Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 27-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | STW RESOURCES HOLDING CORP. | |
Entity Central Index Key | 1357838 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 32,345,817 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 | |
Trading Symbol | STWS |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Assets | ||
Cash | $123,629 | |
Accounts receivable, trade, net | 2,212,806 | 3,710,180 |
Accounts receivable from related parties | 519,789 | |
Deferred project costs | 1,629,891 | 821,359 |
Prepaid expenses and other current assets | 210,296 | 344,525 |
Total current assets | 4,052,993 | 5,519,482 |
Property and equipment, net | 1,050,958 | 1,096,640 |
Total Assets | 5,103,951 | 6,616,122 |
Current liabilities | ||
Book overdraft | 123,629 | |
Accounts Payable | 3,902,003 | 4,523,265 |
Payable to related parties: | ||
Black Pearl Energy, LLC | 37,084 | 1,371,305 |
Crown Financial, LLC | 1,039,545 | 2,035,495 |
Accrued compensation - officers | 918,380 | 873,380 |
Current portion of notes payable, net of discounts and loan costs, payable to related parties $1,661,354 and $1,700,394, respectively | 7,900,661 | 5,793,283 |
Sales and payroll taxes payable | 2,834,095 | 2,671,843 |
Insurance premium finance contract payable | 76,151 | 208,271 |
Accrued expenses and interest | 1,986,084 | 1,769,117 |
Deferred revenue | 1,552,615 | 680,000 |
Accrued compensation | 397,485 | 643,777 |
Accrued board compensation | 112,500 | 496,067 |
Fees payable in common stock | 1,479,073 | 2,783,711 |
Stock subscriptions payable | 17,000 | 27,000 |
Derivative liability | 1,636,590 | 802,340 |
Total current liabilities | 24,012,895 | 24,678,864 |
Notes payable, net of discount and current portion | 1,878,430 | 2,825,295 |
Total liabilities | 25,891,325 | 27,504,159 |
Stockholders' deficit | ||
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively | ||
Common stock; $0.001 par value; 191,666,667shares authorized, 31,683,150 and 28,194,953 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively | 31,686 | 28,197 |
Additional paid-in capital | 21,400,210 | 18,383,411 |
Accumulated deficit | -41,950,763 | -39,112,171 |
Total Stockholders' Deficit of STW Resources Holding Corp. | -20,518,867 | -20,700,563 |
Non-controlling interest in subsidiary | -268,507 | -187,474 |
Total Stockholders' Deficit | -20,787,374 | -20,888,037 |
Total Liabilities and Stockholders' Deficit | $5,103,951 | $6,616,122 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current liabilities | ||
Notes payable to related parties | $1,661,354 | $1,700,394 |
Shareholders' equity (deficit) | ||
Preferred stock, par value | $0.00 | |
Preferred stock, authorized shares | 10,000,000 | |
Preferred stock, issued shares | ||
Preferred stock, outstanding shares | ||
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized shares | 191,666,667 | |
Common stock, issued shares | 31,683,150 | 28,194,953 |
Common stock, outstanding shares | 31,683,150 | 28,194,953 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues | ||
Water treatment services | $148,911 | |
Energy and Construction Services revenues | 2,472,363 | 3,560,787 |
Related parties service revenues | 58,127 | 39,992 |
Net revenues | 2,679,401 | 3,600,779 |
Costs of Revenues | 1,880,265 | 3,181,242 |
Gross Profit | 799,136 | 419,537 |
Operating Expenses | ||
Research and Development | 6,125 | 95,490 |
Sales and marketing | 292,321 | 172,508 |
General and administrative | 2,428,825 | 2,129,269 |
Depreciation and amortization | 45,682 | 52,684 |
Total operating expenses | 2,772,953 | 2,449,951 |
Loss from operations | -1,973,817 | -2,030,414 |
Interest expense, $29,884 and $42,719 to related parties, respectively | -1,219,588 | -437,602 |
Change in fair value of derivative liability | 273,780 | 13,273 |
Net Loss | -2,919,625 | -2,454,743 |
Less: Share of net loss of subsidiary attributable to non-controlling interest | -81,033 | -41,569 |
Net Loss of STW Resources Holding Corp. | ($2,838,592) | ($2,413,174) |
Net loss per common share | ($0.09) | ($0.12) |
Weighted average shares outstanding - basic and diluted | 29,977,880 | 20,538,202 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Operations (Parenthetical) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Interest expense, related parties | $29,884 | $42,719 |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statement of Stockholders' Deficit (USD $) | Common Stock | Additional Paid In Capital | Accumulated Deficit | Non-Controlling Interest | Total |
Beginning balance, Amount at Dec. 31, 2014 | $18,383,411 | ($39,112,171) | ($187,474) | ($20,888,037) | |
Shares issued to Employees from Fees Payable in Common Stock, Shares | 1,059,501 | ||||
Shares issued to Employees from Fees Payable in Common Stock, Amount | 1,060 | 872,866 | 873,926 | ||
Shares issued to Consultants from Fees Payable in Common Stock, Shares | 1,104,976 | ||||
Shares issued to Consultants from Fees Payable in Common Stock, Amount | 1,105 | 941,630 | 942,735 | ||
Shares issued as board of director fees, shares | 562,500 | ||||
Shares issued as board of director fees, amount | 563 | 449,437 | 450,000 | ||
Shares issued for subscriptions stock payable, shares | 15,385 | ||||
Shares issued for subscriptions stock payable, amount | 15 | 9,985 | 10,000 | ||
Shares issued upon conversion of notes payable and accrued interest, Shares | 220,835 | ||||
Shares issued upon conversion of notes payable and accrued interest, Amount | 221 | 322,406 | 322,627 | ||
Shares issued in connection with the 2015 Transfer Agreements origination fees, Shares | 525,000 | ||||
Shares issued in connection with the 2015 Transfer Agreements origination fees, Amount | 525 | 420,475 | 421,000 | ||
Net Loss for the period | -2,838,592 | -81,033 | -2,919,625 | ||
Ending Balance, Amount at Mar. 31, 2015 | $31,686 | $21,400,210 | ($41,950,763) | ($268,507) | ($20,787,374) |
Ending Balance, Shares at Mar. 31, 2015 | 31,683,150 |
Condensed_Consolidated_Stateme3
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Cash flows from operating activities | ||
Net Loss of STW Resources Holding Corp | ($2,919,625) | ($2,454,743) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 45,682 | 52,684 |
Change in fair value of derivative liability | -273,780 | -13,273 |
Financing costs of notes payable | 430,377 | 42,592 |
Change in fair value of debt instruments converted to equity | -272,980 | |
Amortization of discount and debt issuance costs | 492,686 | 43,801 |
Share based compensation | 462,221 | 423,683 |
Changes in operating assets and liabilities: | ||
(Increase) Decrease in accounts receivable | 1,497,374 | -896,702 |
(Increase) Decrease in deferred project costs | -808,532 | |
(Increase) Decrease in prepaid expenses and other current assets | 134,229 | -3,709 |
Increase (Decrease) in accounts payable | -1,133,835 | 558,331 |
Increase (Decrease) in sales and payroll taxes payable | 162,252 | 969,460 |
Increase (Decrease) in deferred revenue | 872,615 | |
Increase (Decrease) in accrued expenses and interest | 216,967 | 530,134 |
Increase (Decrease) in accrued compensation | -246,292 | 108,405 |
Increase (Decrease) in accrued board compensation | -66,433 | 168,750 |
Net cash used in operating activities | -1,001,228 | -743,567 |
Cash flows used in investing activities | ||
Purchases of equipment, net of equipment loans | -43,643 | |
Deposits | -14,000 | |
Net cash used in investing activities | -57,643 | |
Cash flows from financing activities | ||
Book overdraft (repayment) | 50,084 | |
Stock subscriptions payable | 130,000 | |
Related party accounts receivables | 837,824 | |
Related party accounts payables, credit facilities, notes, and advances | ||
Increase (Decrease) in insurance premium finance contract payable | -132,120 | |
Proceeds from notes payable | 1,284,000 | 80,000 |
Principal payments of notes payable | -143,281 | -60,698 |
Proceeds from issuance of common stock | 62,500 | |
Debt issuance costs | -131,000 | |
Net cash provided by financing activities | 877,599 | 1,099,710 |
Net decrease/increase in cash | -110,686 | 298,500 |
Cash at beginning of period | 123,629 | 17,301 |
Cash at end of period | 315,801 | |
Supplemental cash flow information: | ||
Cash paid for interest | 83,973 | 11,402 |
Cash paid for income taxes | ||
Non-cash investing and financing activities: | ||
Shares issued from common stock subscriptions payable | 10,000 | |
Fees payable in common stock | 423,683 | |
Value of shares issued to employees as compensation | 873,926 | |
Value of shares issued to consultants | 942,735 | 145,000 |
Value of shares issued as board fees | 450,000 | |
Value of shares issued in connection with extension of notes payable | 67,354 | |
Value of shares issued in payment of accrued PIK interest | 510,769 | |
Value of shares issued upon conversion of notes payable and accrued interest | 322,627 | 660,684 |
Value of conversion feature of JMJ convertible note payable | 50,000 | |
Shares issued for 2015 Transfer Agreement origination fees | 421,000 | |
Subscriptions payable | $150,000 |
Nature_of_the_Business_and_Sig
Nature of the Business and Significant Accounting Policies | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Nature of the Business and Significant Accounting Policies | Basis of presentation | ||||||||||||||||
The accompanying condensed consolidated financial statements of STW Resources Holding Corp (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2015, which are included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. The December 31, 2014 condensed consolidated balance sheet was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. | |||||||||||||||||
History of the Company | |||||||||||||||||
STW Resources Holding Corp. (“STW” or the “Company”, is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas. STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia. STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem. The Company is also evaluating the deployment of water processing technologies in the municipal wastewater and potable water industry. The Company is also involved in the desalination of brackish water and seawater for industrial and municipal use. | |||||||||||||||||
The Company’s operations are located in the United States of America and the principal executive offices are located at 3424 South County Road 1192, Midland, Texas 79706. | |||||||||||||||||
Consolidation policy | |||||||||||||||||
The unaudited condensed consolidated financial statements for the three months ended March 31, 2015, include the accounts of the Company and its wholly owned subsidiaries: STW Water Process & Technologies LLC, STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and its 75% owned subsidiary STW Energy, LLC. The condensed consolidated financial statements as of March 31, 2014, include STW Resources Holding Corp, STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and STW Energy, LLC as the other subsidiaries noted above were not established during the quarterly period ended March 31, 2014. All significant intercompany transactions and balances have been eliminated in consolidation. | |||||||||||||||||
The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting. | |||||||||||||||||
Reclassifications | |||||||||||||||||
Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. The reclassifications as of December 31, 2015, are comprised of a $321,359 increase in deferred project costs, a $321,359 decrease in property and equipment, a $97,121 decrease in deferred loan fees, and a $97,121 increase in loan discounts. | |||||||||||||||||
Non-Controlling interest | |||||||||||||||||
On June 25, 2013, the Company invested in a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2014, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a cumulative net loss attributable to non-controlling interests of $187,474 for the year ended December 31, 2014. During the three month period ended March 31, 2015, a net loss attributable to the non-controlling interest of $81,033 was incurred. As of March 31, 2015, the net deficit interest in the subsidiary held by the non-controlling interest is $268,507. | |||||||||||||||||
Going Concern and Management Plans | |||||||||||||||||
The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $41,950,763 as of March 31, 2015, and as of that date was delinquent in payment of $2,538,350 of sales and payroll taxes. As of March 31, 2015, $3,664,670 of notes payable are in default. Since its inception in January 2008 through December 31, 2014, management has raised equity and debt financing of approximately $20,000,000 to fund operations and provide working capital. The cash resources of the Company are insufficient to meet its planned business objectives without additional financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. | |||||||||||||||||
Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with oil and gas operators and municipal utility districts; and (c) controlling overhead and expenses. | |||||||||||||||||
There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. | |||||||||||||||||
The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. | |||||||||||||||||
Use of Estimates | |||||||||||||||||
Condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long lived assets, the assumptions used to calculate its derivative liabilities, and equity instruments issued for financing and compensation. Actual results could differ from those estimates. | |||||||||||||||||
Accounts Receivable | |||||||||||||||||
Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations. As of March 31, 2015 and December 31, 2014, the allowance for doubtful accounts were $26,015 and $77,211, respectively. | |||||||||||||||||
Loan Discounts | |||||||||||||||||
The Company amortizes loan discounts over the term of the loan using the effective interest method. | |||||||||||||||||
Concentration of Credit Risk | |||||||||||||||||
A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner per institution. At March 31, 2015, there were no account balances per institution that would have exceeded the $250,000 insurance limit. | |||||||||||||||||
The Company anticipates entering into long-term fixed-price contracts for its services with select oil and gas producers and municipal utilities. The Company will control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. | |||||||||||||||||
As of March 31, 2015, three vendors accounted for 11%, 7% and 5% of total accounts payable. During the three months ended March 31, 2015, three vendors accounted for 86% of total purchases. During the three months ended March 31, 2014, one vendor accounted for 70% of total purchases. | |||||||||||||||||
During the three months ended March 31, 2015, three customers accounted for 68%, 8% and 4% of net revenues. As of March 31, 2015, three customers accounted for 31%, 22% and 2% of accounts receivable. During the three months ended March 31, 2014, three customers accounted for 29%, 28% and 19% of net revenues. | |||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||
“Fair value” is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. | |||||||||||||||||
The Company’s financial instruments consist of cash, accounts receivable, notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments. Our derivative liabilities are recorded at fair value (see Note 5). | |||||||||||||||||
We determine the fair value of our financial instruments based on a three-level hierarchy for fair value measurements under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s use of assumptions to external and internal information. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy: | |||||||||||||||||
Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently, we do not have any items classified as Level 1. | |||||||||||||||||
Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, we do not have any items classified as Level 2. | |||||||||||||||||
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment. We use the Black-Scholes-Merton option pricing model (“Black-Scholes”) to determine the fair value of the financial instruments. | |||||||||||||||||
If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level is based upon the lowest level of input that is significant to the fair value measurement. | |||||||||||||||||
Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5). | |||||||||||||||||
Management has used the simplified Black Scholes model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation. | |||||||||||||||||
