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AND EXCHANGE COMMISSION</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Washington,
D.C. 20549</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">FORM
8-K</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">CURRENT
REPORT</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">PURSUANT
TO SECTION 13 OR 15(d) OF</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">THE
SECURITIES EXCHANGE ACT OF 1934</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Date of
Report (Date of earliest event reported): February 12, 2010</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><a name="FIS_UNIDENTIFIED_TABLE"><!--EFPlaceholder-->
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">WOOZYFLY
INC.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(Exact
name of registrant as specified in its charter)</font></div>
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            </td>
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">000-51430</font></div>
            </td>
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">20-3678799</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">619 West
Texas Avenue, Suite 126, Midland, Texas 79701</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(Address
of principal executive offices) (zip code)</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">432-686-7777</font></div>
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</a>Copies to:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Stephen
M. Fleming, Esq.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Law
Offices of Stephen M. Fleming PLLC</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">49 Front
Street, Suite 206</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Rockville
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(516) 833-5034</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):</font></div>
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)</font></div>
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)</font></div>
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))</font></div>
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This Form
8-K and other reports filed by Woozyfly Inc. (&#8220;Woozyfly&#8221; or the &#8220;Company&#8221;) from
time to time with the Securities and Exchange Commission (collectively the
"Filings") contain or may contain forward looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management as well as estimates and assumptions made by the Company's
management. When used in the filings the words "anticipate", "believe",
"estimate", "expect", "future", "intend", "plan" or the negative of these terms
and similar expressions as they relate to the Company&#8217;s or Company&#8217;s management
identify forward looking statements.&#160;&#160;Such statements reflect the
current view of the Company with respect to future events and are subject to
risks, uncertainties, assumptions and other factors (including the risks
contained in the section of this report entitled "Risk Factors") relating to the
Company&#8217;s industry, the Company&#8217;s operations and results of operations and any
businesses that may be acquired by the Company. Should one or more of these
risks or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended or planned.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Although
the Company&#8217;s management believes that the expectations reflected in the forward
looking statements are reasonable, the Company cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to conform these
statements to actual results. The following discussion should be read in
conjunction with the Company's financial statements and the related notes filed
with this Form 8-K.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In this
Form 8-K, references to "we," "our," "us," the "Company," "Woozy" or "Woozyfly"
refer to Woozyfly Inc., a Nevada corporation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
1.01 Entry into a Material Definitive Agreement.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
2.01&#160;&#160;Completion of Acquisition or Disposition of Assets.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Woozyfly, Inc. was organized September
11, 2003 (Date of Inception) under the laws of the State of Nevada, as GPP
Diversified, Inc. &#160;The business of the Company was to sell pet products via
the Internet. &#160;We were initially authorized to issue 25,000,000 shares of
its no par value common stock. &#160;On November 9, 2005, we amended our
articles of incorporation to increase our authorized capital to 100,000,000
shares with a par value of $0.001. &#160;Concurrently, we changed our name from
GPP Diversified, Inc. to Pet Express Supplies, Inc. &#160;On July 28, 2008, Pet
Express Supply, Inc. entered into an Exchange Agreement with each of the
shareholders of CJ Vision Enterprises, Inc., a Delaware corporation doing
business as Woozyfly.com, pursuant to which we changed our corporate name to
Woozyfly, Inc.&#160;, authorized the issuance of 10,000,000 blank check
preferred shares and effectuated a 6:1 stock split.&#160;&#160;On January 15,
2009, we ceased operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On May
12, 2009, Woozyfly filed a voluntary petition in the United States Bankruptcy
Court for the Southern District of New York (the &#8220;Bankruptcy Court&#8221;) seeking
reorganization relief under the provisions of Chapter&#160;11 of Title 11 of the
United States Code (the &#8220;Bankruptcy Code&#8221;). The Chapter&#160;11 case is being
administered under the caption In re Woozyfly, Inc. Case No.&#160;09-13022 (JMP)
(the &#8220;Chapter&#160;11 Case&#8221;). Woozyfly continued to operate its business as
debtor in possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court.&#160;&#160;In connection with the Chapter&#160;11 Case,
the Bankruptcy Court approved the arrangement pursuant to which MKM Opportunity
Master Fund Ltd agreed to provide a DIP loan in the amount up to $100,000 (the
&#8220;DIP Loan&#8221;).&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Company's 6% Secured Convertible Notes
due June 30, 2011 ("Convertible Notes"). As a result, all indebtedness
outstanding under these facilities and the notes became automatically due and
payable, subject to an automatic stay of any action to collect, assert, or
recover a claim against the Company and the application of applicable bankruptcy
law.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 21, 2010, we entered into an Agreement and Plan of Merger (&#8220;Merger
Agreement&#8221;) with STW Acquisition, Inc. (&#8220;Acquisition Sub&#8221;), a wholly owned
subsidiary of the Company, STW Resources, Inc. (&#8220;Acquiree&#8221; or &#8220;STW&#8221;) and certain
shareholders of STW controlling a majority of the issued and outstanding shares
of STW.&#160;&#160;Pursuant to the Merger Agreement, STW&#160;&#160;merged into
the Acquisition Sub resulting in an exchange of all of the issued and
outstanding shares of STW for shares of the Company on a one for one basis. At
such time, STW will become a wholly owned subsidiary of the
Company.&#160;&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>On February 9, 2010, the Court entered
an order confirming the Seconded Amended Plan of Reorganization (the &#8220;Plan&#8221;)
pursuant to which the Plan and the Merger was approved.&#160;&#160;&#160;It is
expected that the Plan will be effective February 19, 2010 (the &#8220;Effective
Date&#8221;). The</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">principal
provisions of the Plan are as follows:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;</font></div>
            </td>
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    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;</font></div>
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          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">general
      unsecured claims shall received 100,000 shares of common stock;
      and</font></div>
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    </div>
    <div>
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      Company&#8217;s equity interest shall be extinguished and
    cancelled.</font></div>
            </td>
          </tr></table>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the &#8220;Merger&#8221;).&#160;&#160;In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the &#8220;STW Acquisition Shares&#8221;) shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Considering
that, following the merger, the shareholders of STW control the majority of our
outstanding voting common stock and we effectively succeeded our otherwise
minimal operations to those that are theirs, STW is considered the accounting
acquirer in this reverse-merger transaction. &#160;A reverse-merger transaction
is considered, and accounted for as, a capital transaction in substance; it is
equivalent to the issuance of STW securities for our net monetary assets, which
are deminimus, accompanied by a recapitalization. Accordingly, we have not
recognized any goodwill or other intangible assets in connection with this
reverse merger transaction. STW is the surviving and continuing entities and the
historical financials following the reverse merger transaction will be those of
STW.&#160;&#160;We were a "shell company" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) immediately prior to our
acquisition of STW pursuant to the terms of the Merger Agreement.&#160;&#160;As
a result of such acquisition, our operations our now focused on the provision of
customized water reclamation services.&#160;&#160;Consequently, we believe that
acquisition has caused us to cease to be a shell company as we no longer have
nominal operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">STW
Overview</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW,
based in Houston, Texas, provides customized water reclamation
services.&#160;&#160;STW&#8217;s core expertise is an understanding of water chemistry
and its application to the analysis and remediation of complex water reclamation
issues. STW provides a complete solution throughout all phases of a water
reclamation project including analysis, design, evaluation, implementation and
operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW&#8217;s
expertise is applicable to several market segments including:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Gas
      shale hydro-fracturing flowback;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Oil
      and gas produced water;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">acid
      mine drainage (&#8220;AMD&#8221;);</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">desalination;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">brackish
      water; and</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">municipal
      waste water.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Understanding
water chemistry is the foundation of STW&#8217;s expertise. STW will provide detailed
chemical analysis of the input stream and of the process output that conforms to
the various environmental and legal requirements. STW becomes an integral part
of the water management process and provides a customized solution that
encompasses analysis, design and operations including pretreatment and
transportation.&#160;&#160;Simultaneously, STW evaluates the economic impact of
this process to the customer. These processes will use technologies that fit our
customer&#8217;s need: fixed, mobile or portable; evaporation, reverse-osmosis or
membrane technology, and any necessary pre-treatment, crystallization and
post-treatment. STW will also supervise construction, testing, and operation of
these systems. Our keystone is determining and optimizing the most appropriate
technology to effectively and economically address our customers&#8217; particular
requirements.&#160;&#160;As an independent solutions provider STW is
manufacturer-agnostic and is committed to the use of the right technology
demanded by the design process.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Market
Opportunities</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Gas shale fracturing
flowback water</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW is
actively pursuing opportunities in all the major shale formations in the United
States. The initial focus, in this sector, is the Marcellus Shale in
Pennsylvania.&#160;&#160;Presently, we believe there are about 800 producing
wells, the majority being simple vertical wells, and over sixty new wells in
Pennsylvania are being drilled each month.&#160;&#160;Most of the new wells
being drilled are horizontal, requiring about 3.5 million gallons of water per
well.&#160;&#160;There are 28 producers in the Marcellus, with the four largest
being Range Resources, Chesapeake Energy, Atlas Energy Resources and Seneca
Resources.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Unconventional
tight gas shales such as Marcellus require millions of gallons of fresh water to
drill and stimulate a new well.&#160;&#160;The water returns during the fracture
flowback (&#8220;frac&#8221;) and production (&#8220;production&#8221;) with salts or TDS at levels
unfit for human consumption.&#160;&#160;This flowback or produced water is
typically disposed of through various means such as controlled dilution to a
river, or lost from the ecosystem by injection into disposal
wells.&#160;&#160;STW will target the frac water market in the tight gas
formations first, and approach the produced water market for coal bed methane
and oil and gas production subsequently.</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
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      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Oil and
gas reservoirs are usually found in porous rocks, which also contain
saltwater.&#160;&#160;Cross linked gel fracture fluids with high &#8220;proppant&#8221;
loading (additives that prop open fissures in the geological formation caused by
hydraulic fracturing) have been utilized to fracture these zones in order to
gain permeability, allowing the oil and gas to flow to the well
bore.&#160;&#160;The unconventional shale formations have been common knowledge
for decades, but the cost of gas production was always considered to be
uneconomical.&#160;&#160;The wells were drilled and fractured with the same
crossed linked system as discussed above.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">All of
the wells were vertical and required stimulation about every three years with a
new fracture.&#160;&#160;Around 2001, the &#8220;slick water fracture&#8221; technique was
developed. This change required larger volumes of fresh water (1.2 million
gallons per fracture on a vertical well) to be used in the fracturing process, a
friction reducing polymer additive, and low concentrations of a proppant in the
hydraulic fracture fluid.&#160;&#160;Wells using this modified technique now can
economically produce gas for over eight years without
re-stimulation.&#160;&#160;The fresh water is believed to dissolve salts from
the shale over time and open up the natural fractures and fissures in the rock,
allowing more gas to be produced.&#160;&#160;In 2003, horizontal drilling rigs
were brought into the Barnett Shale and the slick water fracture volume
increased from one to eight plus million gallons per well.&#160;&#160;The slick
water fracture technique has become the standard for all of the shale formations
for stimulation of the wells.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This map
illustrates the location of the major shale formations that are discussed
below:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><img src="map.jpg" alt=""></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Marcellus
Shale</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Marcellus Shale formation, located in the Appalachian regions of Pennsylvania,
New York and West Virginia, is the major focus of the Company.&#160;&#160;The
Marcellus covers the largest land mass of any of the known shale zones to date,
and it is located close to the densely populated north-eastern corridor of the
United States.&#160;&#160;The water returns from the slick water fracture
contain significantly higher TDS levels than the Barnett Shale and also include,
in certain cases, extremely high levels of calcium, barium, strontium and
chloride ions.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
approximately 200,000 parts per million in TDS, the produced water from these
regions is nearly seven times the salinity of the ocean.&#160;&#160;The most
common practice utilized by the gas production industry in Pennsylvania for the
disposal of waste water streams produced by gas wells is to remove the oil, some
of the heavy metals and simply discharge this water to the rivers and
streams.&#160;&#160;The volume of water used in the gas well fracture process
has grown substantially over recent years with growth in both the absolute
number of active wells and with increased volumes of water in each
well.&#160;&#160;STW believes that today, the initial daily returns of one
Marcellus fracture well often exceed the volume of thousands of older oil and
gas wells.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">While
there are about 800 Marcellus gas wells in operation in the Marcellus shale
formation today, gas producers in the region are primarily engaged in
exploratory drilling process activities.&#160;&#160;The northern portion of the
state reportedly has some of the best geological formations for gas production,
but drilling activity has been curtailed as a result of limited water supply and
limited capacity to dispose of waste water.&#160;&#160;Because of economic
considerations in local communities, the investment of several billion dollars
by producers in lease acquisition for drilling purposes, and proximity to high
population areas, management believes that drilling activity utilizing hydraulic
fracturing methods will increase significantly in the future.</font></div><br>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Marcellus Shale Formation is believed to be approximately 30 million plus acres
in size. In comparison, the Barnett Shale Formation is approximately 2 million
acres in size and approximately 140 million barrels of produced water are
disposed of in deep disposal wells annually. Each one of the stationary systems
proposed by STW will be able to process approximately 23,000 barrels of water
per day, and the mobile systems will be capable of processing 1,700 barrels per
day. This is therefore a high priority focus for STW.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">With the
mountainous terrain in the Appalachian region, STW believes mobile or portable
evaporation units may provide a key part of the solution in this market by
helping gas producers minimize trucking in and out of production locations and
their neighboring communities.&#160;&#160;These systems may also be airlifted in
and out of drilling locations. Central evaporation and crystallization would
then be required to handle the remaining water and residual
brine.&#160;&#160;The central plants would also be equipped to generate calcium
chloride and sodium chloride salts.&#160;&#160;The sodium chloride would be
processed as rock salt for use in de-icing highways for public
safety.&#160;&#160;As discussed above, revenue from these salts would impact the
overall cost of reclamation, reinforcing the Company&#8217;s competitiveness in the
region.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Fayetteville
Shale</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Producers
in Arkansas&#8217; Fayetteville Shale face similar problems as those operating in the
Marcellus, as there are very limited brine disposal options.&#160;&#160;Most
disposal wells in the Fayetteville shale are located near Ft. Smith; over a
three hour drive from most of the producing gas wells. Although new disposal
wells are being permitted and are under evaluation in the Conway area, gas
producers remain uncertain as to whether the permitted volumes for these brine
injection wells will be sufficient for current and future production
needs.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
fracture system typically utilizes 50,000 to 65,000 barrels, or 2.0 to 2.8
million gallons of water. These wells typically flow back 1,000 to 1,500 bpd of
contaminated frac water for the first few days and then decline to under 100 bpd
for the next three months before finally declining to a rate of five bpd or
less.&#160;&#160;All of this flowback water is disposed of at land farms and
disposal wells.&#160;&#160;Recently the land farms have come under scrutiny due
to claims that these operations fail to comply with applicable regulations and
laws.&#160;&#160;Several land farm operations have been shut down because of
contamination of the areas surrounding these operations, significantly raising
the cost of disposal to the producers.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Water
quality varies with the location of the wells and can range from approximately
20,000 mg/l TDS for wells in the Searcy area to over 70,000 mg/l TDS for wells
in the northern and western portionsf.&#160;&#160;The Company believes water
reclamation coupled with deep well injection could provide a very cost effective
solution to producers in the Fayetteville zone.&#160;&#160;The lower TDS in this
shale, relative to other shales, would allow water recovery at rates in excess
of 90% at 20,000 mg/l TDS, and 75% at TDS levels of approximately 70,000
mg/l.&#160;&#160;These rates will dramatically reduce trucking cost to disposal
wells, and will provide fresh water for new wells or other applications such as
steam generation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As part
of the STW&#8217;s strategy in this region, the Company is actively seeking to educate
gas producers on the advantages of water reclamation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Barnett
Shale</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As
discussed above, the Barnett Shale, located in central and west-central Texas,
was the first shale formation to be developed with production starting nearly 25
years ago.&#160;&#160;In 2009, drilling activity was flat in the Barnett Shale
at current gas prices.&#160;&#160;A large influence for this leveling is the
increasing activity in the other gas formation such as the Haynesville,
Fayetteville and Marcellus.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Piceance
Basin</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
conventional frac process in the Piceance has been to incorporate the typically
low TDS flowback and produced waters as fracture fluids in new
wells.&#160;&#160;Previously, drilling has been completed throughout the year;
however, several producers only fracture in the summer months.&#160;&#160;For
these producers, excess water produced in the winter required storage in surface
containment facilities that created substantial environmental
risk.&#160;&#160;Treatment of this water prior to storage addressed this risk
and resulted in a seasonally high demand for water reclamation during winter
months.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Today,
producers in the Piceance Basin are generally slowing down drilling activity
while natural gas prices remain depressed.&#160;&#160;Whatever produced water is
currently generated is being hauled to other states for disposal.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Eagleford
ShaleFormation</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Eagleford Shale is a recently discovered formation located in South
Texas.&#160;&#160;Several experimental wells have been completed and to date
appear to be very profitable.&#160;&#160;This area has limited supplies of fresh
water, leading the Company to believe water reclamation will be a required
solution in order for producers to access a sufficient supply of frac water in
this market. Production of natural gas has been reported at levels in excess of
10 million cubic feet (&#8220;Mcf&#8221;) per day, and hundreds of barrels of condensate at
some of the wells. The Company expects to intensify its efforts to address this
market opportunity.</font></div>
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      </div>
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      </div>
      <div id="HDR">
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    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Haynesville
Shale</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
shale formation covers the northern half of Louisiana, southern Arkansas and
extends into northeastern Texas.&#160;&#160;It is the highest pressure zone of
all the shale formations discovered to date.&#160;&#160;Most of the wells are
horizontal, utilize the slick water fracture system, and each require about 6.5
million gallons of water.&#160;&#160;Production of natural gas has been reported
at levels in excess of 25 million cubic feet (&#8220;Mcf&#8221;) per day at some of the
wells in the Haynesville shale formation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Once
production starts at typical gas wells in this region, a surge of water
production occurs for a few days before water production declines to ten bpd or
less.&#160;&#160;There appears to be sufficient disposal well capacity in the
Haynesville to handle present production needs.&#160;&#160;The Company believes
that more disposal wells are being added in southern Arkansas and northeastern
Texas as needed.&#160;&#160;STW believes that Legislators in Louisiana are
currently reviewing policies on disposal wells and may alter these to increase
the deep injection well disposal capacity.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Cotton Valley zone actually produces most of the water in the
area.&#160;&#160;It has a TDS content of over 200,000 mg/l and therefore does
not lend itself to economical water reclamation.&#160;&#160;Crystallization
would be required, which is more expensive and would generate a salt cake that
is not required in the area.&#160;&#160;&#160;Consequently, this region is not a
high priority market for STW at this time.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Produced Water</font><font style="FONT-STYLE: italic; DISPLAY: inline">&#160;</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Shale
zones are typically dry geological formations devoid of any formation or connate
water, and hence the fracture flowback water comprises most of water that
returns following gas production.&#160;&#160;Outside of shale formations, where
most gas and oil production occurs, there is typically a reservoir of connate
water in the production zone that generates &#8220;produced&#8221; water. Produced water is
primarily salty water trapped in the reservoir rock and brought up along with
oil and/or gas during production, and is the most common oil field
waste.&#160;&#160;The quality of produced water varies significantly in
different parts of the world depending on the geology of the underlying
formation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In a
large number of the oil fields in the USA, secondary or tertiary means of
handling produced water storage, such as water floods and steam floods, are
typically utilized. These are operations where the produced water is used to
maintain reservoir pressure, prevent subsidence, and sweep the zone to remove
the oil. Most of these water floods utilize a fresh water source as a supply so
that sufficient volumes are available. As these fields age, less water is
required for the flood, so excess contaminated brines concentrate and require
disposal. As this water could be reclaimed with Thermal Evaporative
Technologies, STW believes that the market for reclaiming produced water outside
the shale reclamation projects represents a considerable opportunity for the
Company.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Texas is
the largest oil and gas production state in the nation and the produced water is
unfit for use, poses a threat to the environment and is typically injected into
deep injection wells. In accordance with Texas Railroad Commission regulations,
water placed in these disposal wells is rendered permanently unavailable for
re-use or consumption. The reclaimed water would available for many beneficial
uses, including agricultural and environmental applications, as well as re-use
in hydraulic fracturing operations. Deep injection well practices in every gas
and oil producing region in the world pose the same detrimental environmental
and resource conservation issues.&#160;&#160;The water reclamation products and
services offered by the Company could provide a significant part of the solution
to all constituencies concerned.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In the
steam floods of California, a large portion of the water is recycled through the
water treatment facility and converted back to steam.&#160;&#160;There are some
fields that there is excess water in the millions of gallons per day that is low
in TDS and could very economically be converted back to environmentally usable
water.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Acid mine drainage
(AMD)</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">AMD is
another sensitive environmental issue in the Appalachian Mountain
regions.&#160;&#160;We believe it has impaired more than 4,600 miles of
waterways in Pennsylvania alone. Drainage from old abandoned coal mines is
acidic, and insoluble metal oxides precipitate when the drainage enters a river,
lake or stream, damaging the marine ecosystem. The AMD discharge from a single
mine or coal tailing pile can range from 10 to more than 10,000 gallons per
minute. In just one example, the Lackawanna River in northeastern Pennsylvania
is being contaminated from at least seven monitored AMD locations with estimated
peak flow of 40 million gallons per day. STW has identified the state of
Pennsylvania as a customer for AMD purification and&#160;&#160;&#160;the
Marcellus producers (eg Range Resources, Chesapeake Energy, Atlas Energy
Resouces and Seneca Resources) as potential customers for the resultant
reclaimed water.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Acid Mine
Drainage is the number one environmental water issue throughout most of the
Appalachian Mountains.&#160;&#160;Coal was one of the largest industries in the
region. Unproductive and unprofitable mines were abandoned. Over time a large
number of these mining companies have gone out of business leaving the residual
&#8220;dirty coal&#8221; and the water flowing from the mines as a responsibility of the
states and federal government.&#160;&#160;Dirty coal is the coal that lies near
the edge of the main coal seam and contains a high concentration of
dirt.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As the
mines fill up with water overtime, the excess water flows out.&#160;&#160;Due to
contact with the minerals contained in the dirt, coal, salts and gases, the
water tends to become acidic.&#160;&#160;This lower pH tends to dissolve more
ions or salts such as iron, aluminum, calcium, and
sulfate.&#160;&#160;&#160;&#160;Iron and other metals upon oxidation form
insoluble salts such as iron oxide or rust.&#160;&#160;Once the acid mine
drainage enters a river, lake or stream, the water precipitates these metal
oxides.&#160;&#160;This forms an impervious film on the bed of the water
destroying the marine ecosystem.</font></div>
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      </div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
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      </div>
      <div id="HDR">
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</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Pennsylvania Department of Environmental Protection (&#8220;DEP&#8221;) typically constructs
passive treatment plants that require large acreage, where the process is
oxidation in large lagoons allowing the solids to precipitate and altering the
pH level by adding certain chemicals such as lime.&#160;&#160;The water leaving
these systems will support the growth of plants and animals.&#160;&#160;This
process is inherently more time-consuming and expensive, and because of the land
requirements, not suitable for all locations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW can
provide AMD treatment using a specially-designed mobile unit and sell the
processed AMD to the producers.&#160;&#160;The state will retain ownership of
the AMD, with STW having ownership rights to the processed water.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW&#8217;s
mobile AMD unit can handle about 250 gpm or about 360,000 gallons per
day.&#160;&#160;This mobile unit provides the same functionality as the current
passive system, but in minutes compared to weeks and months and with a much
smaller footprint. The state may provide incentives in the form of grants and/or
subsidies that cover the cost of AMD processing.&#160;&#160;The DEP has permits
in place for the disposal of the filter-pressed sludge. STW is also reviewing
all of the present passive system flow-rates and water quality for potential use
as supply water to producers.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Brackish
Water</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">World-wide,
there are brackish water zones that contain large volumes of
water.&#160;&#160;The water contains dissolved salts in the 0.5 to 2% (5,000 to
20,000 mg/l TDS) range and hence unfit for human use.&#160;&#160;This water can
be treated to reduce the TDS below 500 mg/l or 0.05% TDS making the water fit
for human consumption. Factors such as decreasing supplies of fresh ground and
surface water, increased competition for surface water resources, and changes in
population/demand centers are driving the need for brackish water for water
supply.&#160;&#160;STW&#8217;s potential customers are private companies and
municipalities serving fast growing metropolitan areas where demand for water is
outpacing the available supply.&#160;&#160;For example, aquifers in the Texas
Gulf Coast contain a large volume of brackish water (less than 10,000 ppm TDS)
that, with desalinization, will help meet increasing demand in the
region.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legislative and
Regulatory:</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Progressively
tighter regulations are demanding a thorough review of the entire water-use
cycle in industrial applications with the ultimate goal of encouraging and/or
mandating reclamation and re-use of water. STW works closely with Federal, State
and local regulators and environmental agencies to share our expertise and
knowledge on this complex issue and discuss our views on potential
solutions.&#160;&#160;The Company&#8217;s intimate knowledge of this process is a key
tool to assist their customers to better understand the legislative and
regulatory elements related to water management and advise them of various
alternatives</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Process</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW&#8217;s
process is predicated upon a thorough understanding of the customer&#8217;s water
needs and related issues. This understanding is developed through a series of
interactive discussions with the customer. The next phase is data gathering and
analysis. STW collects samples at various locations and at different time
intervals which are then tested at independent laboratories and analyzed by STW.
