Six months ended June 30, 2013:

	Domestic			International		Total
Sales	$	3,104		$	552,519	$	555,623
Cost of goods sold		3,166			427,145		430,311
Gross profit	$	(62	)	$	125,374	$	125,312