The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2015 and December 31, 2014. | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Fair value of Derivative Liability at March 31, 2015 | $ | -- | $ | -- | $ | 1,636,590 | $ | 1,636,590 | |||||||||
Fair value of Derivative Liability at December 31, 2014 | $ | -- | $ | -- | $ | 802,340 | $ | 802,340 | |||||||||
Accounting for Derivatives Liabilities | |||||||||||||||||
The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as a derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations in other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification to a liability are recorded at the fair value of the instrument on the reclassification date. | |||||||||||||||||
Certain of the Company’s embedded conversion features on debt, with anti-dilution provisions, and price protection features on outstanding common stock warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using the Black-Scholes model (see Note 5). | |||||||||||||||||
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services | |||||||||||||||||
Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. | |||||||||||||||||
Long-lived Assets and Intangible Assets | |||||||||||||||||
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. | |||||||||||||||||
The Company had no such asset impairments during the three months ending March 31, 2015 or 2014. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets. | |||||||||||||||||
Revenue Recognition | |||||||||||||||||
During the year ended December 31, 2014, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. These MSAs contract the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services. The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the three months ended March 31, 2015, the Company recognized $2,530,490 of revenues from these services contracts, which included $58,127 revenues from related parties. During the three months ending March 31, 2014 the Company realized revenue of $3,600,779 from services contracts, which included $39,992 of the service revenue was from related parties. | |||||||||||||||||
Business Segments | |||||||||||||||||
The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note 9. | |||||||||||||||||
Income Taxes | |||||||||||||||||
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. | |||||||||||||||||
The Company maintains a valuation allowance with respect to deferred tax assets. The Company established a valuation allowance based upon the potential likelihood of realizing the deferred tax asset in the future. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any reduction in the valuation allowance will be included in income in the year of the change in estimate. | |||||||||||||||||
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at March 31, 2015 and December 31, 2014, respectively. | |||||||||||||||||
Common Stock and Common Stock Warrants Issued to Employees | |||||||||||||||||
The Company uses the fair value recognition provision of ASC 718, “Stock Compensation,” which requires the Company to recognize the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date. | |||||||||||||||||
At March 31, 2015 and December 31, 2014, the Company had no grants of employee common stock options or warrants outstanding. | |||||||||||||||||
Net Loss per Share | |||||||||||||||||
The basic net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive shares arising from debt or equity instruments. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of March 31, 2015 and December 31, 2014, the Company had 15,358,412 and 14,442,977 shares issuable upon conversion or exercise, respectively, which have been excluded as their effect is anti-dilutive. | |||||||||||||||||
Property and Equipment | |||||||||||||||||
Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives: | |||||||||||||||||
Computer equipment and software | 3 years | ||||||||||||||||
Furniture | 3 years | ||||||||||||||||
Machinery | 3-5 years | ||||||||||||||||
Stock Subscriptions Payable | |||||||||||||||||
The initial balance of stock subscriptions payable as of December 31, 2014, was $27,000 representing 41,539 shares to be issued. During the three months ended March 31, 2015, $10,000 of these stock subscriptions payable were issued representing 15,385 shares of common stock, included in the December 31, 2014 subscription payable. The remaining balance of stock subscriptions payable as of March 31, 2015, is $17,000 representing 26,154 shares to be issued. | |||||||||||||||||
Fees Payable in Common Stock | |||||||||||||||||
During the three months ended March 31, 2015, the Company agreed to issue an aggregate of 1,013,262 shares, valued at $834,649 in payment of performance bonuses, employment signing bonuses, consulting fees, and interest. During the three months ended March 31, 2015, the Company issued an aggregate of 2,385,312 shares of its common stock, valued at $2,139,287, in payment of performance bonuses, employment signing bonuses, consulting fees, and interest which left a remaining balance in fees payable in common stock of $1,479,073, or 1,987,712 shares. | |||||||||||||||||
Recently Issued Accounting Standards | |||||||||||||||||
Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements. | |||||||||||||||||
In April 2015 the FASB issued Accounting Standards Update 2015-03 (ASU 2015-03) Simplifying Balance Sheet Presentation by Presenting Debt Issuance Costs as a Deduction from Recognized Debt Liability. The ASU is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2015. Early adoption is permitted. The new standard requires debt issuance costs to be classified as reductions to the face value of the related debt. The Company has reclassified debt issuance costs previously reported as other assets to loan discounts and debt issuance costs as a deduction of the debt liability. | |||||||||||||||||
Property_Plant_and_Equipment
Property, Plant and Equipment | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Deferred Revenue Disclosure [Abstract] | |||||||||
Property, Plant and Equipment | Property, plant and equipment consisted of the following at March 31, 2015 and December 31, 2014: | ||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Office furniture and equipment | $ | 29,467 | $ | 29,467 | |||||
Tools and yard equipment | 729,735 | 729,735 | |||||||
Vehicles and construction equipment | 502,007 | 502,007 | |||||||
Leasehold improvements | 15,933 | 15,933 | |||||||
Total, cost | 1,277,142 | 1,277,142 | |||||||
Accumulated Depreciation and Amortization | (226,184 | ) | (180,502 | ) | |||||
Property and equipment, net | $ | 1,050,958 | $ | 1,096,640 | |||||
Depreciation expense for the three month periods ended March 31, 2015 and 2014 is $45,682 and $52,684, respectively. |
Receivable_from_Factor_Net_of_
Receivable from Factor, Net of Unapplied Customer Credits | 3 Months Ended |
Mar. 31, 2015 | |
Receivable From Factor Net Of Unapplied Customer Credits | |
Receivable from Factor, Net of Unapplied Customer Credits | Accounts Purchase Agreement – Crown Financial, LLC |
STW Energy Services, LLC (“STW Energy”) entered into an accounts purchase facility with Crown Financial, LLC, pursuant to an Account Purchase Agreement (the “Accounts Purchase Agreement”), pursuant to the Texas Finance Code. | |
The Accounts Purchase Agreement shall continue until terminated by either party upon 30 days written notice. The Accounts Purchase Agreement is secured by a security interest in substantially all of STW Energy’s assets pursuant to the terms of a Security Agreement. Under the terms of the Accounts Purchase Agreement, Crown Financial may, at its sole discretion, purchase certain of the STW Energy’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to STW Energy up to 80% of the face amount of the account receivable; provided however, that based upon when each invoice gets paid, Crown shall pay STW Energy on the related invoice less fess and prior advances. Each account receivable purchased by Crown will be subject to a discount fee of 1.5% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. Crown will generally have full recourse against STW Energy in the event of nonpayment of any such purchased account. As of March 31, 2015 and December 31, 2014, respectively, there were no accounts receivables subject to recourse due to nonpayment of the purchased accounts. | |
The Accounts Purchase Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening STW Energy’s mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Accounts Purchase Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of the repayment obligations of the Company or Crown enforcing its rights under the Security Agreement and take possession of the collateral. The Accounts Purchase Agreement contains provisions relating to events of default that are customary for agreements of this type. | |
Notes_Payable_Net
Notes Payable, Net | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes Payable [Abstract] | |||||||||
Notes Payable | |||||||||
The Company’s notes payable at March 31, 2015 and December 31, 2014, consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
Name | 2015 | 2014 | |||||||
14% Convertible Notes | $ | 2,296,342 | $ | 2,296,342 | |||||
12% Convertible Notes | 100,000 | 100,000 | |||||||
2015 Transfer Agreements | 1,375,000 | -- | |||||||
GE Note | 2,100,000 | 2,100,000 | |||||||
Deferred Compensation Notes | 279,095 | 279,095 | |||||||
Revenue participation notes | 2,371,500 | 2,337,500 | |||||||
Crown Financial note | 684,484 | 702,697 | |||||||
Dufrane Note Payable | 611,561 | 725,000 | |||||||
Black Pearl Note Payable | 777,096 | -- | |||||||
Other Short-term Debt | 55,000 | 55,000 | |||||||
Equipment finance contracts | 100,862 | 110,000 | |||||||
Capital lease obligation | 27,948 | 30,437 | |||||||
Unamortized debt discount and loan fees | (999,797 | ) | -117,483 | ||||||
Total debt | 9,779,091 | 8,618,588 | |||||||
Less: Current Portion | (7,900,661 | ) | (5,793,293 | ) | |||||
Total long term debt | $ | 1,878,430 | $ | 2, 825,295 | |||||
Unamortized loan discounts are applicable to notes payable as follows: | |||||||||
14% convertible notes | $ | -- | $ | 20,362 | |||||
Crown Financial note | 82,366 | 97,121 | |||||||
2015 Transfer Agreements | 917,431 | -- | |||||||
Total unamortized loan discounts | $ | 999,797 | $ | 117,483 | |||||
14% Convertible Notes | |||||||||
As of March 31, 2015 and December 31, 2014, the aggregate principal balances of the 14% notes are $2,296,342 and $2,296,342, respectively. During the three month period ended March 31, 2015, the Company had no activity on these notes. As March 31, 2015, the total of outstanding 14% convertible notes is $2,296,342 of which $688,210 matured on or before March 31, 2015 and are in default, however, as of May 27, 2015, none of the note holders have declared the notes in default. During the three month period ended March 31, 2014, the Company converted principal of $33,793 and accrued interest of $5,632 (total of $39,425) in exchange for 82,685 shares of the Company’s common stock. The value of the stock issued was $46,479 resulting in additional interest expense of $7,054 upon the conversion of convertible debt. | |||||||||
As of March 31, 2015 and December 31, 2014, $171,892 of the 14% convertible notes is payable to related parties. | |||||||||
12% Convertible Notes | |||||||||
Between April 2009 and November 2010, the Company issued a series of 12% notes payable to accredited investors that matured on November 30, 2011 and are currently in default. At March 31, 2015, the remaining balance is $100,000. The Company also issued 273,583 warrants to purchase common stock at an exercise price of $0.12 per share that expire at various dates through 2015. The notes and interest are convertible into 1,422,803 shares of the Company’s common stock. | |||||||||
During the three months ended March 31, 2015, there was no activity. During the three months ended March 31, 2014, the Company issued 1,137,417 shares of its common stock valued at $614,205 in payment of $225,000 of principal and $116,225 accrued interest (total of $341,225). The conversion of these notes payable and accrued interest for common stock resulted in a non-cash charge of $272,980 to the derivative liability upon the conversion of convertible debt. | |||||||||
Other Short-Term Debt | |||||||||
On January 1, 2014, the Company issued a $30,000 short term note from an investor, MKM Capital. The note bears interest at 8% and matured on January 1, 2015. The balance of the delinquent note payable as of March 31, 2015, is $30,000. | |||||||||
In September 2014, the Company entered into short term loan agreements, which matured in October 2014, with seven accredited investors totaling $145,000, to sustain daily operating expenses; the loans had a 5% transaction fee at maturity and the lenders were entitled to receive 18% interest if the notes are not paid at maturity. As additional consideration for the loan, the Company agreed to issue the lenders an aggregate of 171,667 shares of common stock, which are only issuable if and when the Company increases it authorized capital. These shares were included in the "Fees Payable in Common Stock" and were expensed as interest in the current period. As of March 31, 2015, all but $25,000 of the delinquent loans have been repaid, but the remaining lender has not declared a default on the payment of his note. | |||||||||
GE Ionics | |||||||||
On August 31, 2010, the Company entered into a Settlement Agreement relating to a $2,100,000 note payable that was amended on October 30, 2011. On May 7, 2012, GE informed the Company that it had failed to make any required installment payment that was due and payable under the GE Note and that the Company’s failure to make any such installment payment(s) constituted an Event of Default under the GE Note. Pursuant to the terms of the GE Note, upon the occurrence of an Event of Default for any reason whatsoever, GE shall, among other things, have the right to (a) cure such defaults, with the result that all costs and expenses incurred or paid by GE in effecting such cure shall bear interest at the highest rate permitted by law, and shall be payable upon demand; and (b) accelerate the maturity of the GE Note and demand the immediate payment thereof, without presentment, demand, protest or other notice of any kind. Upon an event of default under the GE Note, GE shall be entitled to, among other things (i) the principal amount of the GE Note along with any interest accrued but unpaid thereon and (ii) any and all expenses (including attorney’s fees and expenses) incurred in connection with the collection and enforcement of any rights under the GE Note. | |||||||||
Under the terms of the August 31, 2010 note, interest at the rate of WSJ prime plus 2% is due on the note, upon default, interest is due at the maximum legal rate which is 10% in the state of Texas. The note matured on September 1, 2013, and is in default. Interest on the note through December 31, 2014, has been accrued pursuant to the terms of the note through May 6, 2012, interest upon default on May 7, 2012, has been accrued at the maximum default rate in the state of Texas which is 10%. | |||||||||
As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the GE Note. | |||||||||
On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”). Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE, upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”). As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote. (See Note 8) | |||||||||
Deferred Compensation Notes | |||||||||
As of March 31, 2015, and December 31, 2014, the Company has a balance of $279,095 payable under deferred compensation, non-interest bearing, notes to its former Chief Executive Officer and its in house counsel. The notes matured December 31, 2012, and the notes are in default. | |||||||||
Revenue Participation Notes | |||||||||
As of March 31, 2015 and December 31, 2014, the Company has an outstanding balance of $2,371,500 and $2,337,500, respectively of Revenue Participation Notes comprised as follows: | |||||||||
March 31, | December 31, | ||||||||
Name | 2015 | 2014 | |||||||
2012 Revenue Participation Notes | $ | 165,000 | $ | 165,000 | |||||
2013 Revenue Participation Notes - STW Resources Salt Water Remediation | 302,500 | 302,500 | |||||||
2013 Revenue Participation Notes - STW Energy | 182,000 | 182,000 | |||||||
2013 Convertible Revenue Participation Notes - STW Pipeline | 115,000 | 115,000 | |||||||