Based upon this analysis, STW would recommend a solution using the most
appropriate technologies and negotiate the acquisition and financing of these
technologies as well as contracts with engineering procurement construction
(&#8220;EPC&#8221;). Finally, STW oversees the EPC process and operates the
facility.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW&#8217;s
process is based upon a fundamental understanding of the core issue and
developing an appropriate solution using our experience and expertise. It
includes sampling and testing, analysis, design and as required by customers,
implementation and operation. Some of the steps involved are described
below:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
      inlet water quality must be determined and measurement of Total Dissolved
      Solids (TDS), hardness, barium, strontium, bromine, sulfate and
      hydrocarbon concentrations are
critical.</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
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            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Multiple
      samples over time are taken to ensure consistency and accuracy of inlet
      water quality measurement.</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">An
      understanding and analysis of potential uses for the reclaimed
      water.</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A
      site inspection to determine the various vessels needed such as tanks,
      pumps, pits, truck off loading racks, and engineering testing of the
      land.</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
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      analysis of fluid volumes and their variability over
  time.</font></div>
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<tr valign="top">
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      of time the water needs to be reclaimed at this
  site.</font></div>
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<tr valign="top">
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      of appropriate technology: fixed or mobile, evaporation, reverse osmosis
      or other.</font></div>
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<tr valign="top">
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<tr valign="top">
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            </td>
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              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">An
      investigation of the handling of the concentrated brines and any other
      residue from the reclamation
process.</font></div>
            </td>
          </tr></table>
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<tr valign="top">
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      options on the residue including potential use of the
      by-products.</font></div>
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          </tr></table>
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developed relationships with a number of manufacturers that offer best-of-class
technologies applicable to its customer base. These technologies include thermal
evaporation, membrane technology and reverse osmosis and are available as fixed
or mobile units with varying capacities. Various pre and post-treatment options
are available as necessary including crystallizers that process very high TDS
(&gt;150,000 mg/l).</font></div>
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7 -</font></div>
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</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-WEIGHT: bold">Thermal
Evaporation:</font> This process is capable of handling waters that contain up
to 150,000 mg/l TDS,&#160;with fresh water recovery rates from 50 to 90% or
greater depending on inlet water quality. The recovered fresh water, or
&#8220;distillate&#8221;, is highly purified water from the evaporative process and has
multiple re-use applications. It is particularly applicable in the gas shale and
oil production facilities for reclaiming frac and produced waters.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
technology is scalable and can be deployed as mobile units that can process
72,000 gallons per day (&#8220;gpd&#8221;), or as portable units that can process 216,000
gpd, or as fixed central units capable of processing up to 2,880,000
gpd.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Residual
brine concentrate can, depending on local conditions and producer&#8217;s priorities,
either be disposed off in deep injection wells or be treated further through a
Crystallizer that reduces it into distillate and commercially valuable salt
residuals.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-WEIGHT: bold">Reverse
Osmosis:</font> Waters that are below 34,000 mg/l of total dissolved solids and
contain low levels of barium, strontium, bromine, and sulfate can be reclaimed
through a reverse osmosis unit (RO).&#160;&#160;Reverse osmosis is the process
of forcing a solvent from a region of high solute concentration through a
semi-permeable membrane to a region of low solute concentration by applying a
pressure in excess of the osmotic pressure.&#160;&#160;The membranes used for
reverse osmosis are generally designed to allow only water to pass through while
preventing the passage of solutes (such as salt ions).&#160;&#160;This process
is best known for its use in desalination (removing the salt from sea water to
get fresh water), but it has also been used to purify fresh water for medical,
industrial and domestic applications. Recovery rates for seawater to drinking
water are about 50%.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A stream
of concentrated brine or higher TDS is the by-product.&#160;&#160;This brine can
be properly disposed of or utilized as a feed solution to a brine concentrator
or crystallizer. The latter ensures higher quality water with lower TDS levels
for industrial Uses.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Most
oilfield waters cannot be processed through an RO membrane since they contain
barium, strontium, or bromine. The barium and strontium are very large molecules
and they plug the membrane and create damage or permanent fouling of the
membrane.&#160;&#160;Bromine and other such halogens react with the membrane and
destroy its integrity.&#160;&#160;There are few oil field waters that could be
processed through this technology but a thorough study is required to ensure
success.&#160;&#160;STW Resources will utilize this technology where the water
chemistry can be processed through RO membranes.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-WEIGHT: bold">Membrane
Bioreactor:&#160;&#160;</font>A Membrane BioReactor (&#8220;MBR&#8221;) is a combination of
biological and ultrafiltration technologies.&#160;&#160;The biological area
provides the same process utilized in all sewage treatment
facilities.&#160;&#160;Bacteria are maintained in an aerobic condition which
cause decay in all of the organic materials contained in the water, and
oxidizing these organic materials into low molecular weight acids, usually
acetic acid.&#160;&#160;Maintaining the bacteria in an oxygen rich environment
prevents mutatation or growth of any anaerobic bacteria, which would produce
inorganic acids such as hydrogen sulfide.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">A filter
membrane removes the water fraction from the unit.&#160;&#160;The membrane
provides filtration in the 0.01 microns or lower range which is sufficient
enough to remove viruses, bacteria, and other colloidal
materials.&#160;&#160;The water exiting the units is potable water and safe for
human consumption.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Marketing &amp;
Sales</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW&#8217;s
business proposition is to provide comprehensive, necessary water treatment
solutions. We work closely with our customers to evaluate their water treatment
needs, understand how these may change over time, assess the regulatory and
economic factors and then design an optimal solution.&#160;&#160;As illustrated
in the chart to the right, STW offers a broad array of technical solutions
coupled with a service suite and financial structuring options that provide our
customers with the ability to obtain a turnkey solution to their waste water
disposal challenges.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-WEIGHT: bold">Gas Shales:
</font>Most of the natural gas producers in each of the shale formations are
already well known to the Company.&#160;&#160;STW personnel have developed many,
and in some cases, long standing relationships with key personnel responsible
for well completion and remedial operations at each gas producer.&#160;&#160;STW
monitors production plans at the producer level, the acreage acquisitions at the
shale formations and trends that relate to the demand for water reclamation by
region.&#160;&#160;In addition, the Company maintains detailed databases that
monitor drilling permits, rig counts and other key statistics that forecast gas
production rates by geography.&#160;&#160;These activities allow the Company to
anticipate demand for its services and to prioritize its sales calling effort on
those producers for whom fresh water supply is an issue or where shale water
disposal pose the greatest challenges.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
8 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
foundation of the Company&#8217;s sales strategy is to become an integral part of its
customer&#8217;s water management function.&#160;&#160;This involves identifying and
finding solutions to customer needs through a multi&#8211;step, consultative
approach:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Evaluate
      drilling program and production expansion
plans.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Identify
      and define fracture water supply needs and waste brine generation
      levels.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Study
      the flowback water volumes and chemistry over
  time.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Generate
      economic models jointly with producers, with full consideration of all
      costs of obtaining, utilizing, and disposing of the
  water.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Evaluate
      various water reclamation options, from equipment to logistics,
      and&#160;&#160;&#160;develop financial models for all the
      options.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Provide
      a customized presentation comparing present practices to all of the
      options of water reclamation available to the customer, for buy-in to the
      best scenarios.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Jointly
      develop a presentation of the best scenarios for water management (present
      and future) for use by upper management.&#160;&#160;Support the
      presentation as required.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Review
      and determine optimal system design, location and financial
      structure.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Develop
      a time line for water reclamation
  implementation.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Execute
      definitive off-take and/or other agreements satisfactory to all
      parties.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW is
able to facilitate this part of the sales process through its detailed knowledge
of the gas production process and economics, shale formation geology, frac water
chemistry, well completion techniques and logistics and regional regulatory
landscapes. This expertise reduces the time required during the evaluative stage
of the sales process and fosters a positive working relationship with our
customers.&#160;&#160;STW then works together with its manufacturing partners to
complete the technical solution, develop ancillary system requirements (balance
of plant) evaluate cost and operating data, model the financial performance of
the system and define remaining project parameters and an installation
timeline.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Water
reclamation is a new paradigm for natural gas producers. Educating them about
the economic, environmental and political benefits is key to long-term
adoption.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Some of
the issues that operators are facing currently in the Marcellus Shale
are:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Water
      consumption and usage restrictions on the Susquehanna River are very
      restrictive.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">There
      are only 8 deep injection wells in Pennsylvania, all of which are already
      at or close to capacity. New deep wells are being drilled, but the
      permitting process and actual drilling costs are proving to be
      expensive.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Trucking
      costs from $3.10 to over $10 / barrel, and generate a number of complaints
      about truck traffic, noise and the associated wear and tear on the roads.
      The cost to dispose of the water into the commercial disposal wells is
      $1.50 to $3.00 per barrel in addition to the trucking
    costs.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Reclaimed
      water will not require a consumption permit for use, as it has already
      been consumed once.&#160;&#160;Trucks can bring brine to the Water
      Reclamation facility and return with fresh water for the next
      fracture.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
      crystallization process will produce rock salt that meets the requirements
      of ASTM Standards for road salt. PennDOT purchases between 600,000 and
      1,000,000 tons of road salt each year and local municipalities purchase an
      additional 500,000 tons. An STW 1 million gal/day facility will produce
      approximately 88,500 to 106,000 tons of rock salt per
  year.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">By
      2011 any new permits for disposal to the rivers will require total
      dissolved solids (TDS) removal.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At this
time, in the Marcellus Shale, only a couple of operators have the necessary
scale for a captive facility. Most operators are still in the exploratory
drilling stage, with single wells being drilled over a wide region.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Based on
the geographical mountainous terrain, the producers are constructing the well
sites on the higher elevations so that they do not interfere with the
agricultural and cattle ranch business conducted in the valleys.&#160;&#160;In a
large number of examples a multiple well pad is constructed and then the wells
are directional drilled and completed in the Marcellus.&#160;&#160;One central
water pit is permitted to hold the drilling and fracture water.&#160;&#160;As
the fracture is conducted, the flowback and produced water is presently trucked
to an approved disposal facility.&#160;&#160;In some cases the producers are
recycling some of the early low TDS flowback water by filtration and then
blending into the new fresh water.&#160;&#160;All of the fresh water utilized by
all of the wells must be trucked to the site and then all of the flowback and
produced water is trucked away.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW would
locate mobile evaporation equipment at the well site.&#160;&#160;The flowback
water would be processed and the distilled water generated would be placed into
the fracture water pit.&#160;&#160;The residual brine from the evaporation
process would be trucked to an approved disposal facility or taken to a STW
central crystallizer.&#160;&#160;The crystallizer would provide additional fresh
water that could be trucked (2 way freight) back to the fracture
pit.&#160;&#160;About 98% of the available water from the residual brine or the
high TDS produced water would be recovered.&#160;&#160;Additional bi-products of
sodium chloride for use in Highway deicing and a solution of calcium chloride
would be generated.</font></div><br>
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      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
9 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Competition</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In the
oil and gas industry, current fracturing and produced water disposal methods &#8211;
deep injection wells and surface water disposal &#8211; represent the Company&#8217;s
greatest source of competition.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Brine Discharge / Deep
Injection Wells</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In many
gas shale fields, disposal through a deep injection well offers a cost-effective
(though environmentally questionable) alternative to water reclamation.&#160; If
suitable geology exists, high TDS flowback waters can be disposed by injection
into a deep discharge brine well.&#160; There are operative brine discharge
wells in each of the major shale formations, particularly in the Barnett shale
formation in Texas where many empty oil wells are converted for brine discharge
use.&#160; There are only eight such discharge wells in the state of
Pennsylvania. Management believes these are presently operating at close to
capacity.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Surface Water
Disposal</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Similarly,
surface water disposal facilities (rivers, streams and drainage creeks) offer a
competitive alternative to water reclamation.&#160;&#160;At river discharge
facilities, flowback and produced waters are treated to remove naturally
occurring radioactive materials, some suspended solids and well completion
chemicals before discharge.&#160;&#160;Dissolved salts are not removed and
therefore are added to surface water systems where they degrade water quality,
pollute the environment and disrupt wildlife habits.&#160;&#160;Many states have
taken action to reduce or eliminate altogether the availability of surface water
disposal for gas well waste water streams.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In the
Marcellus shale, there are several treatment facilities that remove only the oil
and heavy metals, then discharge the water to certain rivers (where permitted),
and range in size from 20,000 to 200,000 gallons per day. &#160;The treatment
does not remove salts, so the waters that are being discharged into the river
system retain high TDS contamination levels.&#160; In April of 2009, the
Pennsylvania DEP regulated this type of treatment by limiting it to existing
permitted facilities only through January 2011, at which time treatment to
remove the TDS (salts) will have to be implemented.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
following companies provide pre-discharge brine treatment
solutions:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company accepts flowback and produced waters from gas producers operating in the
Marcellus and other regions in Pennsylvania, removes the oil, heavy metals, and
discharges the water to certain rivers in Pennsylvania. &#160;Advanced Waste
operates one discharge facility in the western part of the Pennsylvania. Sunbury
operates an experimental river discharge site in conjunction with the
Pennsylvania Department of Environmental Protection. &#160;Sunbury&#8217;s primary
business is the operation of waste coal fired power plants, and it has obtained
a permit to discharge significant volumes of contaminated water into certain
rivers in Pennsylvania. &#160;Acid Mine Drainage is presently processed through
large acreage passive systems.&#160;&#160;These systems provide oxidation
followed by a long settling time for the heavy metals to precipitate and
possibly some pH adjustment before the water enters the river or
stream.&#160;&#160;There are several companies that construct such facilities
under contract with the governmental agency.&#160;&#160;At this time there is no
one that provides mobile AMD processing.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legal
Proceedings</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Except
for the current dispute with GE Water &amp; Process Technologies (&#8220;GE Water&#8221;),
we are currently not a party to any legal or administrative proceedings and are
not aware of any pending or threatened legal or administrative proceedings
against us in all material aspects. We may from time to time become a party to
various legal or administrative proceedings arising in the ordinary course of
our business.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
entered into a Memorandum of Understanding with GE Water, a unit of General
Electric Company, dated February 14, 2008 (&#8220;MOU&#8221;) to jointly develop off-take
agreements with oil and gas operators for the deployment of multiple water
reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian
Basin.&#160;&#160;STW and GE Water formalized their relationship on May 22,
2008, by entering into a definitive Teaming Agreement (&#8220;Teaming Agreement&#8221;),
which superseded the MOU.&#160;&#160;The Teaming Agreement was drafted in
accordance with the terms of the MOU and provides greater certainty as to each
party&#8217;s responsibilities and as to the process of entering into agreements with
and providing services to customers.&#160;&#160;The Teaming Agreement sets forth
the terms and conditions that will govern STW and GE Water relationship when STW
is successful in selling its services to an identified prospect.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April
2008, STW entered into a purchase order with GE Water (&#8220;Purchase Order&#8221;), for
the purchase of a modularized produced water evaporator system (the &#8220;Evaporator
System&#8221;) capable of processing approximately 720,000 gallons per
day.&#160;&#160;The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.&#160;&#160;As of September 30, 2009, STW has
paid a total of approximately $4.7 million.&#160;&#160;Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.&#160;&#160;STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November&#160;28,&#160;2008, the fourth installment payment of $1.5 million
which was due on February&#160;27, 2009, and the fifth installment payment of
$1.8 million which was due on August&#160;28,&#160;2009.&#160;&#160;The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September&#160;30, 2009, totaled $9.0 million.&#160;&#160;In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.&#160;&#160;Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.&#160;&#160;This change order obligated STW to additional payments totaling
approximately $1.2 million.</font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
10 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.&#160;&#160;GE
Water took no further action with respect to the notice of default until
August&#160;13,&#160;2009.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.&#160;&#160;At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.&#160;&#160;If, after February
13, 2010, GE Water elected to not extend STW&#8217;s payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW&#8217;s Purchase Order due to STW&#8217;s inability to pay the
current amounts due.&#160;&#160;GE Water also demanded a &#8220;termination&#8221; payment
of $750,000.&#160;&#160;In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water&#8217;s belief that STW was
insolvent.&#160;&#160;GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.&#160;&#160;On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water&#8217;s unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water&#8217;s October 1, 2009 letter. <font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW&#8217;s merger and capital raise in
February2010.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Number of
Employees</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Other
than our directors and officers, presently we have one employee including one
full time employee.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Property</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
principal offices are located at 619 West Texas Avenue, Suite 126, Midland,
Texas&#160;&#160;79701, which includes 1,250 square feet in office
space.&#160;&#160;We pay $1,200 per month in rent and our lease is month to
month.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">RISK
FACTORS</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Our limited operating history makes
it difficult for us to evaluate our future business prospects and make decisions
based on those estimates of our future performance</font>.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We did
not begin operations of our business until February 2008.&#160;&#160;We have a
limited operating history and have generated limited revenue.&#160;&#160;As a
consequence, it is difficult, if not impossible, to forecast our future results
based upon our historical data.&#160; Reliance on the historical results may not
be representative of the results we will achieve, particularly in our combined
form.&#160; Because of the uncertainties related to our lack of historical
operations, we may be hindered in our ability to anticipate and timely adapt to
increases or decreases in revenues or expenses.&#160; If we make poor budgetary
decisions as a result of unreliable historical data, we could be less profitable
or incur losses, which may result in a decline in our stock
price.&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">STW&#8217;s
results of operations have not resulted in profitability and we may not be able
to achieve profitability going forward.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
incurred a net loss amounting to $6,310,500 for the period from inception
(January 28, 2008) through September 30, 2009.&#160;&#160;In addition, as of
September 30, 2009, STW has liabilities of $12,122,949. If we incur additional
significant operating losses, our stock price, may decline, perhaps
significantly.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
management is developing plans to alleviate the negative trends and conditions
described above.&#160;&#160;Our business plan is speculative and unproven. There
is no assurance that we will be successful in executing our business plan or
that even if we successfully implement our business plan, that we will be able
to curtail our losses now or in the future.&#160;&#160;Further, as we are a new
enterprise, we expect that net losses will continue and our working capital
deficiency will exacerbate.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
depend upon key personnel and need additional personnel.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
success depends on the continuing services of Stanley Weiner, our chief
executive officer and director.&#160;&#160;The loss of Mr. Weiner could have a
material and adverse effect on our business operations.&#160;&#160;Additionally,
the success of the Company&#8217;s operations will largely depend upon its ability to
successfully attract and maintain competent and qualified key management
personnel. As with any company with limited resources, there can be no guaranty
that the Company will be able to attract such individuals or that the presence
of such individuals will necessarily translate into profitability for the
Company.&#160;&#160;Our inability to attract and retain key personnel may
materially and adversely affect our business operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">We must effectively manage the growth
of our operations, or our company will suffer.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">To manage
our growth, we believe we must continue to implement and improve our operational
and marketing departments. We may not have adequately evaluated the costs and
risks associated with this expansion, and our systems, procedures, and controls
may not be adequate to support our operations. In addition, our management may
not be able to achieve the rapid execution necessary to successfully offer our
products and services and implement our business plan on a profitable basis. The
success of our future operating activities will also depend upon our ability to
expand our support system to meet the demands of our growing business. Any
failure by our management to effectively anticipate, implement, and manage
changes required to sustain our growth would have a material adverse effect on
our business, financial condition, and results of operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Our
business requires substantial capital, and if we are unable to maintain adequate
financing sources our profitability and financial condition will suffer and
jeopardize our ability to continue operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We
require substantial capital to support our operations.&#160;&#160;If we are
unable to maintain adequate financing or other sources of capital are not
available, we could be forced to suspend, curtail or reduce our operations,
which could harm our revenues, profitability, financial condition and business
prospects.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Regulatory
requirements may have a negative impact upon our business.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">While our
services are subject to substantial regulation under federal, state, and local
laws, we believe that the services are materially in compliance with all
applicable laws. However, to the extent the laws change, if we introduce new
services in the future or if we commence working in a new area, some or all of
our services may not comply with applicable federal, state, or local laws.
