10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

OR

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

FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number 000-53619

———————

VERTEX ENERGY, INC.

(Exact name of registrant as specified in its charter)

———————

NEVADA	94-3439569
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
1331 GEMINI STREET SUITE 250 HOUSTON, TEXAS	77058
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: 866-660-8156

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

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

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

Large accelerated filer  ¨	Accelerated filer   ¨
Non-accelerated filer  ¨	Smaller reporting company  x

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

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 16,743,290 shares of common stock issued and outstanding as of November 13, 2012.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets	F-1
	Consolidated Statements of Operations (unaudited)	F-2
	Consolidated Statements of Cash Flows (unaudited)	F-3
	Notes to Consolidated Financial Statements  (unaudited)	F-4
Item 2.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	3
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
	PART II
Item 1.	Legal Proceedings	24
Item 1A:	Risk Factors	24
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	32
Item 6.	Exhibits	32

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
	September 30,		December 31,
	2012		2011
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	1,151,016	$	675,188
Accounts receivable, net		8,362,742		5,436,006
Accounts receivable- other		127,162		-
Accounts receivable- related party		-		2,459
Inventory		6,507,217		6,408,780
Prepaid expenses and other current assets		221,817		151,821
Total current assets		16,369,954		12,674,254
Noncurrent assets
Licensing agreement, net		-		1,929,549
Fixed assets, net		10,770,902		124,168
Intangible assets		16,255,000		-
Goodwill		3,515,977		-
Deferred federal income tax		3,669,000		2,006,000
Total noncurrent assets		34,210,879		4,059,717
TOTAL ASSETS	$	50,580,833	$	16,733,971
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	10,055,679	$	6,464,193
Accounts payable-related party		917,519		620,724
Current portion of long-term debt		1,748,023		-
Deposits		-		235,557
Total current liabilities		12,721,221		7,320,474
Long-term liabilities
Long-term debt		6,860,948		-
Contingent consideration		4,711,000		-
Line of credit		6,000,000		-
Deferred federal income tax		100,000		76,000
Total liabilities		30,393,169		7,396,474
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value per share:
50,000,000 shares authorized
Series A Convertible Preferred stock, $0.001 par value,   5,000,000 authorized and 3,133,147 and 4,426,639   issued and outstanding at September 30, 2012 and   December 31,2011, respectively		3,133		4,427
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 15,315,208 and    9,414,926 issued and outstanding at September 30, 2012    and December 31, 2011, respectively		15,315		9,415
Additional paid-in capital		10,644,033		3,319,388
Retained earnings		9,525,183		6,004,267
Total stockholders’ equity		20,187,664		9,337,497
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	50,580,833	$	16,733,971

See accompanying notes to the consolidated financial statements.

F-1

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	36,195,570		$	30,301,326		$	102,316,702		$	78,383,111
Revenues – related parties		-			-			-			17,978
		36,195,570			30,301,326			102,316,702			78,401,089
Cost of revenues		33,011,934			28,268,785			95,497,261			71,632,067
Gross profit		3,183,636			2,032,541			6,819,441			6,769,022
Selling, general and    administrative expenses   (exclusive of acquisition  related expenses)		1,610,146			997,723			3,724,120			3,030,461
Acquisition related expenses		1,154,612			-			1,154,612			-
Total selling, general and    administrative expenses		2,764,758			997,723			4,878,732			3,030,461
Income from operations		418,878			1,034,818			1,940,709			3,738,561
Other income (expense)
Interest income		949			-			1,582			-
Interest expense		(28,972	)		(3,593	)		(29,016	)		(57,811	)
Total other income (expense)		(28,023	)		(3,593	)		(27,434	)		(57,811	)
Income before income tax		390,855			1,031,225			1,913,275			3,680,750
Income tax (expense) benefit		1,714,813			(3,000	)		1,607,641			(45,689	)
Net income	$	2,105,668		$	1,028,225		$	3,520,916		$	3,635,061
Earnings  per common share
Basic	$	0.17		$	0.11		$	0.35		$	0.42
Diluted	$	0.13		$	0.06		$	0.25		$	0.25
Shares used in computing earnings per share
Basic		12,255,372			9,187,227			10,085,206			8,722,642
Diluted		16,484,023			15,851,393			14,358,691			14,503,882

See accompanying notes to the consolidated financial statements.