2014 Revenue Participation Notes, Upton Project – STW Water | 1,607,000 | 1,573,000 | |||||||
Total revenue participation notes | $ | 2,371,500 | $ | 2,337,500 | |||||
These notes are more fully described in the notes to the consolidated financial statements for the year ended December 31, 2014, which were included in the Company’s Annual Report on Form 10-K as filed with the SEC on April 3, 2015. | |||||||||
2014 Revenue Participation Notes – STW Resources Upton Project | |||||||||
On September 30, 2014, the Company issued its first note for the new Upton Project. As of March 31, 2015, the total principal amount of this financing is $1,607,000. The financing is a Senior Secured Master Note, with a 15% coupon and a maturity of 18 months with interest only payments paid the first three months and equal monthly payments of principal and interest paid for months four though eighteen of the Master Note with Revenue Participation Interest. Additionally, a 5% royalty is assigned to the Master Note, which will be distributed based on pro rata ownership by investors in the Master Note. Principal and interest payments will come solely from the Investors share of the revenue participation fees from water processing contracts related to brackish water. This Agreement, including but not limited to the revenue sharing arrangement, is applicable to the brackish water processing facility being built with the proceeds of the Note. At March 31, 2015, $197,365 of the principal payments is in default. As of the date of this Report the investors have not declared a default on the payment of these notes. | |||||||||
Note payable to Crown Financial, LLC, a related party | |||||||||
On June 26, 2013, STW Energy Services, LLC entered into a loan agreement with Crown Financial, LLC for a $1.0 million loan facility to purchase machinery and equipment for STW Energy Services. Crown Financial, LLC is a related party in that it holds a 25% non-controlling interest in our subsidiary: STW Energy Services, LLC. The note matures on June 25, 2016, and bears interest at 15%. Commencing November 1, 2013, monthly principal and interest payments are due on the note over a thirty-three month period. The note is secured by all assets of STW Energy Services. LLC. As of March 31, 2015 and December 31, 2014, the Company had drawn down $684,484 and $702,697, respectively, of this loan facility. | |||||||||
For the three months ended March 31, 2015 and 2014, interest expense on all notes payable described above was $1,219,588 and $437,602, respectively, which included $475,868 and $43,801, respectively, of amortization of debt discount and debt issuance costs. | |||||||||
2015 Transfer Agreement Convertible Notes Payable | |||||||||
During the three months ended March 31, 2015, the Company issued a $1,375,000 of convertible notes payable to four (4) accredited investors. The notes bear interest at 5% and mature at various dates through October 17, 2015. The notes are convertible, including accrued interest, into 2,141,827 shares at a conversion price of $0.65. In the event of default, the notes are convertible at a price equal to the lower of (a) $0.65 or (b) 60% multiplied by the lowest closing trade price of the common shares for the ten (10) trading days immediately prior to the applicable conversion date. | |||||||||
The conversion feature of the 2015 Transfer Agreement convertible notes payable meets the definition of a derivative due to the reset provision to occur upon the issuance of equity based instruments at below $0.65 per share or upon default of the notes and is accounted for as a derivative liability. The Company has determined the value of the conversion feature upon default of this note using the Black-Scholes pricing model to be $1,108,030 as of the date of issuance, of which $479,877 was recorded as a financing cost in the condensed consolidated statement of operations and $628,153 was recorded as a loan discount. In connection with these notes, the Company issued 525,000 shares of its common stock to the investors valued at $470,500. The Company also incurred third party loan fees of $151,347 on these notes. The value of the conversion feature of $628,153 and $746,847. will be amortized as interest expense over the term of the note under the straight line method, which we believe approximates the effective interest method due to their short term nature. The effective interest rate of this note was determined to be 102.5%. | |||||||||
Derivative_Liability
Derivative Liability | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
Derivative Liability | We apply the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. | ||||||||
From time to time, the Company has issued notes with embedded conversion features and warrants to purchase common stock. Certain of the embedded conversion features and warrants contain price protection or anti-dilution features that result in these instruments being treated as derivatives, or there were insufficient shares to satisfy the exercise of the instruments. | |||||||||
Management has used the simplified Black Scholes model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation. | |||||||||
During the first quarter of 2015, the Company computed a historical volatility of 160% using daily pricing observations for recent periods. We applied a historical volatility rate during the period ended March 31, 2015, and future periods, since the Company exited its development stage and commenced commercial operations. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these embedded conversion features. | |||||||||
We currently have no reason to believe that future volatility over the expected remaining life of these warrants and embedded conversion features is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and embedded conversion features. The risk-free interest rate is based on one-year to five-year U.S. Treasury securities consistent with the remaining term of the warrants and embedded conversion features. | |||||||||
The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of March 31, 2015 and December 31, 2014: | |||||||||
For the three months ended March 31, 2015 | For the year ended December 31, 2014 | ||||||||
Annual dividend yield | 0 | % | 0 | % | |||||
Expected life (years) | 0.00 - 0.50 | 0.60 - 0.47 | |||||||
Risk-free interest rate | 0.11% - 0.25 | % | 0.11% - 0.25 | % | |||||
Expected volatility | 160 | % | 735 | % | |||||
31-Mar-15 | 31-Dec-14 | ||||||||
Embedded Conversion features | $ | 1,620,142 | $ | 751,439 | |||||
Warrants | 16,448 | 50,901 | |||||||
$ | 1,636,590 | $ | 802,340 | ||||||
The following table presents the changes in fair value of our warrants and embedded conversion features measured at fair value (level 3 in the fair value hierarchy) on a recurring basis for each reporting period-end. | |||||||||
For the three months ended | For the year ended | ||||||||
31-Mar-15 | December 31, | ||||||||
2014 | |||||||||
Balance beginning | $ | 802,340 | $ | 1,630,985 | |||||
Value of derivative liability associated with JMJ note payable | -- | 42,592 | |||||||
Value of derivative liability attributable to conversion feature of Transfer Agreements | 1,108,030 | -- | |||||||
Value of derivative liability attributable to conversion of notes payable and accrued interest | -- | (694,149 | ) | ||||||
Change in derivative liability associated with conversion of notes payable and accrued interest | -- | (272,980 | ) | ||||||
Change in fair value | (273,780 | ) | 95,892 | ||||||
Balance ending | $ | 1,636,590 | $ | 802,340 | |||||
The increase in fair value of the derivative liability is largely attributable to the derivative liability associated with the conversion feature of the transfer agreement convertible notes payable. The change in the fair value of the derivative liability is attributable to the expiration of some of the warrants that were outstanding. | |||||||||
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
Related Party Transactions | Officers’ Compensation |
During the three months ended March 31, 2015 and 2014, we incurred $42,500 and $37,500, respectively, in officers’ compensation due our Director, Chairman, and CEO, Mr. Stanley Weiner. As of March 31, 2015 and December 31, 2014, the balances of $455,583 and $413,083, respectively, were payable to Mr. Weiner for his officers’ salary. There were no payments to Mr. Weiner during the three months ended March 31, 2015 or 2014. | |
During the three months ended March 31, 2015 and 2014, we incurred zero and $37,500, respectively, in officers’ compensation due to one of our former Directors and former Chief Operating Officer, Mr. Lee Maddox. As of March 31, 2015 and December 31, 2014, the balances of $205,500 and $220,500, respectively, were payable to Mr. Maddox for his officers’ salary. During the three months ended March 31, 2015 and 2014, the Company paid Mr. Maddox $15,000 and zero, respectively. | |
During the three months ended March 31, 2015 and 2014, we incurred $24,000 and zero, respectively, in officers’ compensation due to one of our Directors and Officer, Mr. Paul DiFrancesco. As of March 31, 2015 and December 31, 2014, the balances of $9,000 and zero, respectively, were payable to Mr. DiFrancesco for his officers’ salary. During the three months ended March 31, 2015 and 2014, the Company paid Mr. DiFrancesco $15,000 and zero, respectively. | |
During the three months ended March 31, 2015 and 2014, we incurred $23,500 and $22,500, respectively, in general counsel services fees expense with Seabolt Law Group, a firm owned by our Director and General Counsel, Mr. Grant Seabolt. As of March 31, 2015 and December 31, 2014, the balances of $188,297 and $179,797, respectively, were payable to Seabolt Law Group for these services. During the three months ended March 31, 2015 and 2014, the Company paid Mr. Seabolt $15,000 and $15,000, respectively. | |
During three months ended March 31, 2015 and 2014, we incurred $65,749 and $148,598, respectively, in CFO, audit preparation, tax, and SEC compliance services fees expense with Miranda CFO Services, Inc. and Miranda & Associates, a Professional Accountancy Corporation, firms owned by our Chief Financial Officer, Mr. Robert J. Miranda. As of March 31, 2015 and December 31, 2014, the balances of $70,520 and $219,271, respectively, were payable to Miranda & Associates for these services. | |
During three month periods ended March 31, 2015 and 2014, we incurred $50,000 and $50,000, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Pipeline Maintenance & Construction, LLC. Mr. Adam Jennings. During the three month period ended March 31, 2014, we incurred with Mr. Adam Jennings a signing bonus comprised of 50,000 shares of the Company’s common stock valued at $21,000. As of March 31, 2015 and December 31, 2014, the balance of $21,000 and $121,000, was payable to Mr. Jennings for the value of signing bonuses due under his employment agreement. These stock awards are accrued as fees payable in common stock the awards are vested. | |
During three month periods ended March 31, 2015 and 2014, we incurred $50,000 and none, respectively, in officers’ salary due to the President of our wholly-owned subsidiary, STW Water Process and Technologies, LLC. Mr. Alan Murphy. In the second quarter of 2014, we incurred with Mr. Alan Murphy a signing bonus comprised of 333,333 shares of the Company’s common stock valued at $200,000. As of March 31, 2015 and December 31, 2014, the balance of $200,000 and $200,000, was payable to Mr. Murphy for the value of signing bonuses due under his employment agreement. These stock awards are accrued as fees payable in common stock the awards are vested. | |
Board and Advisory Board Compensation | |
Directors are expected to timely and fully participate in all regular and special board meetings, and all meetings of committees that they serve on. In December 2011, the Board voted to authorize the issuance of shares in lieu of cash compensation for past services. | |
Per the Director Agreements, the Company compensates each of the directors through the initial grant of 33,333 shares of common stock and the payment of a cash fee equal to $1,000 plus travel expenses for each board meeting attended, and $75,000 per year as compensation for serving on our board of directors. | |
For the three months ended March 31, 2015 and 2014, the Company incurred board of director fees of $112,500 and $168,750, respectively. During the three months ended March 31, 2015 and 2014, the Company issued 562,500 and zero shares of its common stock in payment of these fees, valued at $450,000 and zero. As of March 31, 2015 and December 31, 2014, the Company has accrued compensation due to its directors (both current and former) of $112,500 and $496,067, respectively. | |
Related Party Sales | |
During three months ended March 31, 2015 and 2014, the Company, had related party sales of $58,127 and $39,992, respectively. Related party sales are a combination of sales to three companies Black Pearl Energy, LLC, Dufrane Construction, and Dufrane Nuclear Shielding Inc. | |
As of March 31, 2015 and December 31, 2014, the Company has a related party note payable of $611,561 and $725,000, respectively, to Dufrane Nuclear, Inc. a company controlled by Mr. Joshua Brooks, the Company’s Former Chief Operating Officer. During the three months ended March 31, 2015 and 2014, the Company made payments on the note of $113,439 and zero, respectively, in principal. | |
As of March 31, 2015 and December 31, 2014, the Company has $777,096 of related party notes payables and $37,084 of related party payables, respectively, to Black Pearl Energy, LLC, a company controlled by the Company’s CEO, COO, and General Counsel. (See Black Pearl note payable) | |
Line of credit with Black Pearl Energy, LLC | |
On March 19, 2014, we entered into a Line of Credit Agreement (the "Credit Agreement") with Black Pearl Energy, LLC ("Black Pearl"), an entity controlled by Stan Weiner and Lee Maddox, the Company’s Chief Executive Officer and former Chief Operating Officer, respectively, and one of our directors: Grant Seabolt. Pursuant to the Credit Agreement, Black Pearl issued us a $2,000,000 line of credit, of which $1,054,944 has been advanced as of December 31, 2014. The credit was issued in the form of a promissory note (the "Note"). On February 26, 2015, the open balance of the credit line and accrued interest were converted into a note payable, described in the next paragraph, and the credit line was dissolved. | |
Black Pearl note payable: | |
On February 26, 2015, the Company negotiated an extension on the note payable to Black Pearl Energy, a Related Party, and established the balance at $1,079,944 plus $105,363 in interest due. The note is to be paid on a monthly basis of $12,000 per month for 48 months and a balloon payment in February of 2019. On March 5, 2015, the note was revised to consolidate the receivables and the payable and net the note down to $805,863 and reduce the interest due to approximately $67,000. Additionally Black Pearl is to be granted 75,000 shares to cure the default and 131,704 shares of common stock to make the extension. These stock awards are accrued as fees payable in common stock the awards are vested. | |
Factoring Agreement with Crown Financial, LLC | |
On January 13, 2014, STW Resource Holding Corp entered into an accounts receivable factoring facility (the “Factoring Facility”) with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement (the “Factoring Agreement”). The Factoring Agreement is secured through a Security Agreement between the Company, two of our subsidiaries: STW Pipeline Maintenance & Construction, LLC and STW Oilfield Construction, LLC (collectively, the "Subsidiaries") and Crown, by all of the instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment of the Company and the Subsidiaries. The Factoring Facility includes a loan in the amount of $4,000,000. Although our former Chief Operating Officer, Lee Maddox, personally guaranteed our full and prompt performance of all of our obligations, representations, warranties and covenants under the Factoring Agreement, pursuant to a Guaranty Agreement for and in consideration of Crown issuing us the Factoring Facility, such guaranty was terminated when Mr. Maddox resigned as our COO in July 2014, pursuant to the terms of the related Termination Agreement. | |