Further, certain federal, state, and local laws and industrial standards
currently regulate electrical and electronics equipment. Although standards for
electric vehicles are not yet generally available or accepted as industry
standards, our products may become subject to federal, state, and local
regulation in the future. Compliance with this regulation could be burdensome,
time consuming, and expensive.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
automobile products are subject to environmental and safety compliance with
various federal and state regulations, including regulations promulgated by the
EPA, NHTSA, and various state boards, and compliance certification is required
for each new model year. The cost of these compliance activities and the delays
and risks associated with obtaining approval can be substantial. The risks,
delays, and expenses incurred in connection with such compliance could be
substantial.</font></div><br>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Risks
associated with the collection, treatment and disposal of wastewater may impose
significant costs.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 27pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
wastewater collection, treatment and disposal operations of our subsidiaries are
subject to substantial regulation and involve significant environmental risks.
If collection systems fail, overflow or do not operate properly, untreated
wastewater or other contaminants could spill onto nearby properties or into
nearby streams and rivers, causing damage to persons or property, injury to
aquatic life and economic damages, which may not be recoverable in
rates.&#160;&#160;Liabilities resulting from such damage could adversely and
materially affect our business, results of operations and financial condition.
Moreover, in the event that we are deemed liable for any damage caused by
overflow, our losses might not be covered by insurance policies, and such losses
may make it difficult for us to secure insurance in the future at acceptable
rates.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">If
the Company is unable to reach an agreement with GE, GE will retain possession
of the Evaporator System and retain all payments made to GE to date, which would
significantly reduce the overall value of the Company and may result in the
Company ceasing operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
entered into a Memorandum of Understanding with GE Water, a unit of General
Electric Company, dated February 14, 2008 (&#8220;MOU&#8221;) to jointly develop off-take
agreements with oil and gas operators for the deployment of multiple water
reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian
Basin.&#160;&#160;STW and GE Water formalized their relationship on May 22,
2008, by entering into a definitive Teaming Agreement (&#8220;Teaming Agreement&#8221;),
which superseded the MOU.&#160;&#160;The Teaming Agreement was drafted in
accordance with the terms of the MOU and provides greater certainty as to each
party&#8217;s responsibilities and as to the process of entering into agreements with
and providing services to customers.&#160;&#160;The Teaming Agreement sets forth
the terms and conditions that will govern STW and GE Water relationship when STW
is successful in selling its services to an identified prospect.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April
2008, STW entered into a purchase order with GE Water (&#8220;Purchase Order&#8221;), for
the purchase of a modularized produced water evaporator system (the &#8220;Evaporator
System&#8221;) capable of processing approximately 720,000 gallons per
day.&#160;&#160;The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.&#160;&#160;As of September 30, 2009, STW has
paid a total of approximately $4.7 million.&#160;&#160;Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.&#160;&#160;STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November&#160;28,&#160;2008, the fourth installment payment of $1.5 million
which was due on February&#160;27, 2009, and the fifth installment payment of
$1.8 million which was due on August&#160;28,&#160;2009.&#160;&#160;The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September&#160;30, 2009, totaled $9.0 million.&#160;&#160;In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.&#160;&#160;Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.&#160;&#160;This change order obligated STW to additional payments totaling
approximately $1.2 million.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.&#160;&#160;GE
Water took no further action with respect to the notice of default until
August&#160;13,&#160;2009.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.&#160;&#160;At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.&#160;&#160;If, after February
13, 2010, GE Water elected to not extend STW&#8217;s payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW&#8217;s Purchase Order due to STW&#8217;s inability to pay the
current amounts due.&#160;&#160;GE Water also demanded a &#8220;termination&#8221; payment
of $750,000.&#160;&#160;In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water&#8217;s belief that STW was
insolvent.&#160;&#160;GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.&#160;&#160;On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water&#8217;s unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water&#8217;s October 1, 2009 letter. <font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW&#8217;s merger and capital raise in
January 2010.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If the
Company is unable to reach an agreement with GE Water whereby STW is again able
to proceed with the Purchase Order and the Teaming Agreement, the Company would
lose its rights to the Evaporator System (this is currently the Company&#8217;s only
significant asset), which could result in the Company ceasing operations and, in
turn, would result in a complete loss of your investment.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
will require significant capital requirements for equipment, commercialization
and overall success.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We will
require additional financing for our operations, to purchase equipment and to
establish a customer base.&#160;&#160;We anticipate that we will require a
minimum of $10.0 to $15.0 million in additional capital over the next six months
to pursue our business plan.&#160;&#160;We cannot assure you that we will obtain
any additional financing through any other means.&#160;&#160;Additional
financing may not be available to us on acceptable terms, if at
all.&#160;&#160;Unless we raise additional financing, we will not have
sufficient funds to complete the purchase of equipment and commercialization of
our services.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Our
additional financing requirements could result in dilution to existing
stockholders.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We will
require additional financings obtained through one or more transactions which
effectively dilute the ownership interests of holders of our Common
Stock.&#160;&#160;We have the authority to issue additional shares of Common
Stock and Preferred Stock as well as additional classes or series of ownership
interests or debt obligations which may be convertible into any class or series
of ownership interests in the Company.&#160;&#160;The Company is authorized to
issue 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock.&#160;&#160;Such securities may be issued without the approval or other
consent of the holders of the Common Stock.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">A
small number of existing shareholders own a significant amount of our Common
Stock, which could limit your ability to influence the outcome of any
shareholder vote.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our
executive officers, directors and shareholders holding in excess of 5% of our
issued and outstanding shares, beneficially own over31.9% of our Common Stock,
before giving effect to the Offering. Under our Articles of Incorporation and
Nevada law, the vote of a majority of the shares outstanding is generally
required to approve most shareholder action.&#160;&#160;As a result, these
individuals will be able to significantly influence the outcome of shareholder
votes for the foreseeable future, including votes concerning the election of
directors, amendments to our Articles of Incorporation or proposed mergers or
other significant corporate transactions.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
face competition.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We face
competition from existing companies in reclamation of oil and gas waste water
space that provide similar services to the Company&#8217;s.&#160;&#160;Our competitors
may have longer operating histories, greater name recognition, broader customer
relationships and industry alliances and substantially greater financial,
technical and marketing resources than we do.&#160;&#160;Our competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
rely on confidentiality agreements that could be breached and may be difficult
to enforce.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Although
we believe that we take reasonable steps to protect our intellectual property,
including the use of agreements relating to the non-disclosure of our
confidential information to third parties, as well as agreements that provide
for disclosure and assignment to us of all rights to the ideas, developments,
discoveries and inventions of our employees and consultants while we employ
them, such agreements can be difficult and costly to
enforce.&#160;&#160;Although we generally seek to enter into these types of
agreements with our consultants, advisors and research collaborators, to the
extent that such parties apply or independently develop intellectual property in
connection with any of our projects, disputes may arise concerning allocation of
the related proprietary rights.&#160;&#160;If a dispute were to arise
enforcement of our rights could be costly and the result
unpredictable.&#160;&#160;In addition, we also rely on trade secrets and
proprietary know-how that we seek to protect, in part, through confidentiality
agreements with our employees, consultants, advisors or others.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Despite
the protective measures we employ, we still face the risk that: agreements may
be breached; agreements may not provide adequate remedies for the applicable
type of breach; our trade secrets or proprietary know-how may otherwise become
known; our competitors may independently develop similar technology; or our
competitors may independently discover our proprietary information and trade
secrets.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
have not paid dividends in the past and do not expect to pay dividends in the
future.&#160;&#160;Any return on investment may be limited to the value of our
common stock</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We have
never paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Our
stock price and trading volume may be volatile, which could result in
substantial losses for our stockholders.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
equity trading markets may experience periods of volatility, which could result
in highly variable and unpredictable pricing of equity securities. The market
price of our common stock could change in ways that may or may not be related to
our business, our industry or our operating performance and financial condition.
In addition, the trading volume in our common stock may fluctuate and cause
significant price variations to occur. We have experienced significant
volatility in the price of our stock over the past few years. We cannot assure
you that the market price of our common stock will not fluctuate or decline
significantly in the future. In addition, the stock markets in general can
experience considerable price and volume fluctuations.</font></div><br>
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      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
14 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
have not voluntary implemented various corporate governance measures, in the
absence of which, shareholders may have more limited protections against
interested director transactions, conflict of interest and similar
matters.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the NASDAQ Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges are those that address board of
directors' independence, audit committee oversight, and the adoption of a code
of ethics. While we intend to adopt certain corporate governance measures such
as a code of ethics and established an audit committee, Nominating and Corporate
Governance Committee, and Compensation Committee of our board of <a name="FORM8K_HTM_EOLPAGE14"><!--EFPlaceholder-->
</a>directors, we presently do not
have any independent directors. We intend to expand our board membership in
future periods to include independent directors. It is possible that if we were
to have independent directors on our board, stockholders would benefit from
somewhat greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by our
sole director who has an interest in the outcome of the matters being decided.
Prospective investors should bear in mind our current lack of both corporate
governance measures and independent directors in formulating their investment
decisions.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">We
may be exposed to potential risks relating to our internal controls over
financial reporting and our ability to have those controls attested to by our
independent auditors.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the
Securities and Exchange Commission adopted rules requiring smaller reporting
companies, such as our company, to include a report of management on the
company's internal controls over financial reporting in their annual reports for
fiscal years ending on or after December 15, 2007.&#160;&#160;We will be
required to include the management report in the annual report for the year
ending December 31, 2009. In addition, for our fiscal year ending December 31,
2009 the independent registered public accounting firm auditing our financial
statements must also attest to and report on management's assessment of the
effectiveness of our internal controls over financial reporting as well as the
operating effectiveness of our internal controls. In the event we are unable to
receive a positive attestation from our independent auditors with respect to our
internal controls, investors and others may lose confidence in the reliability
of our financial statements and our ability to obtain financing as needed could
suffer.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">If
a public market for our common stock develops, trading will be limited under the
SEC&#8217;s penny stock regulations, which will adversely affect the liquidity of our
common stock.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
trading price of our common stock is less than $5.00 per share and, as a result,
our common stock is considered a "penny stock," and trading in our common stock
would be subject to the requirements of Rule 15g-9 under the Exchange Act. Under
this rule, broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements. Generally, the broker/dealer must make an individualized
written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">SEC
regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity of securities
in the secondary market because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the <a name="FORM8K_HTM_EOLPAGE15"><!--EFPlaceholder-->
</a>penny stock rules, other risks
associated with trading in penny stocks could also be price fluctuations and the
lack of a liquid market. An active and liquid market in our common stock may
never develop due to these factors.</font></div><br>
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      </div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
15 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
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        </div>
      </div>
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      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">MANAGEMENT&#8217;S
DISCUSSION AND ANALYSIS</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Forward
Looking Statements</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Some of
the statements contained in this Form 8-K that are not historical facts are
"forward-looking statements" which can be identified by the use of terminology
such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Form 8-K, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div>
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<tr>
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              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
            </td>
            <td valign="top" width="90%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Our
      ability to attract and retain
management;</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td valign="top" width="6%">
              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
            </td>
            <td valign="top" width="90%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Our
      ability to raise capital when needed and on acceptable terms and
      conditions;</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;</font></div>
    <div>
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<tr>
            <td valign="top" width="6%">
              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
            </td>
            <td valign="top" width="90%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">The
      intensity of competition;</font></div>
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          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;</font></div>
    <div>
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<tr>
            <td valign="top" width="6%">
              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
            </td>
            <td valign="top" width="90%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">General
      economic conditions;</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;</font></div>
    <div>
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<tr>
            <td valign="top" width="6%">
              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
            </td>
            <td valign="top" width="90%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Changes
      in regulations and our ability obtain permits from jurisdictions in which
      we operate; and</font></div>
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    </div>
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    <div>
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<tr>
            <td valign="top" width="6%">
              <div style="TEXT-INDENT: -18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#61623;&#61472;&#61472;</font></div>
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">The
      extent to which the market for water reclamation services exists and the
      pace at which it may grow if at all.</font></div>
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            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;All
written and oral forward-looking statements made in connection with this Form
8-K that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Our Plan
of Operation should be read in conjunction with our financial statements
included herein.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Overview</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 21, 2010, Woozyfly entered into an Agreement and Plan of Merger (&#8220;Merger
Agreement&#8221;) with STW Acquisition, Inc. (&#8220;Acquisition Sub&#8221;), a wholly owned
subsidiary of the Company, STW Resources, Inc. (&#8220;STW&#8221;) and certain shareholders
of STW controlling a majority of the issued and outstanding shares of
STW.&#160;&#160;Pursuant to the Merger Agreement, STW will be merged into the
Acquisition Sub resulting in an exchange of all of the issued and outstanding
shares of STW for shares of the Company on a one for one basis. At such time,
STW will become a wholly owned subsidiary of the Company.&#160;&#160;The Merger
Agreement is subject to the Bankruptcy Court confirmation as well as standard
closing conditions.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
February 9, 2010, the Court entered an order confirming the Seconded Amended
Plan of Reorganization (the &#8220;Plan&#8221;) pursuant to which the Plan and the Merger
was approved.&#160;&#160;&#160;It is expected that the Plan will be effective
February 19, 2010 (the &#8220;Effective Date&#8221;). The</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">principal
provisions of the Plan are as follows:</font></div>
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    <div>
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<tr valign="top">
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              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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<tr valign="top">
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            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;</font></div>
            </td>
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    <div>
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<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">general
      unsecured claims shall received 100,000 shares of common stock;
      and</font></div>
            </td>
          </tr></table>
    </div>
    <div>
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<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      Company&#8217;s equity interest shall be extinguished and
    cancelled.</font></div>
            </td>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the &#8220;Merger&#8221;).&#160;&#160;In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the &#8220;STW Acquisition Shares&#8221;) shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.</font></div>
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    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
16 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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</font></div>
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that, following the merger, the shareholders of STW control the majority of our
outstanding voting common stock and we effectively succeeded our otherwise
minimal operations to those that are theirs, STW is considered the accounting
acquirer in this reverse-merger transaction. &#160;A reverse-merger transaction
is considered, and accounted for as, a capital transaction in substance; it is
equivalent to the issuance of STW securities for our net monetary assets, which
are deminimus, accompanied by a recapitalization. Accordingly, we have not
recognized any goodwill or other intangible assets in connection with this
reverse merger transaction. STW is the surviving and continuing entities and the
historical financials following the reverse merger transaction will be those of
STW.&#160;&#160;We were a "shell company" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) immediately prior to our
acquisition of STW pursuant to the terms of the Merger Agreement.&#160;&#160;As
a result of such acquisition, our operations our now focused on the provision of
customized water reclamation services.&#160;&#160;Consequently, we believe that
acquisition has caused us to cease to be a shell company as we no longer have
nominal operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Results
of Operations</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Nine
Months Ended September 30, 2009 Compared to Nine months <font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Ended September 30,
2008</font></font></div>
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nine months ended September 30, 2009 and 2008 was $34,000 and $0
respectively.&#160; Revenue for 2009 was generated in conjunction with a test of
its technology for a potential customer.</font></font></div>
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nine months ended September 30, 2009 were $3,246,480, and consisted of payroll
and payroll taxes ($1,634,830), legal and professional fees ($779,124), stock
based compensation ($600,300) and ($232,226)&#160;&#160;in other administrative
expenses including travel to the prospective sites.&#160;&#160;Our expenses for
the nine months ended September 30, 2008 were $1,725,444 and consisted of
payroll and payroll taxes ($728,662), legal and professional fees ($501,119),
stock based compensation ($202,557) and ($293,106)&#160; in other administrative
expenses.&#160;&#160;The reason for the increase in comparing the nine months
ended September 30, 2008 to the same period for 2009 was due to increased in
activity in evaluating the water reclamation market and to the company&#8217;s process
for permitting sites in Pennsylvania which included the hiring of additional
employees.</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Net
loss</font><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">.</font><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Net loss for the nine months
ended September 30, 2009 and 2008 were $3,663,932 and $1,822,348,
respectively.</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Year Ended December 31,
2008</font></font></div>
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for the year ended December 31, 2008.&#160;&#160;&#160;</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
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year ended December 31, 2008 were $2,525,763 and consisted of payroll and
payroll taxes ($1,023,433), legal and professional fees ($714,865), stock based
compensation ($233,493) and ($553,972)&#160;&#160;in other administrative
expenses including travel to the prospective
sites.&#160;&#160;&#160;</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Net
loss</font><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">. Net loss
for the&#160;year ended December 31, 2008 was $2,646,568.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Liquidity and Capital
Resources</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">As of December 31, 2008, we
had current assets of $69,751 including cash of $17,639 and current liabilities
of $5,720,104.&#160;&#160;As of September 30, 2009, we had current assets of
$204,587 including cash of $75,654 and current liabilities of
$12,122,949.</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Operating
Activities</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Our operating activities from
continuing operations resulted in a net cash used by operations of $911,186 for
the nine months ended September 30, 2009 compared to net cash used by operations
of $910,182 for the nine months ended September 30, 2008.&#160;&#160;The net
cash used by operations for the nine months ended September 30, 2009 reflects a
net loss of $3,663,932 offset by depreciation of $20,360, amortization of debt
issue costs of $303,547, notes payable issued for deferred compensation of
$800,436, stock based compensation of $600,300 and the fair value of equity
issued for services of $273,983, account payables and other accrued expenses of
$674,210 and other minor factors.&#160;&#160;&#160;The net cash used by
operations for the nine months ended September 30, 2008 reflects a net loss of
$1,822,348 offset by depreciation of $5,702,&#160;stock based compensation of
$202,557, and account payables and other accrued expenses of $767,123 and other
minor factors.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Investing
Activities</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Our investing activities
resulted in a net cash outflow of $3,387 for the nine months ended September 30,
2009 compared to a net cash outflow of $4,627,248 for the nine months ended
September 30, 2008.&#160;&#160;Cash used in investing activities principally
represents acquisition of property and equipment offset by proceeds from the
sale of assets.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Financing
Activities</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">Our financing activities
resulted in a cash inflow of $972,588 for the nine months ended September 30,
2009 and $5,824,285 for the nine months ended September 30, 2009, which
represents both issuances of notes payable and sales of equity by
STW.</font></font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
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      </div>
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17 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline; TEXT-DECORATION: underline">Notes
Payable</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">In April 2008, STW issued
promissory notes (&#8220;April 2008 Notes&#8221;) totaling $1,100,000 bearing interest at
10%. These notes were repaid in full in June 2008.</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
September 2008, STW entered into a securities purchase agreement for the
issuance of a 12% promissory note (&#8220;2008 September Bridge Note&#8221;) in the
principal amount of $125,000.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