F-2

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED)
	Nine Months Ended
	September 30, 2012			September 30, 2011
Cash flows operating activities
Net income	$	3,520,916		$	3,635,061
Adjustments to reconcile net income to cash
provided by (used in) operating activities
Stock based compensation expense		124,626			94,358
Depreciation and amortization		180,402			120,138
Deferred federal income tax benefit		(1,639,000	)		-
Changes in assets and liabilities
Accounts receivable		(1,073,778	)		(4,010,965	)
Accounts receivable- other		(127,162	)
Accounts receivable- related parties		2,459			(10,967	)
Inventory		(85,658	)		(4,864,249	)
Prepaid expenses		23,313			(11,381	)
Accounts payable		1,005,932			2,872,639
Accounts payable-related parties		296,795			685,968
Deposits		(235,557	)		1,080,277
Net cash provided by (used in) operating activities		1,993,288			(409,121	)
Cash flows from investing activities
Purchase of intangible assets		(209,061	)		(232,214	)
Acquisition, net		(1,319,015	)
Purchase of fixed assets		(77,232	)		(92,051	)
Net cash used in investing activities		(1,605,308	)		(324,265	)
Cash flows from financing activities
Borrowing from (payments to) note payable		(3,777	)		1,000,000
Proceeds from exercise of common stock warrants		91,625			306,250
Net cash provided by financing activities		87,848			1,306,250
Net increase in cash and cash equivalents		475,828			572,864
Cash and cash equivalents at beginning of the period		675,188			744,313
Cash and cash equivalents at end of period	$	1,151,016		$	1,317,177
SUPPLEMENTAL INFORMATION
Cash paid for interest during the period	$	1,005		$	78,505
Cash paid for income taxes during the period	$	6,187		$	56,000
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	$	78		$	224
Conversion of Series B Preferred Stock into common stock	$	-		$	600,000

See accompanying notes to the consolidated financial statements.

F-3

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements of Vertex Energy, Inc. (the “Company,” or “Vertex Energy”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual consolidated financial statements as filed with the SEC on Form 10-K on March 29, 2012 (the “Form 10-K”).  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform to current period presentation. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year 2011 as reported in Form 10-K, have been omitted.

NOTE 2.  RELATED PARTIES

Prior to the Acquisition (described below in Note 10), the Company had numerous transactions with Vertex Holdings, L.P., formerly Vertex Energy, L.P. (also defined herein as the “Partnership” or “Vertex LP”), including the lease of the Partnership’s storage facility, subletting of office space, transportation of feedstock to re-refiners and the Company’s storage facility, and delivery from the Company’s re-refinery to end customers. The pricing under these contracts is with certain wholly-owned subsidiaries of the Partnership and is priced at market, and is reviewed periodically from time to time by the Board of Director’s Related Party Transaction committee.  The Related Party Transaction committee includes at least two independent directors and will review and pre-approve any and all related party transactions. See Note 10 for additional details on the Acquisition.

The consolidated financial statements include revenues from related parties of $0 and $17,978 and inventory purchases from related parties of $9,569,772 and $9,632,599 for the nine months ended September 30, 2012 and 2011, respectively.  The Company also incurred process costs of $6,198,582 and $5,204,117 for the nine months ended September 30, 2012 and 2011, respectively.  The costs arise from the Thermal Chemical Extraction Process (“TCEP”) operating agreement with CMT (which entity was acquired as part of the Acquisition), whereby we paid up to $0.40 per gallon of processing costs.  In the past, both parties have agreed to share increased costs.

The Company subleased office space from Vertex L.P. Rental payments under the lease were $6,600 per month and the lease was to expire in June 2013 (the lease was acquired as part of the Acquisition).