The Factoring Facility shall continue until terminated by either party upon 30 days written notice. Under the terms of the Factoring Agreement, Crown may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, Crown will advance to the Company up to 80% of the face amount of the account receivable (the "Purchase Price"); although Crown maintains the right to propose a change in that rate, which we can accept in writing, orally or by accepting funding based on such changed rate. Additionally, based upon when each invoice gets paid, Crown shall pay us a rebate percentage of between 0-18% of the related invoice. Crown will generally have full recourse against us in the event of nonpayment of any such purchased account. Crown has the discretion to also accept a substitute invoice from us for uncollected invoices; if such substitute invoice is not accepted, we will be obligated to pay Crown the Purchase Price of such uncollected invoice plus interest at the maximum lawful interest rate per annum, minus any payments made on the invoice. | |
The Factoring Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening our mail, endorsing our name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of our repayment obligations or Crown enforcing its rights under the Security Agreement and taking possession of the collateral. The Factoring Agreement contains provisions relating to events of default that are customary for agreements of this type. | |
As of March 31, 2015 and December 31, 2014, the Company has a related party payable of $1,039,545 and $2,035,495, respectively to Crown Financial. | |
Stockholders_Deficit
Stockholders' Deficit | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
Stockholders' Deficit | Preferred Stock | ||||||||||||||
The Company has authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. However, as of March 31, 2015, no such shares are issued or outstanding and the Company does not currently have any plans to issue shares of such stock. | |||||||||||||||
Common Stock | |||||||||||||||
The Company has authorized 191,666,667 shares of common stock with a par value of $0.001. During the three months ended March 31, 2015, the Company issued common shares as follows: | |||||||||||||||
Issued: | |||||||||||||||
On January 15, 2015, the Company issued 62,500 shares of common stock to an investor, at a unit price of $1.56, in payment of interest on a short term loan for a value of $97,500 and an additional 170,000 shares of common stock, at a unit price of $1.40 to a consultant for services valued at $238,000. | |||||||||||||||
On January 27, 2015, the Company issued 281,167 shares of common stock, at various unit prices, valued at $209,825 to 19 employees for signing bonuses and continued service to the company. | |||||||||||||||
On January 28, 2015, the Company issued 158,335 shares of common stock, at various unit prices, to 7 investors valued at $225,128 in payment of interest on 7 short term loans. | |||||||||||||||
In the first week of February 2015, the Company issued 378,334 shares of common stock, at various unit prices, valued at $344,100 to 4 employees pursuant to their employment contracts. | |||||||||||||||
On February 3, 2015, the Company issued 15,385 shares of common stock, at a unit price of $0.65, to an accredited investor based on a unit offering at $0.65 per unit, increasing Capital of the Company by $10,000. | |||||||||||||||
On February 3, 2015, the Company issued 100,000 shares of common stock, at a unit price of $0.68, to an accredited investor for $68,000 in loan origination fees. | |||||||||||||||
On February 6, 2015, the Company issued 150,001 shares of fully vested common stock, at various unit prices, to 3 consultants valued at $119,500 in payment of services rendered in 2014, previously accrued, and the renewal of a 2015 contract. | |||||||||||||||
On February 6, 2015, the Company issued 225,000 shares of common stock, at various unit prices, to 3 accredited investors for $187,000 in loan origination fees. | |||||||||||||||
On February 17, 2015, the Company issued 100,000 shares of common stock, at a unit price of $0.81, to an accredited investor for $81,000 in loan origination fees. | |||||||||||||||
On February 18, 2015, the Company issued 184,975 shares of common stock to an investment group, at a unit price of $0.65, valued at $120,233 for services rendered in procuring investors for the company. | |||||||||||||||
On February 19, 2015, the Company issued 100,000 shares of common stock, at a unit price of $0.85, to an accredited investor for $85,000 in loan origination fees. | |||||||||||||||
On February 23, 2015, the Company issued 562,500 shares of common stock to 6 directors, at a unit price of $0.80, valued at $450,000 for services rendered in prior year(s). | |||||||||||||||
On February 24, 2015, the Company issued 100,000 shares of common stock, at a unit price of $0.65, to a consultant for services valued at $65,000. | |||||||||||||||
On February 27, 2015, pursuant to the January 8, 2015 Board of Director’s Minutes, a total of 900,000 shares were issued by the Company to 1 employee and 2 consultants for services performed in 2014. They were issued at a unit price of $0.80 per common share at a value of $720,000. | |||||||||||||||
As of March 31, 2015, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding: | |||||||||||||||
Security | Number of Underlying | Exercise | Expire | ||||||||||||
Common Shares | Price $ | ||||||||||||||
Warrants associated with the 12% Convertible Notes | 25,000 | 0.012 | 2015 | ||||||||||||
Warrants associated with 2013 Revenue Participation Notes | 180,872 | 1.20– 1.80 | 2015 | ||||||||||||
Warrants issued to Crown Financial, LLC | 666,667 | 1.2 | 2016 | ||||||||||||
Warrants issued on $20,000 short term loan | 33,333 | 1.2 | 2015 | ||||||||||||
Warrants issued with 2013 Unit Share Offering | 333,333 | 1.2 | 2015 | ||||||||||||
Warrants issued with 2014 Unit Share Offerings | 2,328,542 | 1.20– 1.50 | 2016 | ||||||||||||
Warrants issued with 2014 Unit Share Offering | 20,770 | 1.5 | 2017 | ||||||||||||
Sub-total of Warrants outstanding | 3,588,517 | ||||||||||||||
Common stock associated with the 12% Convertible Notes plus accrued interest | 1,422,803 | 0.12 | N/A | ||||||||||||
Common stock associated with Pipeline Convertible Revenue Participation notes | 164,513 | 0.72 | N/A | ||||||||||||
Common stock associated with 14% convertible notes plus accrued interest | 6,036,040 | 0.48 | N/A | ||||||||||||
Common stock associated with 2015 Transfer Agreements | 2,141,827 | 0.65 | N/A | ||||||||||||
Common stock associated with 2014 Unit Share Offerings | 17,000 | 0.65 | N/A | ||||||||||||
Common stock payable as fees | 1,987,712 | various | N/A | ||||||||||||
Total | 15,358,412 | ||||||||||||||
Warrants | |||||||||||||||
A summary of the Company’s warrant activity and related information during the three months ended March 31, 2015 follows: | |||||||||||||||
Number of Shares | Weighted- Average | Remaining Contractual Life (Years) | Aggregate | ||||||||||||
Exercise Price | Intrinsic Value | ||||||||||||||
Outstanding at January 1, 2015 | 3,634,350 | $ | 1.27 | 1.18 | $ | 851,313 | |||||||||
Issued | -- | -- | -- | ||||||||||||
Exercised | -- | -- | |||||||||||||
Forfeited | -- | -- | |||||||||||||
Cancelled | -- | -- | |||||||||||||
Expired | -45,833 | 0.22 | |||||||||||||
Outstanding at March 31, 2015 | 3,588,517 | $ | 1.29 | 0.94 | $ | 792,563 | |||||||||
Exercisable | 3,588,517 | $ | 1.29 | 0.94 | $ | 792,563 | |||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | ||||||||||||
Mar. 31, 2015 | |||||||||||||
Notes to Financial Statements | |||||||||||||
Commitments and Contingencies | Lease Commitments | ||||||||||||
The Company leased its office facilities under an operating lease that commenced on October 1, 2013 and expires on September 30, 2020. The lease calls for monthly payments of $9,750, plus payment by the Company of all operating expenses, insurance and taxes on the property. The Company has an option until September 30, 2016, to purchase the land and building for $825,500 | |||||||||||||
During 2014, the Company entered into a capital lease of a modular office trailer. The lease contract calls for forty eight (48) monthly payments of $593 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $23,300 with an implicit interest rate in the lease of 10%. In July of 2014, the Company entered into a lease for a commercial ice machine with Executive Leasing, Inc. The lease contract calls for Thirty six (36) monthly payments of $505 with a purchase option at the end of the lease. The Company determined the value of the capital lease to be $14,854 with an implicit interest rate in the lease of 12%. As of March 31, 2015 and December 31, 2014, the principal balances on these capital leases totaled $32,862 and $23,300, respectively. | |||||||||||||
Future minimum lease payments under the capital lease and operating lease as of March 31, 2015, are as follows: | |||||||||||||
Years ending December 31: | Capital Lease | Operating Lease | Totals | ||||||||||
2015 | $ | 9,882 | $ | 87,750 | $ | 97,632 | |||||||
2016 | 13,176 | 117,000 | 130,176 | ||||||||||
2017 | 8,960 | 117,000 | 125,960 | ||||||||||
2018 | 117,000 | 117,000 | |||||||||||
Thereafter | - | 204,750 | 204,750 | ||||||||||
Total minimum lease payments | 32,018 | $ | 643,500 | $ | 675,518 | ||||||||
Less interest | 1,580 | ||||||||||||
Capital lease obligation | 30,438 | ||||||||||||
Less current portion | 10,382 | ||||||||||||
Long-term capital lease obligation | $ | 20,056 | |||||||||||
Rental expense for all property, including equipment rentals cost of sales, and equipment operating leases during the three months ended March 31, 2015 and 2014, was $432,754 (which includes over $350,791 of equipment rental used on projects and reflected in cost of revenues) and $520,196, respectively. Related party rental expense during the three months ended March 31, 2015 and 2014, was zero and $58,698, respectively. | |||||||||||||
Product Purchase and Manufacturing license agreement | |||||||||||||
On June 20, 2014, the Company entered into an exclusive product purchase and manufacturing license agreement with Salttech B.V, (“Salttech”) a company based in the Netherlands. The agreement provides exclusive rights to purchase Salttech’s DyVaR devices which are used to remove salinity from brackish/brine water streams. The agreement grant’s to the Company exclusive United States rights to purchase these products for use in the municipal and oil & gas industries. The agreement also grants to the Company the right of first refusal for this technology in North America. | |||||||||||||
The initial term of the agreement is for five years and is renewable automatically for five years and every five year period unless terminated by written notice of the parties at least three months before the termination date. | |||||||||||||
The initial royalty for the first year of the agreement is for $324,000, payable quarterly beginning with the calendar quarter starting July 1, 2014 as follows: Q3 2014 $60,000, Q4 2014 $60,000, Q1 2015 $100,000 and Q2 2015 $104,000. The Company also agreed to pay a continuing royalty of $240,000 per year for years 2-5, plus 3% of the invoice price of any products sold by the Company under the agreement. The Company also agreed to issue 66,667 shares of its common stock in consideration of this agreement. These stock awards are accrued as fees payable in common stock as the awards are vested and settled upon the issuance of the shares. | |||||||||||||
As of March 31, 2015, the minimum royalty obligation payable under this agreement is as follows: | |||||||||||||
Minimum Royalty Obligation | |||||||||||||
Years ending December 31: | |||||||||||||
2015 | $ | 224,000 | |||||||||||
2016 | 240,000 | ||||||||||||
2017 | 240,000 | ||||||||||||
2018 | 240,000 | ||||||||||||
Thereafter | 120,000 | ||||||||||||
Total minimum royalty payments | 1,064,000 | ||||||||||||
Indemnities and Guarantees | |||||||||||||
In addition to the indemnification provisions contained in the Company’s charter documents, the Company will generally enter into separate indemnification agreements with the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets. | |||||||||||||
Employment Agreements | |||||||||||||
The Company’s subsidiary, STW Pipeline Maintenance & Construction, LLC, has an employment agreement with Adam Jennings that expired on September 22, 2014, but is renewable by mutual consent of the Company and Mr. Jennings. The employment agreement for Mr. Jennings has been renewed. | |||||||||||||
Stanley T. Weiner is to be employed as Chairman and CEO for a three year term effective February 1, 2015. His base salary is $15,000 monthly ($180,000 annually) during the first year of employment, $22,000 monthly ($264,000 annually) during the second year of employment, and $29,000 monthly ($348,000 annually) during the third year of employment. He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 400,000 fully vested shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination. | |||||||||||||
Paul DiFrancesco is to be employed as Head of Finance for a three year term effective February 1, 2015. His base salary is $12,000 monthly ($144,000 annually) during the first year of employment, $16,000 monthly ($192,000 annually) during the second year of employment, and $16,000 monthly ($192,000 annually) during the third year of employment. He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 300,000 fully vested shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 50,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination. | |||||||||||||
Grant Seabolt is to be employed as General Counsel and Corporate Secretary for a three year term effective February 1, 2015. His base salary is $8,000 monthly ($96,000 annually) during the first year of employment, $9,500 monthly ($114,000 annually) during the second year of employment, and $9,500 monthly ($114,000 annually) during the third year of employment. He will be subject to an annual discretionary bonus up to 100% of his previous six month salary, and a signing bonus of 200,000 fully vested shares of the Company’s common stock. He will also be subject to quarterly bonuses equal to 25,000 shares of the Company’s common stock. He will also be subject to a twelve month severance award in the event of termination. | |||||||||||||
Contingencies | |||||||||||||
The Company is subject to various claims and contingencies in the normal course of business that arise from litigation, business transactions, or employee-related matters. The Company establishes reserves when it believes a loss is probable and is able to estimate its potential exposure. For loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. While actual losses may differ from the amounts recorded and the ultimate outcome of our pending actions is generally not yet determinable, the Company does not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on its business, financial position, results of operations, or cash flows. In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. All items, whereby the Company agrees with the amount of the claim, have been recorded in the current period and are reflected in accounts payable. | |||||||||||||
GE Ionics, Inc. Lawsuit. On May 22, 2013, GE filed a lawsuit against STW in the Supreme Court of the State of New York, County of New York, Index No. 651832/2013 (the “GE Lawsuit”). Although the lawsuit arises out of STW’s obligations to GE under its Settlement Agreement with GE (described more fully in Note 4, Notes Payable - GE Ionics Settlement Agreement), upon which STW owed GE $2.1 million plus interest, GE has elected to forgo suit on the settlement amount and sue STW for the original debt of $11,239,437, plus interest and attorneys’ fees (the “Original Debt”). As such, STW filed its Answer and asserted that it is entitled to and shall pursue all of its available legal and equitable defenses to the Original Debt, inasmuch as GE has, among other things, failed to discount the Original Debt sued upon by the amounts that it recovered through re-use and re-sale of the equipment it fabricated for STW. Management has not accrued the original amount of the debt because the probability of recovery is remote. The lawsuit is in the discovery phase of litigation. | |||||||||||||