December 2008, STW entered into a securities purchase agreement with the
Chairman and Chief Executive Officer for the issuance of a 10% promissory note
(&#8220;CEO Bridge Note&#8221;) in the principal amount of $75,000.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">During
2008, STW also entered into various vehicle and insurance financing
contracts.&#160;&#160;The amount outstanding at December 31, 2008 was
$99,102.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
January 2009, STW entered into a securities purchase agreement for the issuance
of a 10% promissory note (&#8220;January 2009 Bridge Note&#8221;) in the principal amount of
$50,000.&#160;&#160;In addition, STW entered into a securities purchase
agreement for the issuance of a 15% promissory note in the principal amount of
$400,000.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In March
2009, STW entered into a securities purchase agreement with the September 2008
Bridge Investor providing for the rollover of the $125,000 principal amount
outstanding under the 2008 September Bridge Note and advancing an additional
$50,000.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April
2009, STW commenced an offering of its 12% Convertible Notes (&#8220;2009 12%
Convertible Notes&#8221;).&#160;&#160;The convertible notes bear interest at 12% and
are convertible at the option of the shareholder into shares of STW&#8217;s common
stock.&#160;&#160;&#160;&#160;Through September 30, 2009 the Company had issued
a total of $650,000 face value of its 2009 12% Convertible Notes for
cash.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
October and November 2009, STW received $90,000 in proceeds from issuance of
additional 12% Convertible Notes, which&#160;provided the funding to remain in
operation during the fourth quarter of 2009.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Equity
Issuances</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 28, 2008, STW issued 8,100,000 shares of Common Stock at $0.0001 per
share for total consideration of $81.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April
2008, STW designated the Series A Preferred Stock, with a par value of $0.0001
per share, and authorized the issuance of 100 shares to STW&#8217;s Chairman and Chief
Executive Officer.&#160;&#160;In addition, STW issued 5,980,000 shares of Common
Stock at $0.0445 per share for total consideration of $266,110.&#160;&#160;STW
then commenced a unit offering (the &#8220;$2.00 Unit Offering&#8221;) whereby each unit
consisted of one share of STW&#8217;s Common Stock and a warrant to acquire one and
one-half shares of STW&#8217;s Common Stock as follows: (i) 0.5 shares at an exercise
price equal to $3.00 per share, (ii) 0.5 shares at an exercise price equal to
$4.00 per share, and (iii) 0.5 shares at an exercise price equal to $8.00 per
share. Each Warrant is exercisable for three years from date of
issue.&#160;&#160;As of December 31, 2008, STW sold an aggregate of 3,467,500
units for gross proceeds of $6.9 million. &#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW also
issued 700,000 Common Shares for investment banking compensation associated with
this offering.&#160;&#160;These shares were valued at an aggregate of $98,800,
based on the estimated fair value of STW&#8217;s Common Stock at that
date.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
connection with the April 2008 Notes, STW issued a total of 275,000 shares of
Common Stock which were valued at an aggregate of $12,238, based upon the price
of STW&#8217;s shares of Common Stock issued under the most recent private placement
offering prior to the issuance of the April 2008 Notes.&#160;&#160;Upon the
extension of the April 2008 Notes in June 2008, STW issued a total of 41,325
additional shares of Common Stock.&#160;&#160;These additional shares of Common
Stock were valued at an aggregate of $11,157, based on the estimated fair value
of the Company&#8217;s Common Stock at that date.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
connection with the September 2008 Bridge Note, STW issued a total of 62,500
shares of Common Stock which were valued at an aggregate of $16,875, based upon
the estimated fair value of STW&#8217;s Common Stock at that date.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
connection with the CEO Bridge Note, STW issued a total of 37,500 shares of
Common Stock which were valued at an aggregate of $10,125, based upon the
estimated fair value of STW&#8217;s Common Stock at that date.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Stock Based
Compensation</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Since
Inception (January 28, 2008), STW issued 6.8 million shares of its Common Stock
to directors, employees and certain consultants.&#160;&#160;As of September 30,
2009, 200,000 of these shares have been forfeited.&#160;&#160;&#160;During the
period from Inception (January 28, 2008) through December 31, 2008, STW
recognized $233,493 in compensation cost associated with the issuance of these
shares and recognized an additional $600,300 during the nine months ended
September 30, 2009.&#160;&#160;At September&#160;30, 2009, STW had no remaining
compensation cost to be recognized related to these issuances.</font></div><br>
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    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Warrants</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of
December 31, 2008, STW had 5,739,900 warrants outstanding to acquire STW&#8217;s
Common Stock.&#160;&#160;As of September 30, 2009 STW had 12,411,401 warrants
outstanding to acquire STW&#8217;s Common Stock.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Presently,
due to the lack of revenue we are not able to meet our operating and capital
expenses. The success of our ability to continue as a going concern is dependent
upon successful permitting of our sites obtaining customers for water
reclamation services, and maintaining a break even or profitable level of
operations. We have incurred operating losses since inception, and this is
likely to continue through the third quarter of 2010.&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
financial requirements of our Company will be dependent upon the financial
support through credit facilities and additional sales of our equity
securities.&#160;&#160;The issuance of additional equity securities by us may
result in a significant dilution in the equity interests of our current
shareholders. Should additional financing be needed for our continued operations
we will need to obtain it on commercially reasonable terms. If we are not able
to obtain the additional financing on a timely basis, we will not be able to
meet our other obligations as they become due and we will be forced to scale
down or perhaps even cease our operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We can
give no assurance that we will be successful in implementing any phase, all
phases of the proposed business plan, or that we will be able to continue as a
going concern.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Credit
Facility</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Credit
Facility</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Presently
we have no revolving Credit Facility established.&#160;&#160;If needed, it will
be necessary to establish a line of credit and it will need to be on favorable
terms.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Off-Balance
Sheet Arrangements</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW does
not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on STW's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to
investors.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Commitments</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
entered into a Memorandum of Understanding with GE Water &amp; Process
Technologies (&#8220;GE Water&#8221;), a unit of General Electric Company, dated February
14, 2008 (&#8220;MOU&#8221;) to jointly develop off-take agreements with oil and gas
operators for the deployment of multiple water reclamation systems throughout
Texas, Arkansas, Louisiana and the Appalachian Basin.&#160;&#160;STW and GE
Water formalized their relationship on May 22, 2008, by entering into a
definitive Teaming Agreement (&#8220;Teaming Agreement&#8221;), which superseded the
MOU.&#160;&#160;The Teaming Agreement was drafted in accordance with the terms
of the MOU and provides greater certainty as to each party&#8217;s responsibilities
and as to the process of entering into agreements with and providing services to
customers.&#160;&#160;The Teaming Agreement sets forth the terms and conditions
that will govern STW and GE Water relationship when STW is successful in selling
its services to an identified prospect.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In April
2008, STW entered into a purchase order with GE Water (&#8220;Purchase Order&#8221;), for
the purchase of a modularized produced water evaporator system (the &#8220;Evaporator
System&#8221;) capable of processing approximately 720,000 gallons per
day.&#160;&#160;The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.&#160;&#160;As of September 30, 2009, STW has
paid a total of approximately $4.7 million.&#160;&#160;Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.&#160;&#160;STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November&#160;28,&#160;2008, the fourth installment payment of $1.5 million
which was due on February&#160;27, 2009, and the fifth installment payment of
$1.8 million which was due on August&#160;28,&#160;2009.&#160;&#160;The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September&#160;30, 2009, totaled $9.0 million.&#160;&#160;In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.&#160;&#160;Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.&#160;&#160;This change order obligated STW to additional payments totaling
approximately $1.2 million.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.&#160;&#160;GE
Water took no further action with respect to the notice of default until
August&#160;13,&#160;2009.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.&#160;&#160;At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.&#160;&#160;If, after February
13, 2010, GE Water elected to not extend STW&#8217;s payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.</font></div><br>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW&#8217;s Purchase Order due to STW&#8217;s inability to pay the
current amounts due.&#160;&#160;GE Water also demanded a &#8220;termination&#8221; payment
of $750,000.&#160;&#160;In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water&#8217;s belief that STW was
insolvent.&#160;&#160;GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.&#160;&#160;On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water&#8217;s unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water&#8217;s October 1, 2009 letter. <font style="BACKGROUND-COLOR: #ffffff; DISPLAY: inline">In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW&#8217;s merger and capital raise in
February2010.</font></font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Critical
Accounting Policies and Estimates</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
following accounting principles and practices of STW are set forth to facilitate
the understanding of data presented in the consolidated financial
statements:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Nature of
operations</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
Resources, Inc. (&#8220;STW&#8221; or the &#8220;Company&#8221;) is a development stage Nevada
corporation formed on January&#160;28, 2008, 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.&#160;&#160;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.&#160;&#160;STW, in conjunction with
energy producers, operators, various state agencies and legislators, are working
to create an efficient and economical solution to this complex
problem.&#160;&#160;STW is also evaluating the deployment of similar technology
in the municipal wastewater industry, the Acid Mine Drainage polluted water
problems in the northeastern United States, and brackish aquifer reclamation for
reuse.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of
estimates</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Property and
depreciation</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Property
and equipment are recorded at cost and depreciation is provided using the
straight-line method over the estimated useful lives of the
assets.&#160;&#160;Leasehold improvements are capitalized and amortized over the
lesser of the life of the lease or the estimated useful life of the
asset.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;Expenditures
for major additions or improvements, which extend the useful lives of assets,
are capitalized.&#160;&#160;Minor replacements, maintenance and repairs, which
do not improve or extend the lives of the assets, are charged to operations as
incurred.&#160;&#160;Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in current
operations.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Income
taxes</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
follows SFAS No. 109, &#8220;<font style="FONT-STYLE: italic; DISPLAY: inline">Accounting for Income Taxes</font>&#8221;
for recording the provision for income taxes.&#160;&#160;Deferred tax assets and
liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled.&#160;&#160;Deferred income tax expenses or benefits are
based on the changes in the asset or liability during each period.&#160;&#160;If
available evidence suggests that it is more likely than not that some portion or
all of the deferred tax assets will not be realized, a valuation allowance is
required to reduce the deferred tax assets to the amount that is more likely
than not to be realized.&#160;&#160;Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of
change.&#160;&#160;Deferred income taxes may arise from temporary differences
resulting from income and expense items reported for financial accounting and
tax purposes in different periods.&#160;&#160;Deferred taxes are classified as
current or non-current, depending on the classification of assets and
liabilities to which they relate.&#160;&#160;Deferred taxes arising from
temporary differences that are not related to an asset or liability are
classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">At
Inception (January 28, 2008), STW adopted Financial Accounting Standards Board
Interpretation Number 48, &#8220;Accounting for Uncertainty in Income Taxes&#8221; (&#8220;FIN
48&#8221;), which is intended to clarify the accounting for income taxes prescribing a
minimum recognition threshold for a tax provision before being recognized in the
consolidated financial statements.&#160;&#160;FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition.&#160;&#160;As a result, STW has
concluded that it does not have any unrecognized tax benefits or any additional
tax liabilities after applying FIN 48.&#160;&#160;The adoption of FIN 48
therefore had no impact on STW&#8217;s consolidated financial statements.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Concentrations</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Financial
instruments that potentially subject STW to concentration of credit risk consist
of cash.&#160;&#160;From time to time, STW has cash in its bank accounts in
excess of federally insured limits.</font></div><br>
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      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
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        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
20 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
anticipates entering into long-term, fixed-price contracts for its services with
select oil and gas producers and municipal utilities.&#160;&#160;STW will
control credit risk related to accounts receivable through credit approvals,
credit limits and monitoring procedures.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Subsequent
events</font></font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW
evaluates events and transactions occurring subsequent to the date of the
financial statements for matters requiring recognition or disclosure in the
financial statements. The accompanying financial statements consider events
through February 12, 2010.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;<a name="FIS_UNIDENTIFIED_TABLE_8"><!--EFPlaceholder-->
 </a></font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
21 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">MANAGEMENT</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Executive
Officers and Directors</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Below are
the names and certain information regarding STW&#8217;s executive officers and
directors following the acquisition of STW.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
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<tr>
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            </td>
            <td align="left" valign="top" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="top" width="7%" style="BORDER-BOTTOM: black 2px solid">
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            </td>
            <td align="left" valign="top" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Position</font></div>
            </td>
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Stanley
      Weiner</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="top" width="7%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;56</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="top" width="48%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Chairman
      of the Board of Directors and Chief Executive Officer</font></div>
            </td>
          </tr><tr bgcolor="white">
            <td align="left" valign="top" width="38%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Eric
      Stoppenhagen (1)</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="top" width="7%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">36</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="top" width="48%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Director</font></div>
            </td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="top" width="38%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Marty
      Walter</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="top" width="7%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">51</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="top" width="48%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Vice
      President of Field Operations</font></div>
            </td>
          </tr><tr bgcolor="white">
            <td align="left" valign="top" width="38%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">D.
      Grant Seabolt, Jr., Esq.</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="top" width="7%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">55</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="top" width="48%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">In-House
      Counsel and Corporate Secretary</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(1) Mr.
Stoppenhagen has agreed to resign as a director of the Company subject to the
filing and mailing of the schedule 14f information statement.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Officers
are elected annually by the Board of Directors (subject to the terms of any
employment agreement), at its annual meeting, to hold such office until an
officer&#8217;s successor has been duly appointed and qualified, unless an officer
sooner dies, resigns or is removed by the Board.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Background
of Executive Officers and Directors</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Stanley T. Weiner, a 30 year veteran of
the oil and gas industry, has explored, drilled and operated oil and gas
properties in the United States and in South America. Previously, Mr. Weiner
served as president and CEO of Molecular Solutions, LLC, and was founder and CEO
of Weiner Investments Inc, and American Crude Oil, Inc.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Eric
Stoppenhagen, through his consulting company, Venor, Inc., provides financial
and management services to small to medium-sized companies that either are
public or desire to become public. He provides temporary CFO services to these
companies, which includes as transaction advice, preparation of security filings
and advice regarding compliance with corporate governance requirements. Mr.
Stoppenhagen has more than ten years of financial experience having served in an
executive capacity for several public and private companies; including as Vice
President of Finance&#160; and subsequently Interim President of Trestle
Holdings, Inc. from 2003 to 2009;&#160;Interim President and Director of
WoozyFly, Inc. from 2009 to 2010; Interim President of Trist Holdings, Inc. from
2007 to 2010; CFO and Director of AuraSource, Inc. from 2008 to 2010; CFO of
GetFugu, Inc. in 2009; and, CFO of Jardinier Corp. from 2007 to 2008. Mr.
Stoppenhagen is a Certified Public Accountant and holds a Juris Doctorate and
Masters of Business Administration both from George Washington University.
Additionally, he holds a Bachelor of Science in Finance and a Bachelor of
Science in Accounting both from Indiana University.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Marty Walter has 25 years of experience
in the specialty chemical, petrochemical, and cryogenics industries in the areas
of operations, safety, environmental, customer service and
logistics.&#160;&#160;Prior to joining STW Resources, Mr. Walter was the
Operations Manager for NuCo2, Inc.&#160;&#160;Prior to that, he was a manager
for Distribution and Office Services for Betz Energy Chemicals, and Assistant
Plant Manager for Betz Laboratories.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>D. Grant Seabolt, Jr., Esq. is an &#8220;AV&#8221;
rated, 29-year law practitioner and principal in the Dallas, Texas law firm of
the Law Office of Grant Seabolt, where he advises small businesses,
entrepreneurs, start-up companies and mature companies in sophisticated business
transactions, including mergers, acquisitions and financings.&#160; He is a
noted arbitrator and is a &#8220;Credentialed Distinguished Mediator.&#8221;&#160; Prior to
entering private practice, Mr. Seabolt served as a Marine Corps Judge Advocate
(attaining rank of Colonel in the Reserves) and as a Division Attorney with The
Dow Chemical Company.&#160; Mr. Seabolt holds the following degrees: LL.M
(Master of Laws in International and Comparative Law, <font style="FONT-STYLE: italic; DISPLAY: inline">with highest honors</font>),
National Law Center, George Washington University, 1984; J.D., Univ. of Alabama
School of Law (Bench &amp; Bar Honor Society), 1979; and B.A. (Accounting),
Birmingham-Southern College, 1976.&#160;</font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
22 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Executive
Compensation</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Summary
Compensation Table</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td valign="bottom" width="15%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Name
      and Principal Position</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Year</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
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      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="7%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Bonus
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(5)</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Stock</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Awards
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">(6)</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Stock</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Options
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Non-equity</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Incentive
      Plan</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Compensation
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Non-Qualified</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Deferred</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Compensation</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Earnings
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">All
      Other</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Compensation</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="6%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Total
      ($)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="15%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Gene
      Brock, President (1)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2008</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$334,000</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$13,350</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$347,350</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td valign="bottom" width="15%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2007</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$0</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="15%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="15%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Stanley
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="4%">
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            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="6%">
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            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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          </tr><tr bgcolor="#cceeff">
            <td valign="bottom" width="15%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2007</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%">
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            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="15%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="15%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">G.
      Wade Stubblefield , CFO (1)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2008</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$109,083</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="15%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Marty
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2008</font></div>
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            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="4%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2007</font></div>
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            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="6%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$0</font></div>
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            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">*Date of
Inception January 8, 2008</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(1) Have
resigned as executive officers of the Company.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
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Equity Awards at Fiscal Year-End</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW does
not have any outstanding equity awards.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">DIRECTOR
COMPENSATION</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">STW has
not paid any fees to its directors.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
following table sets forth certain information, as of February 12, 2010 with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five (5%) percent; (ii) each of the Company&#8217;s executive
officers and directors; and (iii) the Company&#8217;s directors and executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially
owned.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;<a name="FIS_UNIDENTIFIED_TABLE_9"><!--EFPlaceholder-->
 </a></font></div>
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<tr>
            <td valign="bottom" width="68%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Name
      of Beneficial Owner (1)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 1.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Common
      Stock</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 1.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Beneficially
      Owned</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 1.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Percentage
      of</font></div>
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 1.8pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Common
      Stock (2)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Stanley
      Weiner*</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6,447,500</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">22.44%</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Eric
      Stoppenhagen*</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Marty
      Walter*</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">200,000</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.70%</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">D.