Sichenzia and Ross Lawsuit. On June 13, 2014, Sichenzia Ross Friedman Ference LLP filed a lawsuit against the Company in the Supreme Court of New York, County of New York, Index No. 155843/2013, seeking $180,036 in legal fees and expenses from the Company. The legal fees and expenses related to Sichenzia Ross’ representation of the Company on SEC matters. The parties filed a stipulation with the Court on August 25, 2014, which extended the Company’s date to file an Answer to the lawsuit to September 22, 2014. On October 8, 2014, the Parties entered into a Settlement Agreement whereby the Company agreed to pay Sichenzia Ross $80,036.22 on or before November 28, 2014 or within three business days of the Company closing its current round of financing. The agreement to pay was secured by the Company providing Sichenzia Ross an “Affidavit of Judgment by Confession” in the amount of $80,036.22 to be filed only if the Company failed to pay the $80,036.22 by the due date, plus a five day cure period ending on December 03, 2014. On December 10, 2014, Sichenzia Ross filed the Judgement by Confession with the Court. This has been fully accrued for. | |||||||||||||
Bob J. Johnson & Associates Lawsuit. There has been one lawsuit filed on July 14, 2014 against the Company’s subsidiary, STW Water Process & Technologies, LLC (“STW Water”), Bob J. Johnson & Associates, Inc. (BJJA) v. Alan Murphy and STW Water & Process Technologies, LLC, Case No. CV50473 in the 238th District Court of Midland County, Texas (the “BJJA Lawsuit”). BJJA sought to enforce an allegedly enforceable covenant not to compete and a confidentiality agreement signed by Alan Murphy, STW Water’s recently hired President, who was a former vice president and employee of BJJA. On July 14, 2014, BJJA obtained a TRO against Alan Murphy, STW Water and those associated with the Defendants, which, by the Company’s ownership of STW Water, included the Company. The TRO temporarily prohibited the Company, STW Water and Alan Murphy from contacting two key customers of STW and STW Water, Pioneer Energy Resources and the City of St. Stockton, Texas. On July 28, 2014, the Court held a temporary injunction hearing, which resulted in the TRO being dissolved and the Court refusing to further enjoin STW, STW Water or Alan Murphy from competing with BJJA. The case is still on the docket; however, the Company, with the advice of Counsel, is confident that it will not go forward to a trial on the merits, thereby precluding any appreciable risk of a permanent injunction. | |||||||||||||
Arbitration Judgment | |||||||||||||
Viewpoint Securities, LLC Arbitration. On or about July 9, 2012, the Company and Stan Weiner, the Company's chief executive officer, received a demand for arbitration with the American Arbitration Association. The demand was filed by Viewpoint Securities LLC ("VP") who entered into an engagement agreement, dated March 9, 2008 (as amended on March 9, 2008, November 10, 2008, January 1, 2009, February 5, 2010, and December 1, 2010), with STW whereby the Company retained VP to act as its financial and capital markets advisor regarding equity and debt introduced by VP to the Company. The demand alleged breach of contract, breach of the covenant of good faith and fair dealings, negligence prayer for commissions and expenses incurred by VP in its efforts to provide introductions and attempt to provide financing to the Company from March 9, 2008 through February 2, 2012, the date of termination of the Agreement. VP seeks, among other things, $216,217 and a warrant to purchase 94,444 shares of the Company's common stock, payment of a $15,000 promissory note plus 3+ years of interest at 12%, attorneys' fees of $18,000 and costs of arbitration for filing fees and hearing fees. The Company believed it had valid defenses and contested these claims vigorously. On August 18, 2012, VP dismissed Stan Weiner from the claim with prejudice. A final arbitration hearing was held on February 3, 2014. On April 1, 2014, the Arbitrator issued an Award in favor of Viewpoint for $196,727 on Viewpoint's claim for $216,217 in fees and expenses, plus $5,541 in arbitration hearing fees and expenses; interest shall accrue at the rate of 10% per annum on any unpaid portion of the award commencing April 1, 2014. The Arbitrator denied Viewpoint's claims related to the Company's warrants, a $15,000 promissory note plus 12% interest and for $18,000 in attorneys' fees. The Award was final on April 1, 2014, and on October 28, 2014, Viewpoint filed a lawsuit in San Diego County, California Superior Court seeking to enforce its Arbitration Award, in Case No. 37-2014-00036027-CU-PA-CTL. On December 08, 2014, the Company filed a motion to dismiss the enforcement action due to Viewpoint having forfeited its corporate rights in California due to non-payment of California corporate taxes, and that motion is still pending before the Court. The full amount of this award has been accrued for in Accounts Payable. | |||||||||||||
Segment_Information
Segment Information | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Segment Information | |||||||||||||||||
Segment Information | We have three reportable segments, (1) water reclamation services, (2) oil & gas services, and (3) corporate overhead, as described herein. | ||||||||||||||||
Water reclamation services | |||||||||||||||||
The Company plans to provide customized water reclamation services. STW’s core expertise is an understanding of water chemistry and its application to the analysis and remediation of complex water reclamation issues. STW provides a complete solution throughout all phases of a water reclamation project including supplies, analysis, design, evaluation, implementation and operations. | |||||||||||||||||
Oil and Gas Services | |||||||||||||||||
Our subsidiaries, STW Energy, STW Pipeline Maintenance & Construction, and STW Oilfield Construction Services offer a wide a range of oilfield and pipeline construction, maintenance and support services. We employ qualified laborers with years of experience in the oil patch, and Supervisor/Sales people with particular oil patch knowledge in the Permian and Delaware Basins of West Texas, Eastern New Mexico, and in the Eagle Ford of South Texas. | |||||||||||||||||
Corporate Operations | |||||||||||||||||
Corporate operations include senior management salaries and benefits, accounting and finance, legal, business development, and other general corporate operating expenses. | |||||||||||||||||
The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). The following is a list of methodologies that we use for segment reporting that differ from our external reporting: | |||||||||||||||||
● | Liabilities including accounts payable, notes payable, and other liabilities are managed at the corporate level and not included in segment operations. | ||||||||||||||||
● | Interest expense and change in derivative liabilities are managed at the corporate level and not included in segment operations. | ||||||||||||||||
Segment Operations | |||||||||||||||||
Three months ended March 31, 2015 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Revenues | $ | 148,911 | $ | 2,530,490 | $ | -- | $ | 2,679,401 | |||||||||
Costs of revenues | 145,526 | 1,734,739 | -- | 1,880,265 | |||||||||||||
Operating expenses | 534,517 | 796,069 | 1,442,367 | 2,772,953 | |||||||||||||
Other income (expense) | -- | -- | (945,808 | ) | (945,808 | ) | |||||||||||
Segment income (loss) | $ | (531,132 | ) | $ | (318 | ) | $ | (2,388,175 | ) | $ | (2,919,625 | ) | |||||
Three months ended March 31, 2014 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Revenues | $ | -- | $ | 3,600,779 | $ | -- | $ | 3,600,779 | |||||||||
Costs of revenues | -- | 3,181,242 | -- | 3,181,242 | |||||||||||||
Operating expenses | 131,548 | 735,779 | 1,582,624 | 2,449,951 | |||||||||||||
Other income (expense) | -- | -- | (424,329 | ) | (424,329 | ) | |||||||||||
Segment income (loss) | $ | (131,548 | ) | $ | (316,242 | ) | $ | (2,006,953 | ) | $ | (2,454,743 | ) | |||||
Segment Assets | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Water | Oil & Gas | Corporate Operations | Consolidated | ||||||||||||||
Reclamation | Services | Totals | |||||||||||||||
Current Assets | $ | 2,207,139 | $ | 1,742,631 | $ | 103,223 | $ | 4,052,993 | |||||||||
Fixed assets | 490,230 | 488,525 | 72,203 | 1,050,958 | |||||||||||||
Segment Assets | $ | 2,697,369 | $ | 2,231,156 | $ | 175,426 | $ | 5,103,951 | |||||||||
31-Dec-14 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Current Assets | $ | 1,710,793 | $ | 3,561,024 | $ | 247,665 | $ | 5,519,482 | |||||||||
Fixed assets | 496,243 | 524,219 | 76,178 | 1,096,640 | |||||||||||||
Segment Assets | $ | 2,207,036 | $ | 4,085,243 | $ | 323,843 | $ | 6,616,122 | |||||||||
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Shares Issued |
On May 14, 2015, the Company issued 341,667 shares of common stock to two consultants for value of $230,501. | |
On May 15, 2015, the Company issued 26,000 shares of common stock to two consultants for value of $18,610. | |
On May 18, 2015, Company issued 206,667 shares of common stock to two consultant for value of $155,000. | |
On April 30, 2015, our wholly owned subsidiary, STW Water Process & Technologies, LLC (“STW Water”) entered into a work-in-process financing agreement with Crown Financial, LLC ("Crown"), pursuant to an Account Purchase Agreement and Guaranty (the “Account Purchase Agreement”), with the Company and the Company’s CEO, Stanley T. Weiner as guarantors for STW Water’s obligations. The Account Purchase Agreement is secured through a Security Agreement between STW Water as Debtor and Crown as the Secured Party (the “Security Agreement”), by a security interest in (the “Collateral”) STW Water’s instruments, accounts, contracts and rights to the payment of money, all general intangibles and all equipment; the Security Agreement also includes a list of items that are specifically excluded from Collateral. | |
Crown has authorized up to a $5,000,000 credit limit to STW Water under the Account Purchase Agreement, all obligations of which are guaranteed by the Company and Mr. Weiner personally. Neither the Company nor Stanley T. Weiner has received any compensation related to their serving as Guarantors of the Account Purchase Agreement. The Account Purchase Agreement is not a securities transaction and no Company securities are issuable thereunder; therefore, the Account Purchase Agreement and transactions contemplated thereby will not have any dilutive effect on the Company’s outstanding shares of common stock. | |
Under the terms of the Account Purchase Agreement, Crown may, at its sole discretion, accept certain of STW Water’s eligible large project contracts nominated by STW Water for the installation of reverse osmosis concentrates or desalination equipment with cities, water districts or other governmental entities. The Account Purchase Agreements is implemented as a form of purchase order financing for work invoiced by STW Water to its project customers for work yet to be performed by STW Water, and is not factoring of invoices for work already performed by STW Water. Upon Crown’s acceptance of a nominated project contract that STW Water has invoiced its customer for a project with milestone payments due as the work progresses, Crown will advance to the Company 20% of the entire project contract invoice for project start-up costs. Thereafter, STW Water submits work-in-process invoices from its vendors which Crown pays. As STW Water’s customer makes milestone payments on each project contract, Crown is repaid its advances, interest due and fees, with the remainder being paid to STW Water. Crown is entitled to deduct from the amounts paid to STW Water in connection with the accepted project contracts a Gross Contract Fee of 4% of the total amount to be billed by STW Water to its customer under the nominated/accepted project contract. As a result of the Guaranty Agreement, Crown will generally have full recourse against STW Water, Mr. Weiner and the Company in the event of nonpayment of any such purchased account. Crown has the discretion to require STW Water to repurchase any invoice related to an accepted contract which has not been fully paid within 95 days of original invoicing, plus STW Water will be obligated to pay Crown the Purchase Price of such uncollected project invoice plus interest at the maximum lawful interest rate per annum, minus any payments made on the project invoice. The Company and Weiner are also guarantors of STW Water’s repurchase obligations. | |
The Account Purchase Agreement shall continue until terminated by either party upon 30 days written notice. The Account Purchase Agreement contains covenants that are customary for agreements of this type and appoints Crown as attorney in fact for various activities associated with the purchased accounts receivable, including opening our mail, endorsing its name on related notes and payments, and filing liens against related third parties. The failure to satisfy covenants under the Account Purchase Agreement or the occurrence of other specified events that constitute an event of default could result in the acceleration of our repayment obligations or Crown enforcing its rights under the Security Agreement and taking possession of the collateral. The Account Purchase Agreement contains provisions relating to events of default that are customary for agreements of this type. | |
Original Issue Discount Bridge Note | |
On May 13, 2015, the Company issued a $385,000 original issue discount bridge note with an accredited investor. The bridge note includes $35,000 of original issue discount which yielded a net of $350,000 proceeds to the Company. The note bears interest at 5% to be paid at maturity, the note matures on June 13, 2015. In connection with the note, the Company agreed to issue 500,000 shares of its common stock and warrants to purchase up to 500,000 shares of the Company’s common stock at $0.59 per share. In the event of default, the Company agreed to reserve 4,000,000 shares of its common stock that will be released if the default is not cured within a 15 day cure period. |
Nature_of_the_Business_and_Sig1
Nature of the Business and Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Basis of presentation | The accompanying condensed consolidated financial statements of STW Resources Holding Corp (“STW,” “we,” “us, “our” and “our Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2015, which are included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. The December 31, 2014 condensed consolidated balance sheet was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for such year as filed on April 3, 2015. | ||||||||||||||||
History of the Company | STW Resources Holding Corp. (“STW” or the “Company”, is a corporation formed to utilize state of the art water reclamation technologies to reclaim fresh water from highly contaminated oil and gas hydraulic fracture flow-back salt water that is produced in conjunction with the production of oil and gas. STW has been working to establish contracts with oil and gas operators for the deployment of multiple water reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian Basin of Pennsylvania and West Virginia. STW, in conjunction with energy producers, operators, various state agencies and legislators, is working to create an efficient and economical solution to this complex problem. The Company is also evaluating the deployment of water processing technologies in the municipal wastewater and potable water industry. The Company is also involved in the desalination of brackish water and seawater for industrial and municipal use. | ||||||||||||||||
The Company’s operations are located in the United States of America and the principal executive offices are located at 3424 South County Road 1192, Midland, Texas 79706. | |||||||||||||||||
Consolidation Policy | The unaudited condensed consolidated financial statements for the three months ended March 31, 2015, include the accounts of the Company and its wholly owned subsidiaries: STW Water Process & Technologies LLC, STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and its 75% owned subsidiary STW Energy, LLC. The condensed consolidated financial statements as of March 31, 2014, include STW Resources Holding Corp, STW Oilfield Construction LLC, STW Pipeline Maintenance Construction, LLC, and STW Energy, LLC as the other subsidiaries noted above were not established during the quarterly period ended March 31, 2014. All significant intercompany transactions and balances have been eliminated in consolidation. | ||||||||||||||||
The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined. The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting. | |||||||||||||||||
Reclassifications | Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. The reclassifications as of December 31, 2015, are comprised of a $321,359 increase in deferred project costs, a $321,359 decrease in property and equipment, a $97,121 decrease in deferred loan fees, and a $97,121 increase in loan discounts. | ||||||||||||||||
Non-Controlling Interest | On June 25, 2013, the Company invested in a 75% limited liability company (“LLC”) interest in STW Energy Services, LLC (“STW Energy”). The non-controlling interest in STW Energy is held by Crown Financial, LLC, a Texas Limited Liability Company (“Crown” or “Crown Financial”). As of December 31, 2014, $2,500 was recorded as the equity of the non-controlling interest in our consolidated balance sheet representing the third-party investment in STW Energy, with a cumulative net loss attributable to non-controlling interests of $187,474 for the year ended December 31, 2014. During the three month period ended March 31, 2015, a net loss attributable to the non-controlling interest of $81,033 was incurred. As of March 31, 2015, the net deficit interest in the subsidiary held by the non-controlling interest is $268,507. | ||||||||||||||||
Going Concern and Management Plans | The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $41,950,763 as of March 31, 2015, and as of that date was delinquent in payment of $2,834,095 of sales and payroll taxes. As of March 31, 2015, $3,664,670 of notes payable are in default. Since its inception in January 2008 through December 31, 2014, management has raised equity and debt financing of approximately $20,000,000 to fund operations and provide working capital. The cash resources of the Company are insufficient to meet its planned business objectives without additional financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. | ||||||||||||||||
Use of Estimates | Condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long lived assets, the assumptions used to calculate its derivative liabilities, and equity instruments issued for financing and compensation. Actual results could differ from those estimates. | ||||||||||||||||
Accounts Receivable | Trade accounts receivable, net of allowance for doubtful accounts consists primarily of receivables from oil & gas services fees. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables, and once these receivables are determined to be uncollectible, they are written off either against an existing allowance account or as a direct charge to the condensed consolidated statement of operations. As of March 31, 2015 and December 31, 2014, the allowance for doubtful accounts were $26,015 and $77,211, respectively. | ||||||||||||||||
Loan Discounts | |||||||||||||||||
The Company amortizes loan discounts over the term of the loan using the effective interest method. | |||||||||||||||||
Concentration of Credit Risk | A financial instrument that potentially subjects the Company to concentration of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner per institution. At March 31, 2015, there were no account balances per institution that would have exceeded the $250,000 insurance limit. | ||||||||||||||||
The Company anticipates entering into long-term fixed-price contracts for its services with select oil and gas producers and municipal utilities. The Company will control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. | |||||||||||||||||
As of March 31, 2015, three vendors accounted for 11%, 7% and 5% of total accounts payable. During the three months ended March 31, 2015, three vendors accounted for 86% of total purchases. During the three months ended March 31, 2014, one vendor accounted for 70% of total purchases. | |||||||||||||||||
During the three months ended March 31, 2015, three customers accounted for 68%, 8% and 4% of net revenues. As of March 31, 2015, three customers accounted for 31%, 22% and 2% of accounts receivable. During the three months ended March 31, 2014, three customers accounted for 29%, 28% and 19% of net revenues. | |||||||||||||||||
Fair Value of Financial Instruments | “Fair value” is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. | ||||||||||||||||
The Company’s financial instruments consist of cash, accounts receivable, notes payable, accounts payable, accrued expenses and derivative liabilities. The carrying value for all such instruments except convertible notes payable and derivative liabilities approximates fair value due to the short-term nature of the instruments. Our derivative liabilities are recorded at fair value (see Note 5). | |||||||||||||||||
We determine the fair value of our financial instruments based on a three-level hierarchy for fair value measurements under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s use of assumptions to external and internal information. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair-value hierarchy: | |||||||||||||||||
Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently, we do not have any items classified as Level 1. | |||||||||||||||||
Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Currently, we do not have any items classified as Level 2. | |||||||||||||||||
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment. We use the Black-Scholes-Merton option pricing model (“Black-Scholes”) to determine the fair value of the financial instruments. | |||||||||||||||||
If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy level is based upon the lowest level of input that is significant to the fair value measurement. | |||||||||||||||||
Our derivative liabilities consist of embedded conversion features on debt, price protection features on warrants, and are classified as Level 3 liabilities. We use Black-Scholes to determine the fair value of these instruments (see Note 5). | |||||||||||||||||
Management has used the simplified Black Scholes model to estimate fair value of derivative instruments. Management believes that as a result of the relatively short term nature of the warrants and convertibility features, a lattice model would not result in a materially different valuation. | |||||||||||||||||
The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2015 and December 31, 2014. | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Fair value of Derivative Liability at March 31, 2015 | $ | -- | $ | -- | $ | 1,636,590 | $ | 1,636,590 | |||||||||
Fair value of Derivative Liability at December 31, 2014 | $ | -- | $ | -- | $ | 802,340 | $ | 802,340 | |||||||||
Accounting for Derivatives Liabilities | The Company evaluates stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. Financial instruments classified as a derivative instrument is marked-to-market at each balance sheet date and recorded as an asset or a liability with the change in fair value adjusted through the statement of operations in other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification to a liability are recorded at the fair value of the instrument on the reclassification date. | ||||||||||||||||
Certain of the Company’s embedded conversion features on debt, with anti-dilution provisions, and price protection features on outstanding common stock warrants are treated as derivatives for accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset or liability. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants and embedded conversion features as derivative liabilities contracts using the Black-Scholes model (see Note 5). | |||||||||||||||||
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services | Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. | ||||||||||||||||
Long-lived Assets and Intangible Assets | The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. | ||||||||||||||||
The Company had no such asset impairments during the three months ending March 31, 2015 or 2014. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services under development will continue. Either of these could result in future impairment of long-lived assets. | |||||||||||||||||
Revenue Recognition | During the year ended December 31, 2014, the Company entered into Master Services Agreements (“MSA”) with several major oil & gas companies. These MSAs contract the Company to provide a range of oil & gas support services including oilfield site construction and maintenance, pipeline maintenance, oil rig cleaning, site preparation, energy support services, and other oil & gas support services. The Company bills these customers pursuant to purchase orders issued under the MSAs. The revenues billed include hourly labor fees and equipment usage fees. The Company recognized revenues from these contracts as the services are performed under the customer purchase orders and no further performance obligations exist, generally in the form of a customer approval. During the three months ended March 31, 2015, the Company recognized $2,530,490 of revenues from these services contracts, which included $58,127 revenues from related parties. During the three months ending March 31, 2014 the Company realized revenue of $3,600,779 from services contracts, which included $39,992 of the service revenue was from related parties. | ||||||||||||||||
Business Segments | The Company has three reportable segments, (1) water reclamation services, (2) oil & gas services and (3) corporate operations. Segment information is reported in Note 9. | ||||||||||||||||
Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. | ||||||||||||||||
The Company maintains a valuation allowance with respect to deferred tax assets. The Company established a valuation allowance based upon the potential likelihood of realizing the deferred tax asset in the future. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any reduction in the valuation allowance will be included in income in the year of the change in estimate. | |||||||||||||||||
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at March 31, 2015 and December 31, 2014, respectively. | |||||||||||||||||
Common Stock and Common Stock Warrants Issued to Employees | The Company uses the fair value recognition provision of ASC 718, “Stock Compensation,” which requires the Company to recognize the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date. | ||||||||||||||||
At March 31, 2015 and December 31, 2014, the Company had no grants of employee common stock options or warrants outstanding. | |||||||||||||||||
Net Loss per Share | The basic net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive shares arising from debt or equity instruments. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of March 31, 2015 and December 31, 2014, the Company had 15,358,412 and 14,442,977 shares issuable upon conversion or exercise, respectively, which have been excluded as their effect is anti-dilutive. | ||||||||||||||||
Property and Equipment | Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives: | ||||||||||||||||
Computer equipment and software | 3 years | ||||||||||||||||
Furniture | 3 years | ||||||||||||||||
Machinery | 3-5 years | ||||||||||||||||
Stock Subscriptions Payable | The initial balance of stock subscriptions payable as of December 31, 2014, was $27,000 representing 41,539 shares to be issued. During the three months ended March 31, 2015, $10,000 of these stock subscriptions payable were issued representing 15,385 shares of common stock, included in the December 31, 2014 subscription payable. The remaining balance of stock subscriptions payable as of March 31, 2015, is $17,000 representing 26,154 shares to be issued. | ||||||||||||||||
Fees Payable in Common Stock | During the three months ended March 31, 2015, the Company agreed to issue an aggregate of 1,013,262 shares, valued at $834,649 in payment of performance bonuses, employment signing bonuses, consulting fees, and interest. During the three months ended March 31, 2015, the Company issued an aggregate of 2,385,312 shares of its common stock, valued at $2,139,287, in payment of performance bonuses, employment signing bonuses, consulting fees, and interest which left a remaining balance in fees payable in common stock of $1,479,073, or 1,987,712 shares. | ||||||||||||||||
Recently Issued Accounting Standards | Recent accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements. | ||||||||||||||||
In April 2015 the FASB issued Accounting Standards Update 2015-03 (ASU 2015-03) Simplifying Balance Sheet Presentation by Presenting Debt Issuance Costs as a Deduction from Recognized Debt Liability. The ASU is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2015. Early adoption is permitted. The new standard requires debt issuance costs to be classified as reductions to the face value of the related debt. The Company has reclassified debt issuance costs previously reported as other assets to loan discounts and debt issuance costs as a deduction of the debt liability. |
Nature_of_the_Business_and_Sig2
Nature of the Business and Significant Accounting Policies (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Fair Value of Derivative Liability | The following table presents certain financial instruments measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2015 and December 31, 2014. | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Fair value of Derivative Liability at March 31, 2015 | $ | -- | $ | -- | $ | 1,636,590 | $ | 1,636,590 | |||||||||
Fair value of Derivative Liability at December 31, 2014 | $ | -- | $ | -- | $ | 802,340 | $ | 802,340 | |||||||||
Estimated useful life of property and equipment | Property and equipment are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is depreciated or amortized on the straight-line method over the following estimated useful lives: | ||||||||||||||||
Computer equipment and software | 3 years | ||||||||||||||||
Furniture | 3 years | ||||||||||||||||
Machinery | 3-5 years | ||||||||||||||||
Property_Plant_and_Equipment_T
Property, Plant and Equipment (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Property Plant And Equipment Tables | |||||||||
Property, Plant and Equipment | Property, plant and equipment consisted of the following at March 31, 2015 and December 31, 2014: | ||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Office furniture and equipment | $ | 29,467 | $ | 29,467 | |||||
Tools and yard equipment | 729,735 | 729,735 | |||||||
Vehicles and construction equipment | 502,007 | 502,007 | |||||||
Leasehold improvements | 15,933 | 15,933 | |||||||
Total, cost | 1,277,142 | 1,277,142 | |||||||
Accumulated Depreciation and Amortization | (226,184 | ) | (180,502 | ) | |||||
Property and equipment, net | $ | 1,050,958 | $ | 1,096,640 |
Notes_Payable_Net_Tables
Notes Payable, Net (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes Payable Net Tables | |||||||||
Notes Payable | March 31, | December 31, | |||||||
Name | 2015 | 2014 | |||||||
14% Convertible Notes | $ | 2,296,342 | $ | 2,296,342 | |||||
12% Convertible Notes | 100,000 | 100,000 | |||||||
2015 Transfer Agreements | 1,375,000 | -- | |||||||
GE Note | 2,100,000 | 2,100,000 | |||||||
Deferred Compensation Notes | 279,095 | 279,095 | |||||||
Revenue participation notes | 2,371,500 | 2,337,500 | |||||||
Crown Financial note | 684,484 | 702,697 | |||||||
Dufrane Note Payable | 611,561 | 725,000 | |||||||
Black Pearl Note Payable | 777,096 | -- | |||||||
Other Short-term Debt | 55,000 | 55,000 | |||||||
Equipment finance contracts | 100,862 | 110,000 | |||||||
Capital lease obligation | 27,948 | 30,437 | |||||||
Unamortized debt discount and loan fees | (999,797 | ) | -117,483 | ||||||
Total debt | 9,779,091 | 8,618,588 | |||||||
Less: Current Portion | (7,900,661 | ) | (5,793,293 | ) | |||||
Total long term debt | $ | 1,878,430 | $ | 2, 825,295 | |||||
Unamortized loan discounts are applicable to notes payable as follows: | |||||||||
14% convertible notes | $ | -- | $ | 20,362 | |||||
Crown Financial note | 82,366 | 97,121 | |||||||
2015 Transfer Agreements | 917,431 | -- | |||||||
Total unamortized loan discounts | $ | 999,797 | $ | 117,483 | |||||
Revenue Participation Notes | As of March 31, 2015 and December 31, 2014, the Company has an outstanding balance of $2,371,500 and $2,337,500, respectively of Revenue Participation Notes comprised as follows: | ||||||||
March 31, | December 31, | ||||||||
Name | 2015 | 2014 | |||||||
2012 Revenue Participation Notes | $ | 165,000 | $ | 165,000 | |||||
2013 Revenue Participation Notes - STW Resources Salt Water Remediation | 302,500 | 302,500 | |||||||