      Grant Seabolt, Jr., Esq.*</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">50,000</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.17%</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Paul
      Difrancesco</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2,469,537</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">8.60%</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="68%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="68%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">All
      officers and directors as a group (4 persons)</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6,697,500</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">23.31%</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
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          </tr></table>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">*Executive
officer and/or director of the Company.</font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
23 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;**
Less than 1%</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td align="right" valign="top" width="12%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(1)&#160;&#160;</font></div>
            </td>
            <td valign="top" width="84%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Except
      as otherwise indicated, the address of each beneficial owner is c/o STW
      Resources, Inc., 619 West Texas Avenue, Suite 126, Midland,
      Texas&#160;&#160;79701.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td align="right" valign="top" width="12%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(2)&#160;&#160;</font></div>
            </td>
            <td valign="top" width="84%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0.8pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Applicable
      percentage ownership is based on 28,728,075 shares of common stock
      outstanding as of February 12, 2010, together with securities exercisable
      or convertible into shares of common stock within 60 days of February 12,
      2010 for each stockholder.&#160;&#160;Beneficial ownership is determined
      in accordance with the rules of the Securities and Exchange Commission and
      generally includes voting or investment power with respect to
      securities.&#160;&#160;Shares of common stock that are currently
      exercisable or exercisable within 60 days of February 12, 2010 are deemed
      to be beneficially owned by the person holding such securities for the
      purpose of computing the percentage of ownership of such person, but are
      not treated as outstanding for the purpose of computing the percentage
      ownership of any other person.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
24 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">DESCRIPTION
OF SECURITIES</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company&#8217;s authorized capital stock consists of 100,000,000 shares of common
stock at a par value of $0.001 per share and 10,000,000 shares of preferred
stock at a par value of $0.001 per share.&#160;&#160;As of February 12, 2009,
there are 28,728,075 shares of&#160;the Company&#8217;s common stock issued and
outstanding that are held by approximately 65 stockholders of record and
2,140,000 shares of preferred stock issued and outstanding held by one
shareholder.</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Holders
of the Company&#8217;s common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote.&#160;&#160;Holders of common stock do
not have cumulative voting rights.&#160;&#160;Therefore, holders of a majority
of the shares of common stock voting for the election of directors can elect all
of the directors.&#160;&#160;Holders of the Company&#8217;s common stock representing
a majority of the voting power of the Company&#8217;s capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of stockholders.&#160;&#160;A
vote by the holders of a majority of the Company&#8217;s outstanding shares is
required to effectuate certain fundamental corporate changes such as
liquidation, merger or an amendment to the Company&#8217;s articles of
incorporation.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Holders
of the Company&#8217;s common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available
funds.&#160;&#160;In the event of liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. The</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><a name="FIS_UNIDENTIFIED_TABLE_10"><!--EFPlaceholder-->
</a><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Market
Information</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
shares of our common stock have been historically qouted on the OTC Bulletin
Board under the symbol &#8220;WZYFQ&#8221;.&#160;&#160;As a result of the Bankruptcy, our
common stock will be extinguished and we expect that our shares of common stock
will cease trading or being quoted on the OTCBB.&#160;&#160;We expect to have a
registered broker dealer file an application to have our shares quoted on the
OTCBB.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
following table sets forth, for the fiscal quarters indicated, the high and low
sale price for our common stock, as reported on the OTC Bulletin
Board.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td align="left" valign="bottom" width="55%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Quarterly
      period</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">High</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Low</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td valign="bottom" width="55%" style="TEXT-ALIGN: left">
              <div style="TEXT-ALIGN: left; TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fiscal
      year ended December 31, 2008:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" colspan="2" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" colspan="2" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Third
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">5.25</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.88</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fourth
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.88</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fiscal
      year ended December 31, 2009:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">First
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Second
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Third
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
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            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
          </tr><tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <div style="TEXT-INDENT: -9pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Fourth
      Quarter</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
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            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;
      </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font></div>
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              <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">0.15</font></div>
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    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Prior to
the third quarter, our stock was not actively traded.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Holders
of our Common Stock</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of
February 12, 2010, there were approximately 65 stockholders of record of our
common stock.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Dividends</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company has never declared or paid any cash dividends on its common stock. The
Company currently intends to retain future earnings, if any, to finance the
expansion of its business. As a result, the Company does not anticipate paying
any cash dividends in the foreseeable future.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Securities
Authorized for Issuance Under Equity Compensation Plans</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company does not have an authorized equity compensation
plan.&#160;&#160;&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
25 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">INDEMNIFICATION
OF DIRECTORS AND OFFICERS</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
Company&#8217;s directors and executive officers are indemnified as provided by the
Nevada Corporation law and its Bylaws. These provisions state that the Company&#8217;s
directors may cause the Company to indemnify a director or former director
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him as a
result of him acting as a director. The indemnification of costs can include an
amount paid to settle an action or satisfy a judgment.&#160;&#160;Such
indemnification is at the discretion of the Company&#8217;s board of directors and is
subject to the Securities and Exchange Commission&#8217;s policy regarding
indemnification.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, or otherwise, The Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><a name="FIS_SECTION_3_SECURITIES_AND_TRADING_MAR"><!--EFPlaceholder-->
</a><a name="FIS_SALE_OF_EQUITY"><!--EFPlaceholder-->
</a><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
3.02&#160;&#160;Unregistered Sales of Equity Securities.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the &#8220;Merger&#8221;).&#160;&#160;In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the &#8220;STW Acquisition Shares&#8221;) shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">This
issuance of these above securities is exempt from the registration requirements
under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as
promulgated under Regulation D.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><a name="FIS_SECTION_5_CORPORATE_GOVERNANCE"><!--EFPlaceholder-->
</a><a name="FIS_CHANGE_IN_CONTROL"><!--EFPlaceholder-->
</a><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On
February 9, 2010, the Court entered an order confirming the Seconded Amended
Plan of Reorganization (the &#8220;Plan&#8221;) pursuant to which the Plan and the Merger
was approved.&#160;&#160;&#160;It is expected that the Plan will be effective
February 19, 2010 (the &#8220;Effective Date&#8221;). The</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">principal
provisions of the Plan are as follows:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">general
      unsecured claims shall received 100,000 shares of common stock;
      and</font></div>
            </td>
          </tr></table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">the
      Company&#8217;s equity interest shall be extinguished and
    cancelled.</font></div>
            </td>
          </tr></table>
    </div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The offer
and sale of the above securities pursuant to the Plan and the Confirmation Order
was exempt from registration under the Securities Act of 1933, as amended,
pursuant to section <a name="HH_1"><!--EFPlaceholder-->
</a>1145(a) of the
Bankruptcy Code.&#160;&#160;Section <a name="HH_2"><!--EFPlaceholder-->
</a>1145(a)
of the Bankruptcy Code generally exempts from such registration requirements the
<a name="HH_3"><!--EFPlaceholder-->
</a>issuance of securities if the following
conditions are satisfied: (i) the securities are issued or sold under a Chapter
11 plan by (a) a debtor, (b) one of its affiliates participating in a joint plan
with the debtor or (c) a successor to a debtor under the plan and (ii) the
securities are issued entirely in exchange for a claim against or interest in
the debtor or such affiliate, or are issued principally in such exchange and
partly for cash or property.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
3.03&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Material Modification to
Rights of Security holders</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
information set forth in Item 1.01 and Item 3.02 of this Current Report on Form
8-K is incorporated by reference into this Item 3.03.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
5.01 Changes in Control of Registrant.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The
information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 5.01.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><a name="FIS_CHANGE_IN_DIRECTORS_OR_PRINCIPAL_OFF"><!--EFPlaceholder-->
</a>Item 5.02
Departure of Directors or Principal Officers; Election of Directors; Appointment
of Principal Officers.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><a name="FIS_CHANGE_IN_SHELL_COMPANY_STATUS"><!--EFPlaceholder-->
</a>The information
set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by
reference into this Item 5.02.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
5.06&#160;&#160;Change in Shell Company Status.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 27pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As a
result of the consummation of the acquisition of STW described in Item&#160;1.01
of this Current Report on Form 8-K, we are no longer a shell corporation as that
term is defined in Rule&#160;405 of the Securities Act and Rule&#160;12b-2 of
the Exchange Act.</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">&#160;<a name="FIS_SECTION_9_FINANCIAL_STATEMENTS_AND_E"><!--EFPlaceholder-->
 </a><a name="FIS_FINANCIAL_STATEMENTS_AND_EXHIBITS"><!--EFPlaceholder-->
</a></font></div><br>
    <div id="PGBRK" style="TEXT-INDENT: 0pt; WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="TEXT-ALIGN: center; WIDTH: 100%"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">-
26 -</font></div>
        <div style="TEXT-ALIGN: center; WIDTH: 100%">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">&#160;
</font></div>
      </div>
    </div><br>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Item
9.01 Financial Statements and Exhibits</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Financial
Statements of Business Acquired</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Filed
herewith are the following:</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Audited
financial statements of STW Resources, Inc. as of December 31, 2008 (See Exhibit
99.2)</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Unaudited
financial statements STW Resources, Inc. as of September 30, 2009 (See Exhibit
99.3)</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Pro
Forma Financial Information &#160;</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Not
Applicable</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shell
Company Transactions</font></div>
    <div style="TEXT-INDENT: 0pt; DISPLAY: block"><br></div>
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27 -</font></div>
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{"company-data": {"conformed-name": "Woozyfly Inc.", "cik": "0001357838", "assigned-sic": "5961", "irs-number": "000000000"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-52654", "film-number": "10619367"}, "business-address": {"street1": "59 WEST 19TH STREET", "street2": "6TH FLOOR", "city": "NEW YORK", "state": "NY", "zip": "10011", "phone": "646-461-2400"}, "mail-address": {"street1": "59 WEST 19TH STREET", "street2": "6TH FLOOR", "city": "NEW YORK", "state": "NY", "zip": "10011"}, "former-company": {"former-conformed-name": "PET EXPRESS SUPPLY INC", "date-changed": "20060330"}}
form8-k.htm
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): February 12, 2010
WOOZYFLY
INC.
(Exact
name of registrant as specified in its charter)
Nevada
000-51430
20-3678799
(State
      or Other Jurisdiction of Incorporation)
(Commission
      File Number)
(IRS
      Employer Identification Number)
619 West
Texas Avenue, Suite 126, Midland, Texas 79701
(Address
of principal executive offices) (zip code)
432-686-7777
(Registrant's
telephone number, including area code)
Copies to:
Stephen
M. Fleming, Esq.
Law
Offices of Stephen M. Fleming PLLC
49 Front
Street, Suite 206
Rockville
Centre, New York 11570
Phone:
(516) 833-5034
Fax:
(516) 977-1209
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form
8-K and other reports filed by Woozyfly Inc. ("Woozyfly" or the "Company") from
time to time with the Securities and Exchange Commission (collectively the
"Filings") contain or may contain forward looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management as well as estimates and assumptions made by the Company's
management. When used in the filings the words "anticipate", "believe",
"estimate", "expect", "future", "intend", "plan" or the negative of these terms
and similar expressions as they relate to the Company's or Company's management
identify forward looking statements.  Such statements reflect the
current view of the Company with respect to future events and are subject to
risks, uncertainties, assumptions and other factors (including the risks
contained in the section of this report entitled "Risk Factors") relating to the
Company's industry, the Company's operations and results of operations and any
businesses that may be acquired by the Company. Should one or more of these
risks or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended or planned.
Although
the Company's management believes that the expectations reflected in the forward
looking statements are reasonable, the Company cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to conform these
statements to actual results. The following discussion should be read in
conjunction with the Company's financial statements and the related notes filed
with this Form 8-K.
In this
Form 8-K, references to "we," "our," "us," the "Company," "Woozy" or "Woozyfly"
refer to Woozyfly Inc., a Nevada corporation.
Item
1.01 Entry into a Material Definitive Agreement.
Item
2.01  Completion of Acquisition or Disposition of Assets.
Woozyfly, Inc. was organized September
11, 2003 (Date of Inception) under the laws of the State of Nevada, as GPP
Diversified, Inc.  The business of the Company was to sell pet products via
the Internet.  We were initially authorized to issue 25,000,000 shares of
its no par value common stock.  On November 9, 2005, we amended our
articles of incorporation to increase our authorized capital to 100,000,000
shares with a par value of $0.001.  Concurrently, we changed our name from
GPP Diversified, Inc. to Pet Express Supplies, Inc.  On July 28, 2008, Pet
Express Supply, Inc. entered into an Exchange Agreement with each of the
shareholders of CJ Vision Enterprises, Inc., a Delaware corporation doing
business as Woozyfly.com, pursuant to which we changed our corporate name to
Woozyfly, Inc. , authorized the issuance of 10,000,000 blank check
preferred shares and effectuated a 6:1 stock split.  On January 15,
2009, we ceased operations.
On May
12, 2009, Woozyfly filed a voluntary petition in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court") seeking
reorganization relief under the provisions of Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code"). The Chapter 11 case is being
administered under the caption In re Woozyfly, Inc. Case No. 09-13022 (JMP)
(the "Chapter 11 Case"). Woozyfly continued to operate its business as
debtor in possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court.  In connection with the Chapter 11 Case,
the Bankruptcy Court approved the arrangement pursuant to which MKM Opportunity
Master Fund Ltd agreed to provide a DIP loan in the amount up to $100,000 (the
"DIP Loan").
The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Company's 6% Secured Convertible Notes
due June 30, 2011 ("Convertible Notes"). As a result, all indebtedness
outstanding under these facilities and the notes became automatically due and
payable, subject to an automatic stay of any action to collect, assert, or
recover a claim against the Company and the application of applicable bankruptcy
law.
On
January 21, 2010, we entered into an Agreement and Plan of Merger ("Merger
Agreement") with STW Acquisition, Inc. ("Acquisition Sub"), a wholly owned
subsidiary of the Company, STW Resources, Inc. ("Acquiree" or "STW") and certain
shareholders of STW controlling a majority of the issued and outstanding shares
of STW.  Pursuant to the Merger Agreement, STW  merged into
the Acquisition Sub resulting in an exchange of all of the issued and
outstanding shares of STW for shares of the Company on a one for one basis. At
such time, STW will become a wholly owned subsidiary of the
Company.
On February 9, 2010, the Court entered
an order confirming the Seconded Amended Plan of Reorganization (the "Plan")
pursuant to which the Plan and the Merger was approved.   It is
expected that the Plan will be effective February 19, 2010 (the "Effective
Date"). The
principal
provisions of the Plan are as follows:
·
MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;
·
the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;
·
general
      unsecured claims shall received 100,000 shares of common stock;
      and
·
the
      Company's equity interest shall be extinguished and
    cancelled.
-
2 -
On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the "Merger").  In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the "STW Acquisition Shares") shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.
Considering
that, following the merger, the shareholders of STW control the majority of our
outstanding voting common stock and we effectively succeeded our otherwise
minimal operations to those that are theirs, STW is considered the accounting
acquirer in this reverse-merger transaction.  A reverse-merger transaction
is considered, and accounted for as, a capital transaction in substance; it is
equivalent to the issuance of STW securities for our net monetary assets, which
are deminimus, accompanied by a recapitalization. Accordingly, we have not
recognized any goodwill or other intangible assets in connection with this
reverse merger transaction. STW is the surviving and continuing entities and the
historical financials following the reverse merger transaction will be those of
STW.  We were a "shell company" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) immediately prior to our
acquisition of STW pursuant to the terms of the Merger Agreement.  As
a result of such acquisition, our operations our now focused on the provision of
customized water reclamation services.  Consequently, we believe that
acquisition has caused us to cease to be a shell company as we no longer have
nominal operations.
STW
Overview
STW,
based in Houston, Texas, provides customized water reclamation
services.  STW's core expertise is an understanding of water chemistry
and its application to the analysis and remediation of complex water reclamation
issues. STW provides a complete solution throughout all phases of a water
reclamation project including analysis, design, evaluation, implementation and
operations.
STW's
expertise is applicable to several market segments including:
·
Gas
      shale hydro-fracturing flowback;
·
Oil
      and gas produced water;
·
acid
      mine drainage ("AMD");
·
desalination;
·
brackish
      water; and
·
municipal
      waste water.
Understanding
water chemistry is the foundation of STW's expertise. STW will provide detailed
chemical analysis of the input stream and of the process output that conforms to
the various environmental and legal requirements. STW becomes an integral part
of the water management process and provides a customized solution that
encompasses analysis, design and operations including pretreatment and
transportation.  Simultaneously, STW evaluates the economic impact of
this process to the customer. These processes will use technologies that fit our
customer's need: fixed, mobile or portable; evaporation, reverse-osmosis or
membrane technology, and any necessary pre-treatment, crystallization and
post-treatment. STW will also supervise construction, testing, and operation of
these systems. Our keystone is determining and optimizing the most appropriate
technology to effectively and economically address our customers' particular
requirements.  As an independent solutions provider STW is
manufacturer-agnostic and is committed to the use of the right technology
demanded by the design process.
Market
Opportunities
Gas shale fracturing
flowback water
STW is
actively pursuing opportunities in all the major shale formations in the United
States. The initial focus, in this sector, is the Marcellus Shale in
Pennsylvania.  Presently, we believe there are about 800 producing
wells, the majority being simple vertical wells, and over sixty new wells in
Pennsylvania are being drilled each month.  Most of the new wells
being drilled are horizontal, requiring about 3.5 million gallons of water per
well.  There are 28 producers in the Marcellus, with the four largest
being Range Resources, Chesapeake Energy, Atlas Energy Resources and Seneca
Resources.
Unconventional
tight gas shales such as Marcellus require millions of gallons of fresh water to
drill and stimulate a new well.  The water returns during the fracture
flowback ("frac") and production ("production") with salts or TDS at levels
unfit for human consumption.  This flowback or produced water is
typically disposed of through various means such as controlled dilution to a
river, or lost from the ecosystem by injection into disposal
wells.  STW will target the frac water market in the tight gas
formations first, and approach the produced water market for coal bed methane
and oil and gas production subsequently.
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3 -
Oil and
gas reservoirs are usually found in porous rocks, which also contain
saltwater.  Cross linked gel fracture fluids with high "proppant"
loading (additives that prop open fissures in the geological formation caused by
hydraulic fracturing) have been utilized to fracture these zones in order to
gain permeability, allowing the oil and gas to flow to the well
bore.  The unconventional shale formations have been common knowledge
for decades, but the cost of gas production was always considered to be
uneconomical.  The wells were drilled and fractured with the same
crossed linked system as discussed above.
All of
the wells were vertical and required stimulation about every three years with a
new fracture.  Around 2001, the "slick water fracture" technique was
developed. This change required larger volumes of fresh water (1.2 million
gallons per fracture on a vertical well) to be used in the fracturing process, a
friction reducing polymer additive, and low concentrations of a proppant in the
hydraulic fracture fluid.  Wells using this modified technique now can
economically produce gas for over eight years without
re-stimulation.  The fresh water is believed to dissolve salts from
the shale over time and open up the natural fractures and fissures in the rock,
allowing more gas to be produced.  In 2003, horizontal drilling rigs
were brought into the Barnett Shale and the slick water fracture volume
increased from one to eight plus million gallons per well.  The slick
water fracture technique has become the standard for all of the shale formations
for stimulation of the wells.
This map
illustrates the location of the major shale formations that are discussed
below:
The Marcellus
Shale
The
Marcellus Shale formation, located in the Appalachian regions of Pennsylvania,
New York and West Virginia, is the major focus of the Company.  The
Marcellus covers the largest land mass of any of the known shale zones to date,
and it is located close to the densely populated north-eastern corridor of the
United States.  The water returns from the slick water fracture
contain significantly higher TDS levels than the Barnett Shale and also include,
in certain cases, extremely high levels of calcium, barium, strontium and
chloride ions.
At
approximately 200,000 parts per million in TDS, the produced water from these
regions is nearly seven times the salinity of the ocean.  The most
common practice utilized by the gas production industry in Pennsylvania for the
disposal of waste water streams produced by gas wells is to remove the oil, some
of the heavy metals and simply discharge this water to the rivers and
streams.  The volume of water used in the gas well fracture process
has grown substantially over recent years with growth in both the absolute
number of active wells and with increased volumes of water in each
well.  STW believes that today, the initial daily returns of one
Marcellus fracture well often exceed the volume of thousands of older oil and
gas wells.
While
there are about 800 Marcellus gas wells in operation in the Marcellus shale
formation today, gas producers in the region are primarily engaged in
exploratory drilling process activities.  The northern portion of the
state reportedly has some of the best geological formations for gas production,
but drilling activity has been curtailed as a result of limited water supply and
limited capacity to dispose of waste water.  Because of economic
considerations in local communities, the investment of several billion dollars
by producers in lease acquisition for drilling purposes, and proximity to high
population areas, management believes that drilling activity utilizing hydraulic
fracturing methods will increase significantly in the future.
-
4 -
The
Marcellus Shale Formation is believed to be approximately 30 million plus acres
in size. In comparison, the Barnett Shale Formation is approximately 2 million
acres in size and approximately 140 million barrels of produced water are
disposed of in deep disposal wells annually. Each one of the stationary systems
proposed by STW will be able to process approximately 23,000 barrels of water
per day, and the mobile systems will be capable of processing 1,700 barrels per
day. This is therefore a high priority focus for STW.
With the
mountainous terrain in the Appalachian region, STW believes mobile or portable
evaporation units may provide a key part of the solution in this market by
helping gas producers minimize trucking in and out of production locations and
their neighboring communities.  These systems may also be airlifted in
and out of drilling locations. Central evaporation and crystallization would
then be required to handle the remaining water and residual
brine.  The central plants would also be equipped to generate calcium
chloride and sodium chloride salts.  The sodium chloride would be
processed as rock salt for use in de-icing highways for public
safety.  As discussed above, revenue from these salts would impact the
overall cost of reclamation, reinforcing the Company's competitiveness in the
region.
The Fayetteville
Shale
Producers
in Arkansas' Fayetteville Shale face similar problems as those operating in the
Marcellus, as there are very limited brine disposal options.  Most
disposal wells in the Fayetteville shale are located near Ft. Smith; over a
three hour drive from most of the producing gas wells. Although new disposal
wells are being permitted and are under evaluation in the Conway area, gas
producers remain uncertain as to whether the permitted volumes for these brine
injection wells will be sufficient for current and future production
needs.
The
fracture system typically utilizes 50,000 to 65,000 barrels, or 2.0 to 2.8
million gallons of water. These wells typically flow back 1,000 to 1,500 bpd of
contaminated frac water for the first few days and then decline to under 100 bpd
for the next three months before finally declining to a rate of five bpd or
less.  All of this flowback water is disposed of at land farms and
disposal wells.  Recently the land farms have come under scrutiny due
to claims that these operations fail to comply with applicable regulations and
laws.  Several land farm operations have been shut down because of
contamination of the areas surrounding these operations, significantly raising
the cost of disposal to the producers.
Water
quality varies with the location of the wells and can range from approximately
20,000 mg/l TDS for wells in the Searcy area to over 70,000 mg/l TDS for wells
in the northern and western portionsf.  The Company believes water
reclamation coupled with deep well injection could provide a very cost effective
solution to producers in the Fayetteville zone.  The lower TDS in this
shale, relative to other shales, would allow water recovery at rates in excess
of 90% at 20,000 mg/l TDS, and 75% at TDS levels of approximately 70,000
mg/l.  These rates will dramatically reduce trucking cost to disposal
wells, and will provide fresh water for new wells or other applications such as
steam generation.
As part
of the STW's strategy in this region, the Company is actively seeking to educate
gas producers on the advantages of water reclamation.
The Barnett
Shale
As
discussed above, the Barnett Shale, located in central and west-central Texas,
was the first shale formation to be developed with production starting nearly 25
years ago.  In 2009, drilling activity was flat in the Barnett Shale
at current gas prices.  A large influence for this leveling is the
increasing activity in the other gas formation such as the Haynesville,
Fayetteville and Marcellus.
The Piceance
Basin
The
conventional frac process in the Piceance has been to incorporate the typically
low TDS flowback and produced waters as fracture fluids in new
wells.  Previously, drilling has been completed throughout the year;
however, several producers only fracture in the summer months.  For
these producers, excess water produced in the winter required storage in surface
containment facilities that created substantial environmental
risk.  Treatment of this water prior to storage addressed this risk
and resulted in a seasonally high demand for water reclamation during winter
months.
Today,
producers in the Piceance Basin are generally slowing down drilling activity
while natural gas prices remain depressed.  Whatever produced water is
currently generated is being hauled to other states for disposal.
Eagleford
ShaleFormation
The
Eagleford Shale is a recently discovered formation located in South
Texas.  Several experimental wells have been completed and to date
appear to be very profitable.  This area has limited supplies of fresh
water, leading the Company to believe water reclamation will be a required
solution in order for producers to access a sufficient supply of frac water in
this market. Production of natural gas has been reported at levels in excess of
10 million cubic feet ("Mcf") per day, and hundreds of barrels of condensate at
some of the wells. The Company expects to intensify its efforts to address this
market opportunity.
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5 -
The Haynesville
Shale
This
shale formation covers the northern half of Louisiana, southern Arkansas and
extends into northeastern Texas.  It is the highest pressure zone of
all the shale formations discovered to date.  Most of the wells are
horizontal, utilize the slick water fracture system, and each require about 6.5
million gallons of water.  Production of natural gas has been reported
at levels in excess of 25 million cubic feet ("Mcf") per day at some of the
wells in the Haynesville shale formation.
Once
production starts at typical gas wells in this region, a surge of water
production occurs for a few days before water production declines to ten bpd or
less.  There appears to be sufficient disposal well capacity in the
Haynesville to handle present production needs.  The Company believes
that more disposal wells are being added in southern Arkansas and northeastern
Texas as needed.  STW believes that Legislators in Louisiana are
currently reviewing policies on disposal wells and may alter these to increase
the deep injection well disposal capacity.
The
Cotton Valley zone actually produces most of the water in the
area.  It has a TDS content of over 200,000 mg/l and therefore does
not lend itself to economical water reclamation.  Crystallization
would be required, which is more expensive and would generate a salt cake that
is not required in the area.   Consequently, this region is not a
high priority market for STW at this time.