2013 Revenue Participation Notes - STW Energy | 182,000 | 182,000 | |||||||
2013 Convertible Revenue Participation Notes - STW Pipeline | 115,000 | 115,000 | |||||||
2014 Revenue Participation Notes, Upton Project – STW Water | 1,607,000 | 1,573,000 | |||||||
Total revenue participation notes | $ | 2,371,500 | $ | 2,337,500 | |||||
Derivative_Liability_Tables
Derivative Liability (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
Warrants and embedded conversion options which have no observable market data | The following table presents our warrants and embedded conversion options which have no observable market data and are derived using Black-Scholes measured at fair value on a recurring basis, using Level 3 inputs, as of March 31, 2015 and December 31, 2014: | ||||||||
For the three months ended March 31, 2015 | For the year ended December 31, 2014 | ||||||||
Annual dividend yield | 0 | % | 0 | % | |||||
Expected life (years) | 0.00 - 0.50 | 0.60 - 0.47 | |||||||
Risk-free interest rate | 0.11% - 0.25 | % | 0.11% - 0.25 | % | |||||
Expected volatility | 160 | % | 735 | % | |||||
31-Mar-15 | 31-Dec-14 | ||||||||
Embedded Conversion features | $ | 1,620,142 | $ | 751,439 | |||||
Warrants | 16,448 | 50,901 | |||||||
$ | 1,636,590 | $ | 802,340 | ||||||
Warrants and embedded conversion options measured at fair value on a recurring basis | The following table presents the changes in fair value of our warrants and embedded conversion features measured at fair value (level 3 in the fair value hierarchy) on a recurring basis for each reporting period-end. | ||||||||
For the three months ended | For the year ended | ||||||||
31-Mar-15 | December 31, | ||||||||
2014 | |||||||||
Balance beginning | $ | 802,340 | $ | 1,630,985 | |||||
Value of derivative liability associated with JMJ note payable | -- | 42,592 | |||||||
Value of derivative liability attributable to conversion feature of Transfer Agreements | 1,108,030 | -- | |||||||
Value of derivative liability attributable to conversion of notes payable and accrued interest | -- | (694,149 | ) | ||||||
Change in derivative liability associated with conversion of notes payable and accrued interest | -- | (272,980 | ) | ||||||
Change in fair value | (273,780 | ) | 95,892 | ||||||
Balance ending | $ | 1,636,590 | $ | 802,340 | |||||
Stockholders_Deficit_Tables
Stockholders' Deficit (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
Securities to acquire common stock outstanding | As of March 31, 2015, the Company had the following securities outstanding which gives the holder the right to acquire the Company’s common stock outstanding: | ||||||||||||||
Security | Number of Underlying | Exercise | Expire | ||||||||||||
Common Shares | Price $ | ||||||||||||||
Warrants associated with the 12% Convertible Notes | 25,000 | 0.012 | 2015 | ||||||||||||
Warrants associated with 2013 Revenue Participation Notes | 180,872 | 1.20– 1.80 | 2015 | ||||||||||||
Warrants issued to Crown Financial, LLC | 666,667 | 1.2 | 2016 | ||||||||||||
Warrants issued on $20,000 short term loan | 33,333 | 1.2 | 2015 | ||||||||||||
Warrants issued with 2013 Unit Share Offering | 333,333 | 1.2 | 2015 | ||||||||||||
Warrants issued with 2014 Unit Share Offerings | 2,328,542 | 1.20– 1.50 | 2016 | ||||||||||||
Warrants issued with 2014 Unit Share Offering | 20,770 | 1.5 | 2017 | ||||||||||||
Sub-total of Warrants outstanding | 3,588,517 | ||||||||||||||
Common stock associated with the 12% Convertible Notes plus accrued interest | 1,422,803 | 0.12 | N/A | ||||||||||||
Common stock associated with Pipeline Convertible Revenue Participation notes | 164,513 | 0.72 | N/A | ||||||||||||
Common stock associated with 14% convertible notes plus accrued interest | 6,036,040 | 0.48 | N/A | ||||||||||||
Common stock associated with 2015 Transfer Agreements | 2,141,827 | 0.65 | N/A | ||||||||||||
Common stock associated with 2014 Unit Share Offerings | 17,000 | 0.65 | N/A | ||||||||||||
Common stock payable as fees | 1,987,712 | various | N/A | ||||||||||||
Total | 15,358,412 | ||||||||||||||
Warrant activity | A summary of the Company’s warrant activity and related information during the three months ended March 31, 2015 follows: | ||||||||||||||
Number of Shares | Weighted- Average | Remaining Contractual Life (Years) | Aggregate | ||||||||||||
Exercise Price | Intrinsic Value | ||||||||||||||
Outstanding at January 1, 2015 | 3,634,350 | $ | 1.27 | 1.18 | $ | 851,313 | |||||||||
Issued | -- | -- | -- | ||||||||||||
Exercised | -- | -- | |||||||||||||
Forfeited | -- | -- | |||||||||||||
Cancelled | -- | -- | |||||||||||||
Expired | -45,833 | 0.22 | |||||||||||||
Outstanding at March 31, 2015 | 3,588,517 | $ | 1.29 | 0.94 | $ | 792,563 | |||||||||
Exercisable | 3,588,517 | $ | 1.29 | 0.94 | $ | 792,563 | |||||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2015 | |||||||||||||
Restatements Tables | |||||||||||||
Future minimum lease payments | Future minimum lease payments under the capital lease and operating lease as of March 31, 2015, are as follows: | ||||||||||||
Years ending December 31: | Capital Lease | Operating Lease | Totals | ||||||||||
2015 | $ | 9,882 | $ | 87,750 | $ | 97,632 | |||||||
2016 | 13,176 | 117,000 | 130,176 | ||||||||||
2017 | 8,960 | 117,000 | 125,960 | ||||||||||
2018 | 117,000 | 117,000 | |||||||||||
Thereafter | - | 204,750 | 204,750 | ||||||||||
Total minimum lease payments | 32,018 | $ | 643,500 | $ | 675,518 | ||||||||
Less interest | 1,580 | ||||||||||||
Capital lease obligation | 30,438 | ||||||||||||
Less current portion | 10,382 | ||||||||||||
Long-term capital lease obligation | $ | 20,056 | |||||||||||
Minimum royalty obligation payable | As of March 31, 2015, the minimum royalty obligation payable under this agreement is as follows: | ||||||||||||
Minimum Royalty Obligation | |||||||||||||
Years ending December 31: | |||||||||||||
2015 | $ | 224,000 | |||||||||||
2016 | 240,000 | ||||||||||||
2017 | 240,000 | ||||||||||||
2018 | 240,000 | ||||||||||||
Thereafter | 120,000 | ||||||||||||
Total minimum royalty payments | 1,064,000 |
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Segment Information Tables | |||||||||||||||||
Segment Operations and Assets | Segment Operations | ||||||||||||||||
Three months ended March 31, 2015 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Revenues | $ | 148,911 | $ | 2,530,490 | $ | -- | $ | 2,679,401 | |||||||||
Costs of revenues | 145,526 | 1,734,739 | -- | 1,880,265 | |||||||||||||
Operating expenses | 534,517 | 796,069 | 1,442,367 | 2,772,953 | |||||||||||||
Other income (expense) | -- | -- | (945,808 | ) | (945,808 | ) | |||||||||||
Segment income (loss) | $ | (531,132 | ) | $ | (318 | ) | $ | (2,388,175 | ) | $ | (2,919,625 | ) | |||||
Three months ended March 31, 2014 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Revenues | $ | -- | $ | 3,600,779 | $ | -- | $ | 3,600,779 | |||||||||
Costs of revenues | -- | 3,181,242 | -- | 3,181,242 | |||||||||||||
Operating expenses | 131,548 | 735,779 | 1,582,624 | 2,449,951 | |||||||||||||
Other income (expense) | -- | -- | (424,329 | ) | (424,329 | ) | |||||||||||
Segment income (loss) | $ | (131,548 | ) | $ | (316,242 | ) | $ | (2,006,953 | ) | $ | (2,454,743 | ) | |||||
Segment Assets | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Water | Oil & Gas | Corporate Operations | Consolidated | ||||||||||||||
Reclamation | Services | Totals | |||||||||||||||
Current Assets | $ | 2,207,139 | $ | 1,742,631 | $ | 103,223 | $ | 4,052,993 | |||||||||
Fixed assets | 490,230 | 488,525 | 72,203 | 1,050,958 | |||||||||||||
Segment Assets | $ | 2,697,369 | $ | 2,231,156 | $ | 175,426 | $ | 5,103,951 | |||||||||
31-Dec-14 | |||||||||||||||||
Water | Oil & Gas | Corporate | Consolidated | ||||||||||||||
Reclamation | Services | Operations | Totals | ||||||||||||||
Current Assets | $ | 1,710,793 | $ | 3,561,024 | $ | 247,665 | $ | 5,519,482 | |||||||||
Fixed assets | 496,243 | 524,219 | 76,178 | 1,096,640 | |||||||||||||
Segment Assets | $ | 2,207,036 | $ | 4,085,243 | $ | 323,843 | $ | 6,616,122 | |||||||||
Nature_of_Business_and_Signifi
Nature of Business and Significant Accounting Policies (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Fair Value of Derivative Liability | $1,636,590 | $802,340 |
Level 1 [Member] | ||
Fair Value of Derivative Liability | ||
Level 2 [Member] | ||
Fair Value of Derivative Liability | ||
FairValueInputsLevel3Member | ||
Fair Value of Derivative Liability | $1,636,590 | $802,340 |
Nature_of_Business_and_Signifi1
Nature of Business and Significant Accounting Policies (Details 1) | 3 Months Ended |
Mar. 31, 2015 | |
Computer Equipment [Member] | |
Useful lives of Property, Plant and Equipment | 3 years |
Furniture [Member] | |
Useful lives of Property, Plant and Equipment | 3 years |
Machinery and Equipment [Member] | Minimum [Member] | |
Useful lives of Property, Plant and Equipment | 3 years |
Machinery and Equipment [Member] | Maximum [Member] | |
Useful lives of Property, Plant and Equipment | 5 years |
Nature_of_Business_and_Signifi2
Nature of Business and Significant Accounting Policies (Details Narrative) (USD $) | 2 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 86 Months Ended | ||
Dec. 05, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | Sep. 13, 2014 | Dec. 31, 2014 | Mar. 31, 2015 | Jun. 25, 2013 | |
Noncontrolling member interest | 250000.00% | 75.00% | |||||
Common stock issued | 31,683,150 | 28,194,953 | 31,683,150 | ||||
Preferred stock issued | |||||||
Net loss attributable to non-controlling interest | $81,033 | $187,474 | |||||
Net deficit interest in subsidiary held by non-controlling interest | -268,507 | -268,507 | |||||
Accumulated (Deficit) | -41,950,763 | -39,112,171 | -41,950,763 | ||||
Accrued sales and payroll taxes | -2,834,095 | -2,834,095 | |||||
Notes payable in default | 3,664,670 | 3,664,670 | |||||
Raised net equity and debt financing | 20,000,000 | ||||||
Proceeds from issuance of short term debt | 145,000 | ||||||
Proceeds from issuance of notes | 930,750 | 1,284,000 | 80,000 | ||||
Debt | 10,219,000 | ||||||
Equity | 5,875,000 | ||||||
Common Stock equivalents outstanding | 15,358,412 | 14,442,977 | 15,358,412 | ||||
Shares issued for consulting fees, value | 942,735 | ||||||
Revenues from service contracts | 2,530,490 | 3,600,779 | |||||
Revenues from related parties | 58,127 | 39,992 | |||||
Stock subscriptions | 10,000 | 27,000 | |||||
Shares to be issued | 41,539 | 41,539 | |||||
Shares in considerations - stock subscriptions | 2,311,875 | ||||||
Subscription payable issued - shares | 15,385 | ||||||
Subscription payable issued - amount | 1,252,000 | ||||||
Remaining balance of subscription payable | 17,000 | ||||||
Remaining balance of subscription payable - shares | 26,154 | ||||||
Shares issued in payment performance bonus | 1,013,262 | ||||||
Fees payable in common stock, value | 1,479,073 | 1,479,073 | |||||
Fees payable in common stock, shares | 1,987,712 | 1,987,712 | |||||
Share based compensation, value | 834,649 | ||||||
Value of shares issued for services rendered | 450,000 | ||||||
Property and equipment | 1,050,958 | 1,096,640 | 1,050,958 | ||||
Allowance for doubtful accounts | 26,015 | 77,211 | 26,015 | ||||
Scenario, Adjustment [Member] | |||||||
Deferred project costs | 321,359 | ||||||
Property and equipment | -321,359 | ||||||
Deferred loan fees | -97,121 | ||||||
Loan discounts | $97,121 | ||||||
Accounts Payable [Member] | Customer One [Member] | |||||||
Concentration risk | 11.00% | ||||||
Accounts Payable [Member] | Customer Two [Member] | |||||||
Concentration risk | 7.00% | ||||||
Accounts Payable [Member] | Customer Three [Member] | |||||||
Concentration risk | 5.00% | ||||||
Purchases [Member] | ThreeVendors [Member] | |||||||
Concentration risk | 86.00% | ||||||
Purchases [Member] | Two Vendors [Member] | |||||||
Concentration risk | 70.00% | ||||||
Net Revenue [Member] | Customer One [Member] | |||||||
Concentration risk | 68.00% | 29.00% | |||||
Net Revenue [Member] | Customer Two [Member] | |||||||
Concentration risk | 8.00% | 28.00% | |||||
Net Revenue [Member] | Customer Three [Member] | |||||||
Concentration risk | 7.00% | 19.00% | |||||
Accounts Receivable [Member] | Customer One [Member] | |||||||
Concentration risk | 31.00% | ||||||
Accounts Receivable [Member] | Customer Two [Member] | |||||||
Concentration risk | 22.00% | ||||||
Accounts Receivable [Member] | Customer Three [Member] | |||||||
Concentration risk | 2.00% |
Property_Plant_and_Equipment_D
Property, Plant and Equipment (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Property Plant And Equipment Details | ||
Office furniture and equipment | $29,467 | $29,467 |
Tools and yard equipment | 729,735 | 729,735 |
Vehicles and construction equipment | 502,007 | 502,007 |
Leasehold improvements | 15,933 | 15,933 |
Total, cost | 1,277,142 | 1,277,142 |
Accumulated Depreciation and Amortization | -226,184 | -180,502 |
Property and equipment, net | $1,050,958 | $1,096,640 |
Property_Plant_and_Equipment_D1
Property, Plant and Equipment (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Notes to Financial Statements | ||
Depreciation Expense | $45,682 | $52,684 |
Notes_Payable_Net_Details
Notes Payable, Net (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Total Debt | $9,779,091 | $8,618,588 |
Unamortized debt discount and loan fees | 999,797 | 117,483 |
Less: Current Portion | -7,900,661 | -5,793,293 |
Total Long Term Debt | 1,878,430 | 2,825,295 |
Equipment Contract [Member] | ||
Total Debt | 100,862 | |
Equipment Contracts [Member] | ||
Total Debt | 110,000 | |
CNotes 14% [Member] | ||
Total Debt | 2,296,342 | 2,296,342 |
Unamortized debt discount and loan fees | 20,362 | |
CNotes 12% [Member] | ||
Total Debt | 100,000 | 100,000 |
Transfer 2015 Agmts [Member] | ||
Total Debt | 1,375,000 | |
Unamortized debt discount and loan fees | 917,431 | |
GE Ionics [Member] | ||
Total Debt | 2,100,000 | 2,100,000 |
Deferred Comp Notes [Member] | ||
Total Debt | 279,095 | 279,095 |
Rev Part Notes [Member] | ||
Total Debt | 1,250,000 | 2,337,500 |
Crown Financial Notes | ||
Total Debt | 684,484 | |
Unamortized debt discount and loan fees | 82,366 | |
Dufrane Note [Member] | ||
Total Debt | 611,561 | 725,000 |
Black Pearl Note [Member] | ||
Total Debt | 777,096 | |
Other Debt [Member] | ||
Total Debt | 55,000 | 55,000 |
Capital Lease Obligations [Member] | ||
Total Debt | 27,948 | |
Crown Financial [Member] | ||
Total Debt | 702,697 | |
Unamortized debt discount and loan fees | 97,121 | |
Capital Lease Obligation [Member] | ||
Total Debt | $30,437 |
Notes_Payable_Net_Details_1
Notes Payable, Net (Details 1) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Revenue Participation notes | $9,779,091 | $8,618,588 |
ParticipationNote 1 [Member] | ||
Revenue Participation notes | 165,000 | 165,000 |
ParticipationNote 2 [Member] | ||
Revenue Participation notes | 302,500 | 302,500 |
ParticipationNote 3 [Member] | ||
Revenue Participation notes | 182,000 | 182,000 |
ParticipationNote 4 [Member] | ||
Revenue Participation notes | 115,000 | 115,000 |
ParticipationNote 5 [Member] | ||
Revenue Participation notes | 1,607,000 | 1,573,000 |
Rev Part Notes [Member] | ||
Revenue Participation notes | $1,250,000 | $2,337,500 |
Notes_Payable_Net_Details_Narr
Notes Payable, Net (Details Narrative) (USD $) | 2 Months Ended | 3 Months Ended | 12 Months Ended | |||
Dec. 05, 2014 | Mar. 31, 2015 | Sep. 30, 2014 | Mar. 31, 2014 | Sep. 30, 2013 | Dec. 31, 2014 | |
Warrants | 3,588,517 | 3,634,350 | ||||
Annual dividend yield | 0.00% | 0.00% | ||||
Expected volatility | 160.00% | 735.00% | ||||
Authorized shares | 191,666,667 | |||||
Proceeds from notes payable | $930,750 | $1,284,000 | $80,000 | |||
Note discount | 999,797 | 117,483 | ||||
Common stock issued at end of period | 31,683,150 | 28,194,953 | ||||
Common stock value | 31,686 | 28,197 | ||||
Principal converted | 741,912 | 25,000 | ||||
Increase in derivative liability | -273,780 | 834,930 | -13,273 | 1,059,717 | 95,892 | |
Total Debt amount | 9,779,091 | 8,618,588 | ||||
Related party interest expense | 29,884 | 42,719 | ||||
note payable to an accredited investor, amount | 143,281 | 60,698 | ||||
Interest expense, notes payable | 460,577 | 437,602 | 347,877 | |||
Amortization of debt discount and debt issuance costs | 296,449 | 43,801 | 28,788 | |||
Monthly lease payment | 593 | |||||
Capital lease | 30,438 | 20,362 | ||||
Lease interest rate | 10.00% | |||||
Reverse stock split | 1 for 6 | |||||
CNotes 14% [Member] | ||||||
Note discount | 20,362 | |||||