Produced Water
Shale
zones are typically dry geological formations devoid of any formation or connate
water, and hence the fracture flowback water comprises most of water that
returns following gas production.  Outside of shale formations, where
most gas and oil production occurs, there is typically a reservoir of connate
water in the production zone that generates "produced" water. Produced water is
primarily salty water trapped in the reservoir rock and brought up along with
oil and/or gas during production, and is the most common oil field
waste.  The quality of produced water varies significantly in
different parts of the world depending on the geology of the underlying
formation.
In a
large number of the oil fields in the USA, secondary or tertiary means of
handling produced water storage, such as water floods and steam floods, are
typically utilized. These are operations where the produced water is used to
maintain reservoir pressure, prevent subsidence, and sweep the zone to remove
the oil. Most of these water floods utilize a fresh water source as a supply so
that sufficient volumes are available. As these fields age, less water is
required for the flood, so excess contaminated brines concentrate and require
disposal. As this water could be reclaimed with Thermal Evaporative
Technologies, STW believes that the market for reclaiming produced water outside
the shale reclamation projects represents a considerable opportunity for the
Company.
Texas is
the largest oil and gas production state in the nation and the produced water is
unfit for use, poses a threat to the environment and is typically injected into
deep injection wells. In accordance with Texas Railroad Commission regulations,
water placed in these disposal wells is rendered permanently unavailable for
re-use or consumption. The reclaimed water would available for many beneficial
uses, including agricultural and environmental applications, as well as re-use
in hydraulic fracturing operations. Deep injection well practices in every gas
and oil producing region in the world pose the same detrimental environmental
and resource conservation issues.  The water reclamation products and
services offered by the Company could provide a significant part of the solution
to all constituencies concerned.
In the
steam floods of California, a large portion of the water is recycled through the
water treatment facility and converted back to steam.  There are some
fields that there is excess water in the millions of gallons per day that is low
in TDS and could very economically be converted back to environmentally usable
water.
Acid mine drainage
(AMD)
AMD is
another sensitive environmental issue in the Appalachian Mountain
regions.  We believe it has impaired more than 4,600 miles of
waterways in Pennsylvania alone. Drainage from old abandoned coal mines is
acidic, and insoluble metal oxides precipitate when the drainage enters a river,
lake or stream, damaging the marine ecosystem. The AMD discharge from a single
mine or coal tailing pile can range from 10 to more than 10,000 gallons per
minute. In just one example, the Lackawanna River in northeastern Pennsylvania
is being contaminated from at least seven monitored AMD locations with estimated
peak flow of 40 million gallons per day. STW has identified the state of
Pennsylvania as a customer for AMD purification and   the
Marcellus producers (eg Range Resources, Chesapeake Energy, Atlas Energy
Resouces and Seneca Resources) as potential customers for the resultant
reclaimed water.
Acid Mine
Drainage is the number one environmental water issue throughout most of the
Appalachian Mountains.  Coal was one of the largest industries in the
region. Unproductive and unprofitable mines were abandoned. Over time a large
number of these mining companies have gone out of business leaving the residual
"dirty coal" and the water flowing from the mines as a responsibility of the
states and federal government.  Dirty coal is the coal that lies near
the edge of the main coal seam and contains a high concentration of
dirt.
As the
mines fill up with water overtime, the excess water flows out.  Due to
contact with the minerals contained in the dirt, coal, salts and gases, the
water tends to become acidic.  This lower pH tends to dissolve more
ions or salts such as iron, aluminum, calcium, and
sulfate.    Iron and other metals upon oxidation form
insoluble salts such as iron oxide or rust.  Once the acid mine
drainage enters a river, lake or stream, the water precipitates these metal
oxides.  This forms an impervious film on the bed of the water
destroying the marine ecosystem.
-
6 -
The
Pennsylvania Department of Environmental Protection ("DEP") typically constructs
passive treatment plants that require large acreage, where the process is
oxidation in large lagoons allowing the solids to precipitate and altering the
pH level by adding certain chemicals such as lime.  The water leaving
these systems will support the growth of plants and animals.  This
process is inherently more time-consuming and expensive, and because of the land
requirements, not suitable for all locations.
STW can
provide AMD treatment using a specially-designed mobile unit and sell the
processed AMD to the producers.  The state will retain ownership of
the AMD, with STW having ownership rights to the processed water.
STW's
mobile AMD unit can handle about 250 gpm or about 360,000 gallons per
day.  This mobile unit provides the same functionality as the current
passive system, but in minutes compared to weeks and months and with a much
smaller footprint. The state may provide incentives in the form of grants and/or
subsidies that cover the cost of AMD processing.  The DEP has permits
in place for the disposal of the filter-pressed sludge. STW is also reviewing
all of the present passive system flow-rates and water quality for potential use
as supply water to producers.
Brackish
Water
World-wide,
there are brackish water zones that contain large volumes of
water.  The water contains dissolved salts in the 0.5 to 2% (5,000 to
20,000 mg/l TDS) range and hence unfit for human use.  This water can
be treated to reduce the TDS below 500 mg/l or 0.05% TDS making the water fit
for human consumption. Factors such as decreasing supplies of fresh ground and
surface water, increased competition for surface water resources, and changes in
population/demand centers are driving the need for brackish water for water
supply.  STW's potential customers are private companies and
municipalities serving fast growing metropolitan areas where demand for water is
outpacing the available supply.  For example, aquifers in the Texas
Gulf Coast contain a large volume of brackish water (less than 10,000 ppm TDS)
that, with desalinization, will help meet increasing demand in the
region.
Legislative and
Regulatory:
Progressively
tighter regulations are demanding a thorough review of the entire water-use
cycle in industrial applications with the ultimate goal of encouraging and/or
mandating reclamation and re-use of water. STW works closely with Federal, State
and local regulators and environmental agencies to share our expertise and
knowledge on this complex issue and discuss our views on potential
solutions.  The Company's intimate knowledge of this process is a key
tool to assist their customers to better understand the legislative and
regulatory elements related to water management and advise them of various
alternatives
Process
STW's
process is predicated upon a thorough understanding of the customer's water
needs and related issues. This understanding is developed through a series of
interactive discussions with the customer. The next phase is data gathering and
analysis. STW collects samples at various locations and at different time
intervals which are then tested at independent laboratories and analyzed by STW.
Based upon this analysis, STW would recommend a solution using the most
appropriate technologies and negotiate the acquisition and financing of these
technologies as well as contracts with engineering procurement construction
("EPC"). Finally, STW oversees the EPC process and operates the
facility.
STW's
process is based upon a fundamental understanding of the core issue and
developing an appropriate solution using our experience and expertise. It
includes sampling and testing, analysis, design and as required by customers,
implementation and operation. Some of the steps involved are described
below:
·
The
      inlet water quality must be determined and measurement of Total Dissolved
      Solids (TDS), hardness, barium, strontium, bromine, sulfate and
      hydrocarbon concentrations are
critical.
·
Multiple
      samples over time are taken to ensure consistency and accuracy of inlet
      water quality measurement.
·
An
      understanding and analysis of potential uses for the reclaimed
      water.
·
A
      site inspection to determine the various vessels needed such as tanks,
      pumps, pits, truck off loading racks, and engineering testing of the
      land.
·
An
      analysis of fluid volumes and their variability over
  time.
·
Length
      of time the water needs to be reclaimed at this
  site.
·
Determination
      of appropriate technology: fixed or mobile, evaporation, reverse osmosis
      or other.
·
Permitting
      as needed
·
An
      investigation of the handling of the concentrated brines and any other
      residue from the reclamation
process.
·
Disposal
      options on the residue including potential use of the
      by-products.
Technology
STW has
developed relationships with a number of manufacturers that offer best-of-class
technologies applicable to its customer base. These technologies include thermal
evaporation, membrane technology and reverse osmosis and are available as fixed
or mobile units with varying capacities. Various pre and post-treatment options
are available as necessary including crystallizers that process very high TDS
(>150,000 mg/l).
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7 -
Thermal
Evaporation:
This process is capable of handling waters that contain up
to 150,000 mg/l TDS, with fresh water recovery rates from 50 to 90% or
greater depending on inlet water quality. The recovered fresh water, or
"distillate", is highly purified water from the evaporative process and has
multiple re-use applications. It is particularly applicable in the gas shale and
oil production facilities for reclaiming frac and produced waters.
The
technology is scalable and can be deployed as mobile units that can process
72,000 gallons per day ("gpd"), or as portable units that can process 216,000
gpd, or as fixed central units capable of processing up to 2,880,000
gpd.
Residual
brine concentrate can, depending on local conditions and producer's priorities,
either be disposed off in deep injection wells or be treated further through a
Crystallizer that reduces it into distillate and commercially valuable salt
residuals.
Reverse
Osmosis:
Waters that are below 34,000 mg/l of total dissolved solids and
contain low levels of barium, strontium, bromine, and sulfate can be reclaimed
through a reverse osmosis unit (RO).  Reverse osmosis is the process
of forcing a solvent from a region of high solute concentration through a
semi-permeable membrane to a region of low solute concentration by applying a
pressure in excess of the osmotic pressure.  The membranes used for
reverse osmosis are generally designed to allow only water to pass through while
preventing the passage of solutes (such as salt ions).  This process
is best known for its use in desalination (removing the salt from sea water to
get fresh water), but it has also been used to purify fresh water for medical,
industrial and domestic applications. Recovery rates for seawater to drinking
water are about 50%.
A stream
of concentrated brine or higher TDS is the by-product.  This brine can
be properly disposed of or utilized as a feed solution to a brine concentrator
or crystallizer. The latter ensures higher quality water with lower TDS levels
for industrial Uses.
Most
oilfield waters cannot be processed through an RO membrane since they contain
barium, strontium, or bromine. The barium and strontium are very large molecules
and they plug the membrane and create damage or permanent fouling of the
membrane.  Bromine and other such halogens react with the membrane and
destroy its integrity.  There are few oil field waters that could be
processed through this technology but a thorough study is required to ensure
success.  STW Resources will utilize this technology where the water
chemistry can be processed through RO membranes.
Membrane
Bioreactor:
A Membrane BioReactor ("MBR") is a combination of
biological and ultrafiltration technologies.  The biological area
provides the same process utilized in all sewage treatment
facilities.  Bacteria are maintained in an aerobic condition which
cause decay in all of the organic materials contained in the water, and
oxidizing these organic materials into low molecular weight acids, usually
acetic acid.  Maintaining the bacteria in an oxygen rich environment
prevents mutatation or growth of any anaerobic bacteria, which would produce
inorganic acids such as hydrogen sulfide.
A filter
membrane removes the water fraction from the unit.  The membrane
provides filtration in the 0.01 microns or lower range which is sufficient
enough to remove viruses, bacteria, and other colloidal
materials.  The water exiting the units is potable water and safe for
human consumption.
Marketing &
Sales
STW's
business proposition is to provide comprehensive, necessary water treatment
solutions. We work closely with our customers to evaluate their water treatment
needs, understand how these may change over time, assess the regulatory and
economic factors and then design an optimal solution.  As illustrated
in the chart to the right, STW offers a broad array of technical solutions
coupled with a service suite and financial structuring options that provide our
customers with the ability to obtain a turnkey solution to their waste water
disposal challenges.
Gas Shales:
Most of the natural gas producers in each of the shale formations are
already well known to the Company.  STW personnel have developed many,
and in some cases, long standing relationships with key personnel responsible
for well completion and remedial operations at each gas producer.  STW
monitors production plans at the producer level, the acreage acquisitions at the
shale formations and trends that relate to the demand for water reclamation by
region.  In addition, the Company maintains detailed databases that
monitor drilling permits, rig counts and other key statistics that forecast gas
production rates by geography.  These activities allow the Company to
anticipate demand for its services and to prioritize its sales calling effort on
those producers for whom fresh water supply is an issue or where shale water
disposal pose the greatest challenges.
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8 -
The
foundation of the Company's sales strategy is to become an integral part of its
customer's water management function.  This involves identifying and
finding solutions to customer needs through a multi–step, consultative
approach:
·
Evaluate
      drilling program and production expansion
plans.
·
Identify
      and define fracture water supply needs and waste brine generation
      levels.
·
Study
      the flowback water volumes and chemistry over
  time.
·
Generate
      economic models jointly with producers, with full consideration of all
      costs of obtaining, utilizing, and disposing of the
  water.
·
Evaluate
      various water reclamation options, from equipment to logistics,
      and   develop financial models for all the
      options.
·
Provide
      a customized presentation comparing present practices to all of the
      options of water reclamation available to the customer, for buy-in to the
      best scenarios.
·
Jointly
      develop a presentation of the best scenarios for water management (present
      and future) for use by upper management.  Support the
      presentation as required.
·
Review
      and determine optimal system design, location and financial
      structure.
·
Develop
      a time line for water reclamation
  implementation.
·
Execute
      definitive off-take and/or other agreements satisfactory to all
      parties.
STW is
able to facilitate this part of the sales process through its detailed knowledge
of the gas production process and economics, shale formation geology, frac water
chemistry, well completion techniques and logistics and regional regulatory
landscapes. This expertise reduces the time required during the evaluative stage
of the sales process and fosters a positive working relationship with our
customers.  STW then works together with its manufacturing partners to
complete the technical solution, develop ancillary system requirements (balance
of plant) evaluate cost and operating data, model the financial performance of
the system and define remaining project parameters and an installation
timeline.
Water
reclamation is a new paradigm for natural gas producers. Educating them about
the economic, environmental and political benefits is key to long-term
adoption.
Some of
the issues that operators are facing currently in the Marcellus Shale
are:
·
Water
      consumption and usage restrictions on the Susquehanna River are very
      restrictive.
·
There
      are only 8 deep injection wells in Pennsylvania, all of which are already
      at or close to capacity. New deep wells are being drilled, but the
      permitting process and actual drilling costs are proving to be
      expensive.
·
Trucking
      costs from $3.10 to over $10 / barrel, and generate a number of complaints
      about truck traffic, noise and the associated wear and tear on the roads.
      The cost to dispose of the water into the commercial disposal wells is
      $1.50 to $3.00 per barrel in addition to the trucking
    costs.
·
Reclaimed
      water will not require a consumption permit for use, as it has already
      been consumed once.  Trucks can bring brine to the Water
      Reclamation facility and return with fresh water for the next
      fracture.
·
The
      crystallization process will produce rock salt that meets the requirements
      of ASTM Standards for road salt. PennDOT purchases between 600,000 and
      1,000,000 tons of road salt each year and local municipalities purchase an
      additional 500,000 tons. An STW 1 million gal/day facility will produce
      approximately 88,500 to 106,000 tons of rock salt per
  year.
·
By
      2011 any new permits for disposal to the rivers will require total
      dissolved solids (TDS) removal.
At this
time, in the Marcellus Shale, only a couple of operators have the necessary
scale for a captive facility. Most operators are still in the exploratory
drilling stage, with single wells being drilled over a wide region.
Based on
the geographical mountainous terrain, the producers are constructing the well
sites on the higher elevations so that they do not interfere with the
agricultural and cattle ranch business conducted in the valleys.  In a
large number of examples a multiple well pad is constructed and then the wells
are directional drilled and completed in the Marcellus.  One central
water pit is permitted to hold the drilling and fracture water.  As
the fracture is conducted, the flowback and produced water is presently trucked
to an approved disposal facility.  In some cases the producers are
recycling some of the early low TDS flowback water by filtration and then
blending into the new fresh water.  All of the fresh water utilized by
all of the wells must be trucked to the site and then all of the flowback and
produced water is trucked away.
STW would
locate mobile evaporation equipment at the well site.  The flowback
water would be processed and the distilled water generated would be placed into
the fracture water pit.  The residual brine from the evaporation
process would be trucked to an approved disposal facility or taken to a STW
central crystallizer.  The crystallizer would provide additional fresh
water that could be trucked (2 way freight) back to the fracture
pit.  About 98% of the available water from the residual brine or the
high TDS produced water would be recovered.  Additional bi-products of
sodium chloride for use in Highway deicing and a solution of calcium chloride
would be generated.
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9 -
Competition
In the
oil and gas industry, current fracturing and produced water disposal methods –
deep injection wells and surface water disposal – represent the Company's
greatest source of competition.
Brine Discharge / Deep
Injection Wells
In many
gas shale fields, disposal through a deep injection well offers a cost-effective
(though environmentally questionable) alternative to water reclamation.  If
suitable geology exists, high TDS flowback waters can be disposed by injection
into a deep discharge brine well.  There are operative brine discharge
wells in each of the major shale formations, particularly in the Barnett shale
formation in Texas where many empty oil wells are converted for brine discharge
use.  There are only eight such discharge wells in the state of
Pennsylvania. Management believes these are presently operating at close to
capacity.
Surface Water
Disposal
Similarly,
surface water disposal facilities (rivers, streams and drainage creeks) offer a
competitive alternative to water reclamation.  At river discharge
facilities, flowback and produced waters are treated to remove naturally
occurring radioactive materials, some suspended solids and well completion
chemicals before discharge.  Dissolved salts are not removed and
therefore are added to surface water systems where they degrade water quality,
pollute the environment and disrupt wildlife habits.  Many states have
taken action to reduce or eliminate altogether the availability of surface water
disposal for gas well waste water streams.
In the
Marcellus shale, there are several treatment facilities that remove only the oil
and heavy metals, then discharge the water to certain rivers (where permitted),
and range in size from 20,000 to 200,000 gallons per day.  The treatment
does not remove salts, so the waters that are being discharged into the river
system retain high TDS contamination levels.  In April of 2009, the
Pennsylvania DEP regulated this type of treatment by limiting it to existing
permitted facilities only through January 2011, at which time treatment to
remove the TDS (salts) will have to be implemented.
The
following companies provide pre-discharge brine treatment
solutions:
The
Company accepts flowback and produced waters from gas producers operating in the
Marcellus and other regions in Pennsylvania, removes the oil, heavy metals, and
discharges the water to certain rivers in Pennsylvania.  Advanced Waste
operates one discharge facility in the western part of the Pennsylvania. Sunbury
operates an experimental river discharge site in conjunction with the
Pennsylvania Department of Environmental Protection.  Sunbury's primary
business is the operation of waste coal fired power plants, and it has obtained
a permit to discharge significant volumes of contaminated water into certain
rivers in Pennsylvania.  Acid Mine Drainage is presently processed through
large acreage passive systems.  These systems provide oxidation
followed by a long settling time for the heavy metals to precipitate and
possibly some pH adjustment before the water enters the river or
stream.  There are several companies that construct such facilities
under contract with the governmental agency.  At this time there is no
one that provides mobile AMD processing.
Legal
Proceedings
Except
for the current dispute with GE Water & Process Technologies ("GE Water"),
we are currently not a party to any legal or administrative proceedings and are
not aware of any pending or threatened legal or administrative proceedings
against us in all material aspects. We may from time to time become a party to
various legal or administrative proceedings arising in the ordinary course of
our business.
STW
entered into a Memorandum of Understanding with GE Water, a unit of General
Electric Company, dated February 14, 2008 ("MOU") to jointly develop off-take
agreements with oil and gas operators for the deployment of multiple water
reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian
Basin.  STW and GE Water formalized their relationship on May 22,
2008, by entering into a definitive Teaming Agreement ("Teaming Agreement"),
which superseded the MOU.  The Teaming Agreement was drafted in
accordance with the terms of the MOU and provides greater certainty as to each
party's responsibilities and as to the process of entering into agreements with
and providing services to customers.  The Teaming Agreement sets forth
the terms and conditions that will govern STW and GE Water relationship when STW
is successful in selling its services to an identified prospect.
In April
2008, STW entered into a purchase order with GE Water ("Purchase Order"), for
the purchase of a modularized produced water evaporator system (the "Evaporator
System") capable of processing approximately 720,000 gallons per
day.  The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.  As of September 30, 2009, STW has
paid a total of approximately $4.7 million.  Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.  STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November 28, 2008, the fourth installment payment of $1.5 million
which was due on February 27, 2009, and the fifth installment payment of
$1.8 million which was due on August 28, 2009.  The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September 30, 2009, totaled $9.0 million.  In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.  Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.  This change order obligated STW to additional payments totaling
approximately $1.2 million.
-
10 -
On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.  GE
Water took no further action with respect to the notice of default until
August 13, 2009.
On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.  At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.  If, after February
13, 2010, GE Water elected to not extend STW's payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.
On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW's Purchase Order due to STW's inability to pay the
current amounts due.  GE Water also demanded a "termination" payment
of $750,000.  In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water's belief that STW was
insolvent.  GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.  On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water's unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water's October 1, 2009 letter.
In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW's merger and capital raise in
February2010.
Number of
Employees
Other
than our directors and officers, presently we have one employee including one
full time employee.
Property
Our
principal offices are located at 619 West Texas Avenue, Suite 126, Midland,
Texas  79701, which includes 1,250 square feet in office
space.  We pay $1,200 per month in rent and our lease is month to
month.
-
11 -
RISK
FACTORS
Our limited operating history makes
it difficult for us to evaluate our future business prospects and make decisions
based on those estimates of our future performance
.
We did
not begin operations of our business until February 2008.  We have a
limited operating history and have generated limited revenue.  As a
consequence, it is difficult, if not impossible, to forecast our future results
based upon our historical data.  Reliance on the historical results may not
be representative of the results we will achieve, particularly in our combined
form.  Because of the uncertainties related to our lack of historical
operations, we may be hindered in our ability to anticipate and timely adapt to
increases or decreases in revenues or expenses.  If we make poor budgetary
decisions as a result of unreliable historical data, we could be less profitable
or incur losses, which may result in a decline in our stock
price.
STW's
results of operations have not resulted in profitability and we may not be able
to achieve profitability going forward.
STW
incurred a net loss amounting to $6,310,500 for the period from inception
(January 28, 2008) through September 30, 2009.  In addition, as of
September 30, 2009, STW has liabilities of $12,122,949. If we incur additional
significant operating losses, our stock price, may decline, perhaps
significantly.
Our
management is developing plans to alleviate the negative trends and conditions
described above.  Our business plan is speculative and unproven. There
is no assurance that we will be successful in executing our business plan or
that even if we successfully implement our business plan, that we will be able
to curtail our losses now or in the future.  Further, as we are a new
enterprise, we expect that net losses will continue and our working capital
deficiency will exacerbate.
We
depend upon key personnel and need additional personnel.
Our
success depends on the continuing services of Stanley Weiner, our chief
executive officer and director.  The loss of Mr. Weiner could have a
material and adverse effect on our business operations.  Additionally,
the success of the Company's operations will largely depend upon its ability to
successfully attract and maintain competent and qualified key management
personnel. As with any company with limited resources, there can be no guaranty
that the Company will be able to attract such individuals or that the presence
of such individuals will necessarily translate into profitability for the
Company.  Our inability to attract and retain key personnel may
materially and adversely affect our business operations.
We must effectively manage the growth
of our operations, or our company will suffer.
To manage
our growth, we believe we must continue to implement and improve our operational
and marketing departments. We may not have adequately evaluated the costs and
risks associated with this expansion, and our systems, procedures, and controls
may not be adequate to support our operations. In addition, our management may
not be able to achieve the rapid execution necessary to successfully offer our
products and services and implement our business plan on a profitable basis. The
success of our future operating activities will also depend upon our ability to
expand our support system to meet the demands of our growing business. Any
failure by our management to effectively anticipate, implement, and manage
changes required to sustain our growth would have a material adverse effect on
our business, financial condition, and results of operations.
Our
business requires substantial capital, and if we are unable to maintain adequate
financing sources our profitability and financial condition will suffer and
jeopardize our ability to continue operations.
We
require substantial capital to support our operations.  If we are
unable to maintain adequate financing or other sources of capital are not
available, we could be forced to suspend, curtail or reduce our operations,
which could harm our revenues, profitability, financial condition and business
prospects.
Regulatory
requirements may have a negative impact upon our business.
While our
services are subject to substantial regulation under federal, state, and local
laws, we believe that the services are materially in compliance with all
applicable laws. However, to the extent the laws change, if we introduce new
services in the future or if we commence working in a new area, some or all of
our services may not comply with applicable federal, state, or local laws.
Further, certain federal, state, and local laws and industrial standards
currently regulate electrical and electronics equipment. Although standards for
electric vehicles are not yet generally available or accepted as industry
standards, our products may become subject to federal, state, and local
regulation in the future. Compliance with this regulation could be burdensome,
time consuming, and expensive.
Our
automobile products are subject to environmental and safety compliance with
various federal and state regulations, including regulations promulgated by the
EPA, NHTSA, and various state boards, and compliance certification is required
for each new model year. The cost of these compliance activities and the delays
and risks associated with obtaining approval can be substantial. The risks,
delays, and expenses incurred in connection with such compliance could be
substantial.
-
12 -
Risks
associated with the collection, treatment and disposal of wastewater may impose
significant costs.
Our
wastewater collection, treatment and disposal operations of our subsidiaries are
subject to substantial regulation and involve significant environmental risks.
If collection systems fail, overflow or do not operate properly, untreated
wastewater or other contaminants could spill onto nearby properties or into
nearby streams and rivers, causing damage to persons or property, injury to
aquatic life and economic damages, which may not be recoverable in
rates.  Liabilities resulting from such damage could adversely and
materially affect our business, results of operations and financial condition.
Moreover, in the event that we are deemed liable for any damage caused by
overflow, our losses might not be covered by insurance policies, and such losses
may make it difficult for us to secure insurance in the future at acceptable
rates.
If
the Company is unable to reach an agreement with GE, GE will retain possession
of the Evaporator System and retain all payments made to GE to date, which would
significantly reduce the overall value of the Company and may result in the
Company ceasing operations.
STW
entered into a Memorandum of Understanding with GE Water, a unit of General
Electric Company, dated February 14, 2008 ("MOU") to jointly develop off-take
agreements with oil and gas operators for the deployment of multiple water
reclamation systems throughout Texas, Arkansas, Louisiana and the Appalachian
Basin.  STW and GE Water formalized their relationship on May 22,
2008, by entering into a definitive Teaming Agreement ("Teaming Agreement"),
which superseded the MOU.  The Teaming Agreement was drafted in
accordance with the terms of the MOU and provides greater certainty as to each
party's responsibilities and as to the process of entering into agreements with
and providing services to customers.  The Teaming Agreement sets forth
the terms and conditions that will govern STW and GE Water relationship when STW
is successful in selling its services to an identified prospect.
In April
2008, STW entered into a purchase order with GE Water ("Purchase Order"), for
the purchase of a modularized produced water evaporator system (the "Evaporator
System") capable of processing approximately 720,000 gallons per
day.  The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.  As of September 30, 2009, STW has
paid a total of approximately $4.7 million.  Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.  STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November 28, 2008, the fourth installment payment of $1.5 million
which was due on February 27, 2009, and the fifth installment payment of
$1.8 million which was due on August 28, 2009.  The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September 30, 2009, totaled $9.0 million.  In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.  Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.  This change order obligated STW to additional payments totaling
approximately $1.2 million.
On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.  GE
Water took no further action with respect to the notice of default until
August 13, 2009.
On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.  At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.  If, after February
13, 2010, GE Water elected to not extend STW's payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.
On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW's Purchase Order due to STW's inability to pay the
current amounts due.  GE Water also demanded a "termination" payment
of $750,000.  In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water's belief that STW was
insolvent.  GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.  On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water's unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water's October 1, 2009 letter.
In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW's merger and capital raise in
January 2010.
If the
Company is unable to reach an agreement with GE Water whereby STW is again able
to proceed with the Purchase Order and the Teaming Agreement, the Company would
lose its rights to the Evaporator System (this is currently the Company's only
significant asset), which could result in the Company ceasing operations and, in
turn, would result in a complete loss of your investment.
-
13 -
We
will require significant capital requirements for equipment, commercialization
and overall success.
We will
require additional financing for our operations, to purchase equipment and to
establish a customer base.  We anticipate that we will require a
minimum of $10.0 to $15.0 million in additional capital over the next six months
to pursue our business plan.  We cannot assure you that we will obtain
any additional financing through any other means.  Additional
financing may not be available to us on acceptable terms, if at
all.  Unless we raise additional financing, we will not have
sufficient funds to complete the purchase of equipment and commercialization of
our services.
Our
additional financing requirements could result in dilution to existing
stockholders.
We will
require additional financings obtained through one or more transactions which
effectively dilute the ownership interests of holders of our Common
Stock.  We have the authority to issue additional shares of Common
Stock and Preferred Stock as well as additional classes or series of ownership
interests or debt obligations which may be convertible into any class or series
of ownership interests in the Company.  The Company is authorized to
issue 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock.  Such securities may be issued without the approval or other
consent of the holders of the Common Stock.
A
small number of existing shareholders own a significant amount of our Common
Stock, which could limit your ability to influence the outcome of any
shareholder vote.
Our
executive officers, directors and shareholders holding in excess of 5% of our
issued and outstanding shares, beneficially own over31.9% of our Common Stock,
before giving effect to the Offering. Under our Articles of Incorporation and
Nevada law, the vote of a majority of the shares outstanding is generally
required to approve most shareholder action.  As a result, these
individuals will be able to significantly influence the outcome of shareholder
votes for the foreseeable future, including votes concerning the election of
directors, amendments to our Articles of Incorporation or proposed mergers or
other significant corporate transactions.
We
face competition.
We face
competition from existing companies in reclamation of oil and gas waste water
space that provide similar services to the Company's.  Our competitors
may have longer operating histories, greater name recognition, broader customer
relationships and industry alliances and substantially greater financial,
technical and marketing resources than we do.  Our competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements.
We
rely on confidentiality agreements that could be breached and may be difficult
to enforce.
Although
we believe that we take reasonable steps to protect our intellectual property,
including the use of agreements relating to the non-disclosure of our
confidential information to third parties, as well as agreements that provide
for disclosure and assignment to us of all rights to the ideas, developments,
discoveries and inventions of our employees and consultants while we employ
them, such agreements can be difficult and costly to
enforce.  Although we generally seek to enter into these types of
agreements with our consultants, advisors and research collaborators, to the
extent that such parties apply or independently develop intellectual property in
connection with any of our projects, disputes may arise concerning allocation of
the related proprietary rights.  If a dispute were to arise
enforcement of our rights could be costly and the result
unpredictable.  In addition, we also rely on trade secrets and
proprietary know-how that we seek to protect, in part, through confidentiality
agreements with our employees, consultants, advisors or others.
Despite
the protective measures we employ, we still face the risk that: agreements may
be breached; agreements may not provide adequate remedies for the applicable
type of breach; our trade secrets or proprietary know-how may otherwise become
known; our competitors may independently develop similar technology; or our
competitors may independently discover our proprietary information and trade
secrets.
We
have not paid dividends in the past and do not expect to pay dividends in the
future.  Any return on investment may be limited to the value of our
common stock
We have
never paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.
Our
stock price and trading volume may be volatile, which could result in
substantial losses for our stockholders.
The
equity trading markets may experience periods of volatility, which could result
in highly variable and unpredictable pricing of equity securities. The market
price of our common stock could change in ways that may or may not be related to
our business, our industry or our operating performance and financial condition.
In addition, the trading volume in our common stock may fluctuate and cause
significant price variations to occur. We have experienced significant
volatility in the price of our stock over the past few years. We cannot assure
you that the market price of our common stock will not fluctuate or decline
significantly in the future. In addition, the stock markets in general can
experience considerable price and volume fluctuations.
-
14 -
We
have not voluntary implemented various corporate governance measures, in the
absence of which, shareholders may have more limited protections against
interested director transactions, conflict of interest and similar
matters.
Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the NASDAQ Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges are those that address board of
directors' independence, audit committee oversight, and the adoption of a code
of ethics. While we intend to adopt certain corporate governance measures such
as a code of ethics and established an audit committee, Nominating and Corporate
Governance Committee, and Compensation Committee of our board of
directors, we presently do not
have any independent directors. We intend to expand our board membership in
future periods to include independent directors. It is possible that if we were
to have independent directors on our board, stockholders would benefit from
somewhat greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by our
sole director who has an interest in the outcome of the matters being decided.
Prospective investors should bear in mind our current lack of both corporate
governance measures and independent directors in formulating their investment
decisions.
We
may be exposed to potential risks relating to our internal controls over
financial reporting and our ability to have those controls attested to by our
independent auditors.
As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the
Securities and Exchange Commission adopted rules requiring smaller reporting
companies, such as our company, to include a report of management on the
company's internal controls over financial reporting in their annual reports for
fiscal years ending on or after December 15, 2007.  We will be
required to include the management report in the annual report for the year
ending December 31, 2009. In addition, for our fiscal year ending December 31,
2009 the independent registered public accounting firm auditing our financial
statements must also attest to and report on management's assessment of the
effectiveness of our internal controls over financial reporting as well as the
operating effectiveness of our internal controls. In the event we are unable to
receive a positive attestation from our independent auditors with respect to our
internal controls, investors and others may lose confidence in the reliability
of our financial statements and our ability to obtain financing as needed could
suffer.
If
a public market for our common stock develops, trading will be limited under the
SEC's penny stock regulations, which will adversely affect the liquidity of our
common stock.
The
trading price of our common stock is less than $5.00 per share and, as a result,
our common stock is considered a "penny stock," and trading in our common stock
would be subject to the requirements of Rule 15g-9 under the Exchange Act. Under
this rule, broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements. Generally, the broker/dealer must make an individualized
written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
SEC
regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity of securities
in the secondary market because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the
penny stock rules, other risks
associated with trading in penny stocks could also be price fluctuations and the
lack of a liquid market. An active and liquid market in our common stock may
never develop due to these factors.
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15 -
MANAGEMENT'S
DISCUSSION AND ANALYSIS
Forward
Looking Statements
Some of
the statements contained in this Form 8-K that are not historical facts are
"forward-looking statements" which can be identified by the use of terminology
such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Form 8-K, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:

Our
      ability to attract and retain
management;

Our
      ability to raise capital when needed and on acceptable terms and
      conditions;

The
      intensity of competition;

General
      economic conditions;

Changes
      in regulations and our ability obtain permits from jurisdictions in which
      we operate; and

The
      extent to which the market for water reclamation services exists and the
      pace at which it may grow if at all.
All
written and oral forward-looking statements made in connection with this Form
8-K that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.
Our Plan
of Operation should be read in conjunction with our financial statements
included herein.
Overview
On
January 21, 2010, Woozyfly entered into an Agreement and Plan of Merger ("Merger
Agreement") with STW Acquisition, Inc. ("Acquisition Sub"), a wholly owned
subsidiary of the Company, STW Resources, Inc. ("STW") and certain shareholders
of STW controlling a majority of the issued and outstanding shares of
STW.  Pursuant to the Merger Agreement, STW will be merged into the
Acquisition Sub resulting in an exchange of all of the issued and outstanding
shares of STW for shares of the Company on a one for one basis. At such time,
STW will become a wholly owned subsidiary of the Company.  The Merger
Agreement is subject to the Bankruptcy Court confirmation as well as standard
closing conditions.
On
February 9, 2010, the Court entered an order confirming the Seconded Amended
Plan of Reorganization (the "Plan") pursuant to which the Plan and the Merger
was approved.   It is expected that the Plan will be effective
February 19, 2010 (the "Effective Date"). The
principal
provisions of the Plan are as follows:
·
MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;
·
the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;
·
general
      unsecured claims shall received 100,000 shares of common stock;
      and
·
the
      Company's equity interest shall be extinguished and
    cancelled.
On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the "Merger").  In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the "STW Acquisition Shares") shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.
-
16 -
Considering
that, following the merger, the shareholders of STW control the majority of our
outstanding voting common stock and we effectively succeeded our otherwise
minimal operations to those that are theirs, STW is considered the accounting
acquirer in this reverse-merger transaction.  A reverse-merger transaction
is considered, and accounted for as, a capital transaction in substance; it is
equivalent to the issuance of STW securities for our net monetary assets, which
are deminimus, accompanied by a recapitalization. Accordingly, we have not
recognized any goodwill or other intangible assets in connection with this
reverse merger transaction. STW is the surviving and continuing entities and the
historical financials following the reverse merger transaction will be those of
STW.  We were a "shell company" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) immediately prior to our
acquisition of STW pursuant to the terms of the Merger Agreement.  As
a result of such acquisition, our operations our now focused on the provision of
customized water reclamation services.  Consequently, we believe that
acquisition has caused us to cease to be a shell company as we no longer have
nominal operations.
Results
of Operations
Nine
Months Ended September 30, 2009 Compared to Nine months
Ended September 30,
2008
Revenue
.
Revenue generated for the
nine months ended September 30, 2009 and 2008 was $34,000 and $0
respectively.  Revenue for 2009 was generated in conjunction with a test of
its technology for a potential customer.
Expenses
.
Our expenses for the
nine months ended September 30, 2009 were $3,246,480, and consisted of payroll
and payroll taxes ($1,634,830), legal and professional fees ($779,124), stock
based compensation ($600,300) and ($232,226)  in other administrative
expenses including travel to the prospective sites.  Our expenses for
the nine months ended September 30, 2008 were $1,725,444 and consisted of
payroll and payroll taxes ($728,662), legal and professional fees ($501,119),
stock based compensation ($202,557) and ($293,106)  in other administrative
expenses.  The reason for the increase in comparing the nine months
ended September 30, 2008 to the same period for 2009 was due to increased in
activity in evaluating the water reclamation market and to the company's process
for permitting sites in Pennsylvania which included the hiring of additional
employees.
Net
loss
.
Net loss for the nine months
ended September 30, 2009 and 2008 were $3,663,932 and $1,822,348,
respectively.
Year Ended December 31,
2008
Revenue
.
We did not generate revenue
for the year ended December 31, 2008.
Expenses
.
Our expenses for the
year ended December 31, 2008 were $2,525,763 and consisted of payroll and
payroll taxes ($1,023,433), legal and professional fees ($714,865), stock based
compensation ($233,493) and ($553,972)  in other administrative
expenses including travel to the prospective
sites.
Net
loss
. Net loss
for the year ended December 31, 2008 was $2,646,568.
Liquidity and Capital
Resources
As of December 31, 2008, we
had current assets of $69,751 including cash of $17,639 and current liabilities
of $5,720,104.  As of September 30, 2009, we had current assets of
$204,587 including cash of $75,654 and current liabilities of
$12,122,949.
Operating
Activities
Our operating activities from
continuing operations resulted in a net cash used by operations of $911,186 for
the nine months ended September 30, 2009 compared to net cash used by operations
of $910,182 for the nine months ended September 30, 2008.  The net
cash used by operations for the nine months ended September 30, 2009 reflects a
net loss of $3,663,932 offset by depreciation of $20,360, amortization of debt
issue costs of $303,547, notes payable issued for deferred compensation of
$800,436, stock based compensation of $600,300 and the fair value of equity
issued for services of $273,983, account payables and other accrued expenses of
$674,210 and other minor factors.   The net cash used by
operations for the nine months ended September 30, 2008 reflects a net loss of
$1,822,348 offset by depreciation of $5,702, stock based compensation of
$202,557, and account payables and other accrued expenses of $767,123 and other
minor factors.
Investing
Activities
Our investing activities
resulted in a net cash outflow of $3,387 for the nine months ended September 30,
2009 compared to a net cash outflow of $4,627,248 for the nine months ended
September 30, 2008.  Cash used in investing activities principally
represents acquisition of property and equipment offset by proceeds from the
sale of assets.
Financing
Activities
Our financing activities
resulted in a cash inflow of $972,588 for the nine months ended September 30,
2009 and $5,824,285 for the nine months ended September 30, 2009, which
represents both issuances of notes payable and sales of equity by
STW.
-
17 -
Notes
Payable
In April 2008, STW issued
promissory notes ("April 2008 Notes") totaling $1,100,000 bearing interest at
10%. These notes were repaid in full in June 2008.
In
September 2008, STW entered into a securities purchase agreement for the
issuance of a 12% promissory note ("2008 September Bridge Note") in the
principal amount of $125,000.
In
December 2008, STW entered into a securities purchase agreement with the
Chairman and Chief Executive Officer for the issuance of a 10% promissory note
("CEO Bridge Note") in the principal amount of $75,000.
During
2008, STW also entered into various vehicle and insurance financing
contracts.  The amount outstanding at December 31, 2008 was
$99,102.
In
January 2009, STW entered into a securities purchase agreement for the issuance
of a 10% promissory note ("January 2009 Bridge Note") in the principal amount of
$50,000.  In addition, STW entered into a securities purchase
agreement for the issuance of a 15% promissory note in the principal amount of
$400,000.
In March
2009, STW entered into a securities purchase agreement with the September 2008
Bridge Investor providing for the rollover of the $125,000 principal amount
outstanding under the 2008 September Bridge Note and advancing an additional
$50,000.
In April
2009, STW commenced an offering of its 12% Convertible Notes ("2009 12%
Convertible Notes").  The convertible notes bear interest at 12% and
are convertible at the option of the shareholder into shares of STW's common
stock.    Through September 30, 2009 the Company had issued
a total of $650,000 face value of its 2009 12% Convertible Notes for
cash.
In
October and November 2009, STW received $90,000 in proceeds from issuance of
additional 12% Convertible Notes, which provided the funding to remain in
operation during the fourth quarter of 2009.
Equity
Issuances
On
January 28, 2008, STW issued 8,100,000 shares of Common Stock at $0.0001 per
share for total consideration of $81.
In April
2008, STW designated the Series A Preferred Stock, with a par value of $0.0001
per share, and authorized the issuance of 100 shares to STW's Chairman and Chief
Executive Officer.  In addition, STW issued 5,980,000 shares of Common
Stock at $0.0445 per share for total consideration of $266,110.  STW
then commenced a unit offering (the "$2.00 Unit Offering") whereby each unit
consisted of one share of STW's Common Stock and a warrant to acquire one and
one-half shares of STW's Common Stock as follows: (i) 0.5 shares at an exercise
price equal to $3.00 per share, (ii) 0.5 shares at an exercise price equal to
$4.00 per share, and (iii) 0.5 shares at an exercise price equal to $8.00 per
share. Each Warrant is exercisable for three years from date of
issue.  As of December 31, 2008, STW sold an aggregate of 3,467,500
units for gross proceeds of $6.9 million.
STW also
issued 700,000 Common Shares for investment banking compensation associated with
this offering.  These shares were valued at an aggregate of $98,800,
based on the estimated fair value of STW's Common Stock at that
date.
In
connection with the April 2008 Notes, STW issued a total of 275,000 shares of
Common Stock which were valued at an aggregate of $12,238, based upon the price
of STW's shares of Common Stock issued under the most recent private placement
offering prior to the issuance of the April 2008 Notes.  Upon the
extension of the April 2008 Notes in June 2008, STW issued a total of 41,325
additional shares of Common Stock.  These additional shares of Common
Stock were valued at an aggregate of $11,157, based on the estimated fair value
of the Company's Common Stock at that date.
In
connection with the September 2008 Bridge Note, STW issued a total of 62,500
shares of Common Stock which were valued at an aggregate of $16,875, based upon
the estimated fair value of STW's Common Stock at that date.
In
connection with the CEO Bridge Note, STW issued a total of 37,500 shares of
Common Stock which were valued at an aggregate of $10,125, based upon the
estimated fair value of STW's Common Stock at that date.