Common stock value | 812,607 | |||||
Principal converted | 39,425 | 9,568 | ||||
Repayment of accrued interest | -214,234 | |||||
Note interest rate | 14.00% | |||||
Total Debt amount | 2,296,342 | 2,296,342 | ||||
Notes payable to related parties | 171,892 | |||||
Interest expense, notes payable | 192,532 | |||||
Short-term Financing [Member] | ||||||
Annual dividend yield | 0.00% | |||||
Expected life (years) | 6 months | |||||
Risk-free interest rate | 0.11% | |||||
Expected volatility | 315.00% | |||||
Embedded conversion feature at issuance | 1,108,030 | |||||
Total Debt amount | 0 | |||||
CNotes 12% [Member] | ||||||
Warrants | 273,583 | |||||
warrants exercise price | $0.12 | |||||
notes convertible into common stock share amount | 1,422,803 | |||||
Common Stock issued during period | 1,137,417 | |||||
Common Stock issued during period, value | 614,205 | |||||
Principal converted | 225,000 | |||||
Repayment of accrued interest | 116,225 | |||||
Total note amount converted | 341,225 | |||||
Increase in derivative liability | 272,980 | |||||
Note interest rate | 12.00% | |||||
Total Debt amount | 100,000 | 100,000 | ||||
Interest expense, notes payable | 44,243 | |||||
Notes 12% [Member] | ||||||
Common Stock issued during period | ||||||
Common Stock issued during period, value | ||||||
Other Debt [Member] | ||||||
Common Stock issued during period | 171,667 | |||||
Total Debt amount | 55,000 | 55,000 | ||||
Loan facility amount outstanding | 25,000 | |||||
Notes payable to related parties | 30,000 | |||||
note payable to an accredited investor, amount | 30,000 | |||||
unsecured loan agreement, amount | 145,000 | |||||
interest rate of debt | 8.00% | |||||
GE Ionics [Member] | ||||||
Total Debt amount | 2,100,000 | 2,100,000 | ||||
Default note rate | 10.00% | |||||
STW original debt with GE, amount | 11,239,437 | |||||
Deferred Comp Notes [Member] | ||||||
Total Debt amount | 279,095 | 279,095 | ||||
Rev Part Notes [Member] | ||||||
Total Debt amount | 1,250,000 | 2,337,500 | ||||
ParticipationNote 5 [Member] | ||||||
Note interest rate | 15.00% | |||||
Total Debt amount | 1,607,000 | 1,573,000 | ||||
Principal required | 1,250,000 | |||||
Crown [Member] | ||||||
Total Debt amount | 1,000,000 | |||||
Loan facility amount outstanding | 684,484 | 702,697 | ||||
Related party interest expense | $48,756 | $36,703 | ||||
interest rate of debt | 15.00% |
Derivative_Liability_Details
Derivative Liability (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Annual dividend yield | 0.00% | 0.00% |
Expected volatility | 160.00% | 735.00% |
FairValueInputsLevel3Member | ||
Embedded conversion Options | 1,620,142 | 751,439 |
Warrants | 16,448 | 50,901 |
Increase (Decrease) in fair value | 1,636,590 | 802,340 |
Minimum [Member] | ||
Expected life (years) | 0 years | 7 months 6 days |
Risk-free interest rate | 0.11% | 0.11% |
Maximum [Member] | ||
Expected life (years) | 6 months | 5 months 19 days |
Risk-free interest rate | 0.25% | 0.25% |
Derivative_Liability_Details_1
Derivative Liability (Details 1) (USD $) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Sep. 30, 2014 | Mar. 31, 2014 | Sep. 30, 2013 | Dec. 31, 2014 | |
Derivative Liabilities Details 1 | |||||
Beginning Balance | $802,340 | $1,630,985 | $1,630,985 | ||
Value of derivative liability associated with JMJ note payable | 42,592 | ||||
Value of derivative liability attributable to conversion feature of Transfer Agreements | 1,108,030 | ||||
Value of derivative liability attributable to conversion of notes payable and accrued interest | -694,149 | ||||
Change in derivative liability associated with conversion of notes payable and accrued interest | -272,980 | ||||
Change in fair value | -273,780 | 834,930 | -13,273 | 1,059,717 | 95,892 |
Ending Balance | $1,636,590 | $802,340 |
Derivative_Liability_Details_N
Derivative Liability (Details Narrative) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Derivative Liability Details Narrative | ||
Common stock, authorized shares | 191,666,667 | |
Convertible debt interest rate | 14.00% | |
Volatility rate to value derivative instruments | 160.00% | 735.00% |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Repayment of note | $143,281 | $60,698 | |
Black Pearl Note [Member] | |||
Due to related parties | 37,084 | 37,084 | |
Crown Financial Notes | |||
Due to related parties | 1,039,545 | ||
Crown Financial [Member] | |||
Due to related parties | 2,035,495 | ||
Weiner [Member] | |||
Consulting fees incurred | 42,500 | 37,500 | |
Salary and consulting fees payable | 455,583 | 413,083 | |
Maddox [Member] | |||
Consulting fees incurred | 0 | 37,500 | |
Salary and consulting fees payable | 205,500 | 220,500 | |
Compensation and professional fees | 150,000 | 0 | |
DiFrancesco [Member] | |||
Consulting fees incurred | 24,000 | 0 | |
Salary and consulting fees payable | 9,000 | 0 | |
Compensation and professional fees | 15,000 | 0 | |
Seabolt [Member] | |||
Consulting fees incurred | 23,500 | 22,500 | |
Salary and consulting fees payable | 188,297 | 179,797 | |
Compensation and professional fees | 15,000 | 15,000 | |
Miranda Associates [Member] | |||
Compensation and professional fees | 65,749 | 148,598 | |
Accrued professional fees | 219,271 | 70,520 | |
Officers Salary [Member] | |||
Compensation and professional fees | 50,000 | 50,000 | |
Board of Directors [Member] | |||
Salary and consulting fees payable | 112,500 | 491,724 | |
Initial grant | 33,333 | ||
Initial cash fee compensation | 1,000 | ||
Compensation and professional fees | 112,500 | 16,750 | |
Due to related parties | 450,000 | 0 | |
Related party payable, cash advance | |||
Related party payable, common stock | 562,500 | 0 | |
Other Related Party [Member] | |||
Due to related parties | 1,054,944 | 139,763 | |
Related party sales | 58,127 | 39,992 | |
Dufrane [Member] | |||
Due to related parties | 611,561 | 725,000 | |
Repayment of note | $113,439 | $0 |
Stockholders_Deficit_Details
Stockholders' Deficit (Details) (USD $) | Mar. 31, 2015 |
Securities to acquire common stock outstanding | 15,358,412 |
Warrant 1 [Member] | |
Securities to acquire common stock outstanding | 250,000 |
Exercise price | 0.12 |
Warrant 5 [Member] | |
Securities to acquire common stock outstanding | 180,872 |
Warrant 5 [Member] | Minimum [Member] | |
Exercise price | 1.2 |
Warrant 5 [Member] | Maximum [Member] | |
Exercise price | 1.8 |
Warrant 3 [Member] | |
Securities to acquire common stock outstanding | 666,666 |
Exercise price | 1.2 |
Warrant 4 [Member] | |
Securities to acquire common stock outstanding | 33,333 |
Exercise price | 1.2 |
Warrant 6 [Member] | |
Securities to acquire common stock outstanding | 333,333 |
Exercise price | 1.2 |
Warrant 8 [Member] | |
Securities to acquire common stock outstanding | 2,328,542 |
Warrant 8 [Member] | Minimum [Member] | |
Exercise price | 1.2 |
Warrant 8 [Member] | Maximum [Member] | |
Exercise price | 1.5 |
Warrant 7 [Member] | |
Securities to acquire common stock outstanding | 20,770 |
Exercise price | 1.5 |
Warrant Total [Member] | |
Securities to acquire common stock outstanding | 3,588,517 |
Notes 1 [Member] | |
Securities to acquire common stock outstanding | 1,422,803 |
Exercise price | 0.12 |
Notes 2 [Member] | |
Securities to acquire common stock outstanding | 164,513 |
Exercise price | 0.72 |
Notes 3 [Member] | |
Securities to acquire common stock outstanding | 6,036,040 |
Exercise price | 0.48 |
Notes 4 [Member] | |
Securities to acquire common stock outstanding | 2,141,827 |
Exercise price | 0.65 |
Notes 5 [Member] | |
Securities to acquire common stock outstanding | 17,000 |
Exercise price | 0.65 |
Stock Fees [Member] | |
Securities to acquire common stock outstanding | 1,987,712 |
Stockholders_Deficit_Details_1
Stockholders' Deficit (Details 1) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Number of Shares Under Warrants | |
Warrants outstanding at beginning of period | 3,634,350 |
Warrants Issued | |
Warrants Exercised | |
Warrants Forfeited | |
Warrants Cancelled | |
Warrants Expired | -45,833 |
Warrants outstanding at end of period | 3,588,517 |
Warrants exercisable at end of period | 3,588,517 |
Weighted Average Exercise Price | |
Warrants outstanding at beginning of period | $1.27 |
Warrants Issued | |
Warrants Exercised | |
Warrants Forfeited | |
Warrants Cancelled | |
Warrants Expired | $0.22 |
Warrants outstanding at end of period | $1.29 |
Warrants exercisable at end of period | $1.29 |
Remaining Contractual Life (Years) | |
Warrants outstanding at beginning of period | 1 year 2 months 4 days |
Warrants outstanding at end of period | 11 months 8 days |
Warrants exercisable at end of period | 11 months 8 days |
Aggregate Intrinsic Value | |
Warrants outstanding at beginning of period | $851,313 |
Warrants expired during period | |
Warrants outstanding at end of period | 792,563 |
Warrants exercisable at end of period | $792,563 |
Stockholders_Deficit_Details_N
Stockholders' Deficit (Details Narrative) (USD $) | 3 Months Ended | 1 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2014 | |
Shares authorized | 10,000,000 | |||
Common stock shares authorized | 191,666,667 | |||
Shares outstanding | 15,358,412 | 14,442,977 | ||
Charitable contribution | $450,000 | |||
Value of shares issued for services rendered | 450,000 | |||
Officers compensation, value of shares | 462,221 | 423,683 | ||
Preferred Stock [Member] | ||||
Par value per share | $0.00 | |||
Common Stock Issuance 1 [Member] | ||||
Shares issued | 62,500 | |||
Shares issued, unit price | $1.56 | |||
Stock issued, value | 97,500 | |||
Decrease debt | 43,750 | |||
Consultant [Member] | ||||
Shares issued | 170,000 | |||
Shares issued, unit price | $1.40 | |||
Decrease debt | 91,800 | |||
Value of shares issued for services rendered | 238,000 | |||
Common Stock Issuance 2 [Member] | ||||
Shares issued | 281,167 | |||
Stock issued, value | 209,825 | |||
Investor [Member] | ||||
Shares issued | 158,335 | 15,385 | ||
Shares issued, unit price | $0.65 | |||
Stock issued, value | 225,128 | |||
Common Stock Issuance 3 [Member] | ||||
Shares issued | 378,334 | |||
Stock issued, value | 344,101 | |||
Common Stock Issuance 4 [Member] | ||||
Shares issued | 100,000 | |||
Shares issued, unit price | $0.68 | |||
Decrease debt | 68,000 | |||
Common Stock Issuance 5 [Member] | ||||
Shares issued | 150,001 | |||
Value of shares issued for services rendered | 119,500 | |||
Common Stock Issuance 7 [Member] | ||||
Shares issued | 225,000 | |||
Decrease debt | 187,000 | |||
Common Stock Issuance 8 [Member] | ||||
Shares issued | 100,000 | |||
Shares issued, unit price | $0.81 | |||
Decrease debt | 81,000 | |||
Common Stock Issuance 9 [Member] | ||||
Shares issued | 184,975 | |||
Shares issued, unit price | $0.65 | |||
Decrease debt | 120,233 | |||
Common Stock Issuance 10 [Member] | ||||
Shares issued | 100,000 | |||
Shares issued, unit price | $0.85 | |||
Decrease debt | 85,000 | |||
Common Stock Issuance 11 [Member] | ||||
Shares issued | 562,500 | |||
Shares issued, unit price | $0.80 | |||
Value of shares issued for services rendered | 450,000 | |||
Common Stock Issuance 12 [Member] | ||||
Shares issued | 100,000 | |||
Shares issued, unit price | $0.65 | |||
Value of shares issued for services rendered | 65,000 | |||
Common Stock Issuance 13 [Member] | ||||
Shares issued | 900,000 | |||
Shares issued, unit price | $0.80 | |||
Value of shares issued for services rendered | $720,000 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Future minimum lease payments | ||
Future minimum lease payments, 2015 | $97,632 | |
Future minimum lease payments, 2016 | 130,176 | |
Future minimum lease payments, 2017 | 125,960 | |
Future minimum lease payments, 2018 | 117,000 | |
Future minimum lease payments, Thereafter | 204,750 | |
Total future minimum lease payments, Capital Lease | 675,518 | |
Capital lease obligation | 30,438 | 20,362 |
Capital Lease Obligations [Member] | ||
Future minimum lease payments | ||
Future minimum lease payments, 2015 | 9,882 | |
Future minimum lease payments, 2016 | 13,176 | |
Future minimum lease payments, 2017 | 8,960 | |
Future minimum lease payments, Thereafter | ||
Total future minimum lease payments, Capital Lease | 32,018 | |
Less interest | 1,580 | |
Capital lease obligation | 30,438 | |
Less current portion | 10,382 | |
Long-term capital lease obligation | 20,056 | |
Operating Lease Expense [Member] | ||
Future minimum lease payments | ||
Future minimum lease payments, 2015 | 87,750 | |
Future minimum lease payments, 2016 | 117,000 | |
Future minimum lease payments, 2017 | 117,000 | |
Future minimum lease payments, 2018 | 117,000 | |
Future minimum lease payments, Thereafter | 204,750 | |
Total future minimum lease payments, Capital Lease | $643,500 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details 1) (Royalty Arrangement [Member], USD $) | Mar. 31, 2015 |
Royalty Arrangement [Member] | |
2015 | $224,000 |
2016 | 240,000 |
2017 | 240,000 |
2018 | 240,000 |
Thereafter | 120,000 |
Total minimum royalty payments | $1,064,000 |
Commitments_and_Contingencies_3
Commitments and Contingencies (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Capital lease obligation | $30,438 | $20,362 | |
Capital lease interest rate | 10.00% | ||
Option to purchase land and building | 825,500 | ||
Rental expense | 432,754 | ||
Rental expense to related party | 0 | 58,698 | |
Product purchase agreement term | 5 years | ||
Royalty expense, initial | 324,000 | ||
Royalty expense, quarter 1 | 60,000 | ||
Royalty expense, quarter 2 | 60,000 | ||
Royalty expense, quarter 3 | 100,000 | ||
Royalty expense, quarter 4 | 104,000 | ||
Royalty expense, thereafter | 240,000 | ||
Royalty payment rate | 3.00% | ||
Shares issued upon product purchase agreement | 66,667 | ||
Total Debt | 9,779,091 | 8,618,588 | |
SRFF [Member] | |||
Loss contingency | 180,036 | ||
Judgement amount | 80,036 | ||
Johnson Associates [Member] | |||
Loss contingency | 216,217 | ||
Note interest rate | 12.00% | ||
Judgement amount | 196,727 | ||
GE Ionics [Member] | |||
Loss contingency | 11,239,437 | ||
Total Debt | 2,100,000 | 2,100,000 | |
Weiner [Member] | |||
Annual salary | 180,000 | ||
Salary rate, monthly | 15,000 | ||
DiFrancesco [Member] | |||
Annual salary | 144,000 | ||
Salary rate, monthly | 12,000 | ||
Seabolt [Member] | |||
Annual salary | 96,000 | ||
Salary rate, monthly | 8,000 | ||
Land and Building [Member] | |||
Monthly rent payments | 9,750 | ||
Option to purchase land and building | 825,500 | ||
Trailer [Member] | |||
Monthly rent payments | 593 | ||
Capital lease obligation | 23,300 | ||
Capital lease interest rate | 10.00% | ||
Option to purchase land and building | 0 | ||
Machinery and Equipment [Member] | |||
Monthly rent payments | 505 | ||
Capital lease obligation | $14,854 | ||
Capital lease interest rate | 12.00% |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Segment Operations | |||
Revenues | $2,679,401 | $3,600,779 | |
Cost of revenues | 1,880,265 | 3,181,242 | |
Operating expenses | 2,772,953 | 2,449,951 | |
Other income (expense) | -945,808 | -424,329 | |
Net Loss | -2,919,625 | -2,454,743 | |
Segment Assets | |||
Current Assets | 4,052,993 | 5,519,482 | |
Fixed assets | 1,050,958 | 1,096,640 | |
Segment Assets | 5,103,951 | 6,616,122 | |
Water Reclamation [Member] | |||
Segment Operations | |||
Revenues | 148,911 | ||
Cost of revenues | 145,526 | ||
Operating expenses | 534,517 | 131,548 | |
Other income (expense) | |||
Net Loss | -531,132 | -131,548 | |
Segment Assets | |||
Current Assets | 2,207,139 | 1,710,793 | |
Fixed assets | 490,230 | 496,243 | |
Segment Assets | 2,697,369 | 2,207,036 | |
Oil and Gas Services [Member] | |||
Segment Operations | |||
Revenues | 2,530,490 | 3,600,779 | |
Cost of revenues | 1,734,739 | 3,181,242 | |
Operating expenses | 796,069 | 735,779 | |
Other income (expense) | |||
Net Loss | -318 | -316,242 | |
Segment Assets | |||
Current Assets | 1,742,631 | 3,561,024 | |
Fixed assets | 488,525 | 524,219 | |
Segment Assets | 2,231,156 | 4,085,243 | |
Corporate Segment [Member] | |||
Segment Operations | |||
Revenues | |||
Cost of revenues | |||
Operating expenses | 1,442,367 | 1,582,624 | |
Other income (expense) | -945,808 | -424,329 | |
Net Loss | -2,388,175 | -2,006,953 | |
Segment Assets | |||
Current Assets | 103,223 | 247,665 | |
Fixed assets | 72,203 | 76,178 | |
Segment Assets | $175,426 | $323,843 |
Segment_Information_Details_Na
Segment Information (Details Narrative) | 3 Months Ended |
Mar. 31, 2015 | |
Segment Information Details Narrative | |
Reportable segments | 3 |