Stock Based
Compensation
Since
Inception (January 28, 2008), STW issued 6.8 million shares of its Common Stock
to directors, employees and certain consultants.  As of September 30,
2009, 200,000 of these shares have been forfeited.   During the
period from Inception (January 28, 2008) through December 31, 2008, STW
recognized $233,493 in compensation cost associated with the issuance of these
shares and recognized an additional $600,300 during the nine months ended
September 30, 2009.  At September 30, 2009, STW had no remaining
compensation cost to be recognized related to these issuances.
-
18 -
Warrants
As of
December 31, 2008, STW had 5,739,900 warrants outstanding to acquire STW's
Common Stock.  As of September 30, 2009 STW had 12,411,401 warrants
outstanding to acquire STW's Common Stock.
Presently,
due to the lack of revenue we are not able to meet our operating and capital
expenses. The success of our ability to continue as a going concern is dependent
upon successful permitting of our sites obtaining customers for water
reclamation services, and maintaining a break even or profitable level of
operations. We have incurred operating losses since inception, and this is
likely to continue through the third quarter of 2010.
The
financial requirements of our Company will be dependent upon the financial
support through credit facilities and additional sales of our equity
securities.  The issuance of additional equity securities by us may
result in a significant dilution in the equity interests of our current
shareholders. Should additional financing be needed for our continued operations
we will need to obtain it on commercially reasonable terms. If we are not able
to obtain the additional financing on a timely basis, we will not be able to
meet our other obligations as they become due and we will be forced to scale
down or perhaps even cease our operations.
We can
give no assurance that we will be successful in implementing any phase, all
phases of the proposed business plan, or that we will be able to continue as a
going concern.
Credit
Facility
Credit
Facility
Presently
we have no revolving Credit Facility established.  If needed, it will
be necessary to establish a line of credit and it will need to be on favorable
terms.
Off-Balance
Sheet Arrangements
STW does
not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on STW's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to
investors.
Commitments
STW
entered into a Memorandum of Understanding with GE Water & Process
Technologies ("GE Water"), a unit of General Electric Company, dated February
14, 2008 ("MOU") to jointly develop off-take agreements with oil and gas
operators for the deployment of multiple water reclamation systems throughout
Texas, Arkansas, Louisiana and the Appalachian Basin.  STW and GE
Water formalized their relationship on May 22, 2008, by entering into a
definitive Teaming Agreement ("Teaming Agreement"), which superseded the
MOU.  The Teaming Agreement was drafted in accordance with the terms
of the MOU and provides greater certainty as to each party's responsibilities
and as to the process of entering into agreements with and providing services to
customers.  The Teaming Agreement sets forth the terms and conditions
that will govern STW and GE Water relationship when STW is successful in selling
its services to an identified prospect.
In April
2008, STW entered into a purchase order with GE Water ("Purchase Order"), for
the purchase of a modularized produced water evaporator system (the "Evaporator
System") capable of processing approximately 720,000 gallons per
day.  The total commitment under the Purchase Order was $14.5 million,
to be paid over eight installments.  As of September 30, 2009, STW has
paid a total of approximately $4.7 million.  Included in this total is
$300,000 of its $1.5 million second installment payment which was due at the end
of June 2008.  STW is currently in arrears on the remaining $1.2
million under the second installment payment and is also in arrears in its third
installment payment of $3.6 million which was due on
November 28, 2008, the fourth installment payment of $1.5 million
which was due on February 27, 2009, and the fifth installment payment of
$1.8 million which was due on August 28, 2009.  The total of
all amounts invoiced and unpaid, including accrued interest of approximately
$998,000, through September 30, 2009, totaled $9.0 million.  In
addition, pursuant to the terms of the Purchase Order, STW is required to post a
letter of credit securing the balance of the payments due under the Purchase
Order, totaling $1.9 million, which STW has not yet done.  Finally, in
April 2009, STW issued a change order to the Purchase Order to increase the
overall processing capacity to approximately one million gallons per
day.  This change order obligated STW to additional payments totaling
approximately $1.2 million.
On
January 12, 2009, GE Water sent a notice of default with respect to the past due
payments on the Evaporator System, and the required posting of the letter of
credit, as set forth under the Purchase Order, with a requirement that such
default be cured within 30 days from the date of the notices.  GE
Water took no further action with respect to the notice of default until
August 13, 2009.
On August
13, 2009, GE Water provided STW a six month additional grace period, through
February 13, 2010.  At the end of the additional six month grace
period, if STW has not met its obligations, GE Water represented that it would
meet with STW to determine the state of the investment market and grant or not
grant an additional grace period, as necessary.  If, after February
13, 2010, GE Water elected to not extend STW's payment obligations, GE Water
could foreclose on the Evaporator System, resulting in the loss of payments
advanced to date by STW and future use of the Evaporator System under
construction.
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19 -
On
October 1, 2009, GE Water sent a letter to STW unilaterally announcing to STW
that GE was canceling STW's Purchase Order due to STW's inability to pay the
current amounts due.  GE Water also demanded a "termination" payment
of $750,000.  In the same letter, GE Water unilaterally announced it
was cancelling the Teaming Agreement citing GE Water's belief that STW was
insolvent.  GE Water prefaced its cancellation of the Purchase Order
and Teaming Agreement on a failure of GE Water and STW to renegotiate a
substitute Teaming Agreement.  On October 8, 2009, STW responded to GE
Water in writing rejecting GE Water's unilateral termination of the Purchase
Order and Teaming Agreements, among other things including that GE Water had the
contractual requirement to arbitrate certain of the disputed matters raised by
GE Water's October 1, 2009 letter.
In discussions in December
2009 between STW management and GE Water, GE Water expressed continued interest
in working with STW by providing technical support and a willingness to resolve
their differences, pending the results of STW's merger and capital raise in
February2010.
Critical
Accounting Policies and Estimates
The
following accounting principles and practices of STW are set forth to facilitate
the understanding of data presented in the consolidated financial
statements:
Nature of
operations
STW
Resources, Inc. ("STW" or the "Company") is a development stage Nevada
corporation formed on January 28, 2008, 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, are working
to create an efficient and economical solution to this complex
problem.  STW is also evaluating the deployment of similar technology
in the municipal wastewater industry, the Acid Mine Drainage polluted water
problems in the northeastern United States, and brackish aquifer reclamation for
reuse.
Use of
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Property and
depreciation
Property
and equipment are recorded at cost and depreciation is provided using the
straight-line method over the estimated useful lives of the
assets.  Leasehold improvements are capitalized and amortized over the
lesser of the life of the lease or the estimated useful life of the
asset.
Expenditures
for major additions or improvements, which extend the useful lives of assets,
are capitalized.  Minor replacements, maintenance and repairs, which
do not improve or extend the lives of the assets, are charged to operations as
incurred.  Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in current
operations.
Income
taxes
STW
follows SFAS No. 109, "
Accounting for Income Taxes
"
for recording the provision for income taxes.  Deferred tax assets and
liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled.  Deferred income tax expenses or benefits are
based on the changes in the asset or liability during each period.  If
available evidence suggests that it is more likely than not that some portion or
all of the deferred tax assets will not be realized, a valuation allowance is
required to reduce the deferred tax assets to the amount that is more likely
than not to be realized.  Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of
change.  Deferred income taxes may arise from temporary differences
resulting from income and expense items reported for financial accounting and
tax purposes in different periods.  Deferred taxes are classified as
current or non-current, depending on the classification of assets and
liabilities to which they relate.  Deferred taxes arising from
temporary differences that are not related to an asset or liability are
classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse.
At
Inception (January 28, 2008), STW adopted Financial Accounting Standards Board
Interpretation Number 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"), which is intended to clarify the accounting for income taxes prescribing a
minimum recognition threshold for a tax provision before being recognized in the
consolidated financial statements.  FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition.  As a result, STW has
concluded that it does not have any unrecognized tax benefits or any additional
tax liabilities after applying FIN 48.  The adoption of FIN 48
therefore had no impact on STW's consolidated financial statements.
Concentrations
Financial
instruments that potentially subject STW to concentration of credit risk consist
of cash.  From time to time, STW has cash in its bank accounts in
excess of federally insured limits.
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20 -
STW
anticipates entering into long-term, fixed-price contracts for its services with
select oil and gas producers and municipal utilities.  STW will
control credit risk related to accounts receivable through credit approvals,
credit limits and monitoring procedures.
Subsequent
events
STW
evaluates events and transactions occurring subsequent to the date of the
financial statements for matters requiring recognition or disclosure in the
financial statements. The accompanying financial statements consider events
through February 12, 2010.
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21 -
MANAGEMENT
Executive
Officers and Directors
Below are
the names and certain information regarding STW's executive officers and
directors following the acquisition of STW.
Name
Age
Position
Stanley
      Weiner
56
Chairman
      of the Board of Directors and Chief Executive Officer
Eric
      Stoppenhagen (1)
36
Director
Marty
      Walter
51
Vice
      President of Field Operations
D.
      Grant Seabolt, Jr., Esq.
55
In-House
      Counsel and Corporate Secretary
(1) Mr.
Stoppenhagen has agreed to resign as a director of the Company subject to the
filing and mailing of the schedule 14f information statement.
Officers
are elected annually by the Board of Directors (subject to the terms of any
employment agreement), at its annual meeting, to hold such office until an
officer's successor has been duly appointed and qualified, unless an officer
sooner dies, resigns or is removed by the Board.
Background
of Executive Officers and Directors
Stanley T. Weiner, a 30 year veteran of
the oil and gas industry, has explored, drilled and operated oil and gas
properties in the United States and in South America. Previously, Mr. Weiner
served as president and CEO of Molecular Solutions, LLC, and was founder and CEO
of Weiner Investments Inc, and American Crude Oil, Inc.
Eric
Stoppenhagen, through his consulting company, Venor, Inc., provides financial
and management services to small to medium-sized companies that either are
public or desire to become public. He provides temporary CFO services to these
companies, which includes as transaction advice, preparation of security filings
and advice regarding compliance with corporate governance requirements. Mr.
Stoppenhagen has more than ten years of financial experience having served in an
executive capacity for several public and private companies; including as Vice
President of Finance  and subsequently Interim President of Trestle
Holdings, Inc. from 2003 to 2009; Interim President and Director of
WoozyFly, Inc. from 2009 to 2010; Interim President of Trist Holdings, Inc. from
2007 to 2010; CFO and Director of AuraSource, Inc. from 2008 to 2010; CFO of
GetFugu, Inc. in 2009; and, CFO of Jardinier Corp. from 2007 to 2008. Mr.
Stoppenhagen is a Certified Public Accountant and holds a Juris Doctorate and
Masters of Business Administration both from George Washington University.
Additionally, he holds a Bachelor of Science in Finance and a Bachelor of
Science in Accounting both from Indiana University.
Marty Walter has 25 years of experience
in the specialty chemical, petrochemical, and cryogenics industries in the areas
of operations, safety, environmental, customer service and
logistics.  Prior to joining STW Resources, Mr. Walter was the
Operations Manager for NuCo2, Inc.  Prior to that, he was a manager
for Distribution and Office Services for Betz Energy Chemicals, and Assistant
Plant Manager for Betz Laboratories.
D. Grant Seabolt, Jr., Esq. is an "AV"
rated, 29-year law practitioner and principal in the Dallas, Texas law firm of
the Law Office of Grant Seabolt, where he advises small businesses,
entrepreneurs, start-up companies and mature companies in sophisticated business
transactions, including mergers, acquisitions and financings.  He is a
noted arbitrator and is a "Credentialed Distinguished Mediator."  Prior to
entering private practice, Mr. Seabolt served as a Marine Corps Judge Advocate
(attaining rank of Colonel in the Reserves) and as a Division Attorney with The
Dow Chemical Company.  Mr. Seabolt holds the following degrees: LL.M
(Master of Laws in International and Comparative Law,
with highest honors
),
National Law Center, George Washington University, 1984; J.D., Univ. of Alabama
School of Law (Bench & Bar Honor Society), 1979; and B.A. (Accounting),
Birmingham-Southern College, 1976.
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22 -
Executive
Compensation
Summary
Compensation Table
Name
      and Principal Position
Year
Salary
      ($)
Bonus
      ($)
(5)
Stock
Awards
      ($)
(6)
Stock
Options
      ($)
Non-equity
Incentive
      Plan
Compensation
      ($)
Non-Qualified
Deferred
Compensation
Earnings
      ($)
All
      Other
Compensation
($)
Total
      ($)
Gene
      Brock, President (1)
2008
$334,000
$13,350
$347,350
2007
$0
Stanley
      T Weiner, CEO Chairman
2008
$221,000
$89,000
$310,000
2007
$0
G.
      Wade Stubblefield , CFO (1)
2008
$109,083
$25,312
$134,395
2007
$0
Marty
      Walter ,  V P   Operations
2008
$102,500
$13,500
$116,000
2007
$0
*Date of
Inception January 8, 2008
(1) Have
resigned as executive officers of the Company.
Outstanding
Equity Awards at Fiscal Year-End
STW does
not have any outstanding equity awards.
DIRECTOR
COMPENSATION
STW has
not paid any fees to its directors.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of February 12, 2010 with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five (5%) percent; (ii) each of the Company's executive
officers and directors; and (iii) the Company's directors and executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially
owned.
Name
      of Beneficial Owner (1)
Common
      Stock
Beneficially
      Owned
Percentage
      of
Common
      Stock (2)
Stanley
      Weiner*
6,447,500
22.44%
Eric
      Stoppenhagen*
Marty
      Walter*
200,000
0.70%
D.
      Grant Seabolt, Jr., Esq.*
50,000
0.17%
Paul
      Difrancesco
2,469,537
8.60%
All
      officers and directors as a group (4 persons)
6,697,500
23.31%
*Executive
officer and/or director of the Company.
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23 -
**
Less than 1%
(1)
Except
      as otherwise indicated, the address of each beneficial owner is c/o STW
      Resources, Inc., 619 West Texas Avenue, Suite 126, Midland,
      Texas  79701.
(2)
Applicable
      percentage ownership is based on 28,728,075 shares of common stock
      outstanding as of February 12, 2010, together with securities exercisable
      or convertible into shares of common stock within 60 days of February 12,
      2010 for each stockholder.  Beneficial ownership is determined
      in accordance with the rules of the Securities and Exchange Commission and
      generally includes voting or investment power with respect to
      securities.  Shares of common stock that are currently
      exercisable or exercisable within 60 days of February 12, 2010 are deemed
      to be beneficially owned by the person holding such securities for the
      purpose of computing the percentage of ownership of such person, but are
      not treated as outstanding for the purpose of computing the percentage
      ownership of any other person.
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DESCRIPTION
OF SECURITIES
The
Company's authorized capital stock consists of 100,000,000 shares of common
stock at a par value of $0.001 per share and 10,000,000 shares of preferred
stock at a par value of $0.001 per share.  As of February 12, 2009,
there are 28,728,075 shares of the Company's common stock issued and
outstanding that are held by approximately 65 stockholders of record and
2,140,000 shares of preferred stock issued and outstanding held by one
shareholder.
Holders
of the Company's common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote.  Holders of common stock do
not have cumulative voting rights.  Therefore, holders of a majority
of the shares of common stock voting for the election of directors can elect all
of the directors.  Holders of the Company's common stock representing
a majority of the voting power of the Company's capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of stockholders.  A
vote by the holders of a majority of the Company's outstanding shares is
required to effectuate certain fundamental corporate changes such as
liquidation, merger or an amendment to the Company's articles of
incorporation.
Holders
of the Company's common stock are entitled to share in all dividends that the
board of directors, in its discretion, declares from legally available
funds.  In the event of liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. The
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
The
shares of our common stock have been historically qouted on the OTC Bulletin
Board under the symbol "WZYFQ".  As a result of the Bankruptcy, our
common stock will be extinguished and we expect that our shares of common stock
will cease trading or being quoted on the OTCBB.  We expect to have a
registered broker dealer file an application to have our shares quoted on the
OTCBB.
The
following table sets forth, for the fiscal quarters indicated, the high and low
sale price for our common stock, as reported on the OTC Bulletin
Board.
Quarterly
      period
High
Low
Fiscal
      year ended December 31, 2008:
Third
      Quarter
$
5.25
$
0.88
Fourth
      Quarter
$
0.88
$
0.15
Fiscal
      year ended December 31, 2009:
First
      Quarter
$
0.15
$
0.15
Second
      Quarter
$
0.15
$
0.15
Third
      Quarter
$
0.15
$
0.15
Fourth
      Quarter
$
0.15
$
0.15
Prior to
the third quarter, our stock was not actively traded.
Holders
of our Common Stock
As of
February 12, 2010, there were approximately 65 stockholders of record of our
common stock.
Dividends
The
Company has never declared or paid any cash dividends on its common stock. The
Company currently intends to retain future earnings, if any, to finance the
expansion of its business. As a result, the Company does not anticipate paying
any cash dividends in the foreseeable future.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
Company does not have an authorized equity compensation
plan.
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INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Company's directors and executive officers are indemnified as provided by the
Nevada Corporation law and its Bylaws. These provisions state that the Company's
directors may cause the Company to indemnify a director or former director
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him as a
result of him acting as a director. The indemnification of costs can include an
amount paid to settle an action or satisfy a judgment.  Such
indemnification is at the discretion of the Company's board of directors and is
subject to the Securities and Exchange Commission's policy regarding
indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, or otherwise, The Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
Item
3.02  Unregistered Sales of Equity Securities.
On
February 12, 2009, pursuant to the terms of the Merger Agreement, STW merged
with and into Acquisition Sub, which became a wholly-owned subsidiary of the
Company (the "Merger").  In consideration for the Merger and STW
becoming a wholly-owned subsidiary of the Company, the Company issued an
aggregate of 26,543,075 (the "STW Acquisition Shares") shares of common stock to
the shareholders of STW at the closing of the merger and all derivative
securities of STW as of the Merger became derivative securities of Woozyfly
including options and warrants to acquire 12,613,002 shares of common stock at
an exercise price ranging from $3.00 to $8.00 with an exercise period ranging
from July 31, 2011 through November 12, 2014 and convertible debentures in the
principal amount of $1,467,903 with a conversion price of $0.25 and maturity
dates ranging from April 24, 2010 through November 12, 2010.
This
issuance of these above securities is exempt from the registration requirements
under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as
promulgated under Regulation D.
On
February 9, 2010, the Court entered an order confirming the Seconded Amended
Plan of Reorganization (the "Plan") pursuant to which the Plan and the Merger
was approved.   It is expected that the Plan will be effective
February 19, 2010 (the "Effective Date"). The
principal
provisions of the Plan are as follows:
·
MKM,
      the DIP Lender, shall receive 400,000 shares of common stock and 2,140,000
      shares of preferred stock;
·
the
      holders of the Convertible Notes shall receive 1,760,000 shares of common
      stock;
·
general
      unsecured claims shall received 100,000 shares of common stock;
      and
·
the
      Company's equity interest shall be extinguished and
    cancelled.
The offer
and sale of the above securities pursuant to the Plan and the Confirmation Order
was exempt from registration under the Securities Act of 1933, as amended,
pursuant to section
1145(a) of the
Bankruptcy Code.  Section
1145(a)
of the Bankruptcy Code generally exempts from such registration requirements the
issuance of securities if the following
conditions are satisfied: (i) the securities are issued or sold under a Chapter
11 plan by (a) a debtor, (b) one of its affiliates participating in a joint plan
with the debtor or (c) a successor to a debtor under the plan and (ii) the
securities are issued entirely in exchange for a claim against or interest in
the debtor or such affiliate, or are issued principally in such exchange and
partly for cash or property.
Item
3.03        Material Modification to
Rights of Security holders
The
information set forth in Item 1.01 and Item 3.02 of this Current Report on Form
8-K is incorporated by reference into this Item 3.03.
Item
5.01 Changes in Control of Registrant.
The
information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 5.01.
Item 5.02
Departure of Directors or Principal Officers; Election of Directors; Appointment
of Principal Officers.
The information
set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by
reference into this Item 5.02.
Item
5.06  Change in Shell Company Status.
As a
result of the consummation of the acquisition of STW described in Item 1.01
of this Current Report on Form 8-K, we are no longer a shell corporation as that
term is defined in Rule 405 of the Securities Act and Rule 12b-2 of
the Exchange Act.
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26 -
Item
9.01 Financial Statements and Exhibits
Financial
Statements of Business Acquired
(a)           Filed
herewith are the following:
Audited
financial statements of STW Resources, Inc. as of December 31, 2008 (See Exhibit
99.2)
Unaudited
financial statements STW Resources, Inc. as of September 30, 2009 (See Exhibit
99.3)
(b)          Pro
Forma Financial Information
Not
Applicable
(c)           Shell
Company Transactions
Not
Applicable
(d)           Exhibits
Exhibit
      No.
Description
3.1
3.2
10.1
Amendment
      to the Articles of Incorporation (to be filed by amendment)
Articles
      of Merger between STW Acquisition, Inc. and STW Resources,
      Inc.
Agreement
      and Plan of Merger for proposed merger between Woozyfly, Inc., Merger Sub,
      and STW Resources, Inc. dated January 17, 2010. (1)
21.1
List
      of Subsidiaries
99.1
Order
      Confirming the Second Amended Plan of Reorganization of Woozyfly,
      Inc.
99.2
Audited
      financial statements of STW Resources, Inc. as of December 31,
      2008
99.3
Unaudited
      financial statements STW Resources, Inc. as of September 30,
      2009
(1)           Incorporated
by reference to the Form 8-K Current Report filed with the Securities and
Exchange Commission on January 26, 2010.
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27 -
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
WOOZYFLY,
      INC.
Dated:
      February 12, 2010
By:
/s/ Stanley
      Weiner
Name:
      Stanley Weiner
Title:
      Chief Executive Officer and Chairman of the Board of
    Directors
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