The Company leased approximately 30,000 barrels in storage capacity for its Black Oil division at Cedar Marine Terminal, located in Baytown, Texas.  The monthly lease expense was $22,500 and the lease expired in March 2011; however, the parties agreed to an extension of the lease with the same terms and conditions, through June 2012.  CMT was acquired as part of the Acquisition.

The Company leased approximately 45,000 barrels in storage capacity for its TCEP division at CMT, located in Baytown, Texas.  The monthly lease expense was $45,000 and the lease expired in March 2011; however, the parties agreed to an extension of the leases with the same terms and conditions, through August 2012, other than an increase in the monthly lease expense to $49,500 in consideration for an additional rental of 3,000 barrels of capacity. CMT was acquired as part of the Acquisition.

NOTE 3. CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

The Company has concentrated credit risk for cash by maintaining deposits in one bank.  These balances are insured by the Federal Deposit Insurance Corporation up to $250,000.  From time to time during the nine months ended September 30, 2012, the Company’s cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.

F-4

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

At September 30, 2012 and 2011 and for each of the nine months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2012		2011
	% of	% of	% of	% of
	Revenues	Receivables	Revenues	Receivables
Customer 1	40%	0%	48%	46%
Customer 2	14%	11%	12%	16%
Customer 3	5%	4%	10%	7%
Customer 4	11%	1%	10%	0%
Customer 5	4%	0%	1%	15%
Customer 6	15%	56%	5%	13%

The Company purchases goods and services from two companies that represented 11% and 11% of total purchases for the nine months ended September 30, 2012.

The Company has had various debt facilities available for use, of which there was $6,000,000 and $1,000,000 outstanding as of September 30, 2012 and 2011, respectively. See Note 4 for further details.

The Company’s revenue, profitability and future rate of growth are substantially dependent on prevailing prices for petroleum-based products.  Historically, the energy markets have been very volatile, and there can be no assurance that these prices will not be subject to wide fluctuations in the future.  A substantial or extended decline in such prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and access to capital and on the quantities of petroleum-based product that the Company can economically produce.

The Company, in its normal course of business, is involved in various other claims and legal action.  In the opinion of management, the outcome of these claims and actions will not have a material adverse impact upon the financial position of the Company.

We intend to take advantage of any potential tax benefits related to net operating losses (“NOLs”) acquired as part of the Company’s April 2009 merger with World Waste Technologies, Inc. (“World Waste”).  As a result of the merger we acquired approximately $42 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

It is possible that the Company may be unable to use these NOLs in their entirety.  The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Waste’s historical business, and the extent of the Company’s subsequent income. As of December 31, 2011, the Company had utilized approximately $6.6 million of these NOLs leaving approximately $35.4 million of potential NOLs of which we expect to utilize approximately $2 million for the nine months ended September 30, 2012. The Company recorded a change in the valuation allowance as of September 30, 2012 for approximately $2,378,000.

NOTE 4. NOTES PAYABLE

In September 2010, the Company entered into a loan agreement and obtained a line of credit with Bank of America Merrill Lynch. On March 30, 2012, Bank of America renewed the line of credit through March 31, 2014. The balance on the line of credit was $0 at September 30, 2012. The loan agreement is guaranteed by CMT, a related party of the Company.  The most restrictive covenants of the loan require an interest coverage ratio of at least 1.5 to 1 and a Funded Debt to EBITDA ratio not to exceed 2 to 1. This line of credit was replaced with the new agreement dated September 2012, described below.

F-5

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

In September 2012, the Company entered into a credit agreement with Bank of America. Pursuant to the agreement, Bank of America agreed to loan the Company $8,500,000 in the form of a term loan and the lender agreed to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, which is expected to be used for feedstock purchases and general corporate purposes. The line of credit bears interest at the option of the Company of either the lender's prime commercial lending rate in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the revolving note is due and payable monthly in arrears and all amounts outstanding under the revolving note are due and payable on August 31, 2014.  The balance on the revolving line of credit is $6,000,000 at September 30, 2012.

Amounts borrowed under the term note bear interest at the option of the Company of either the lender's prime commercial lending rate then in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the term note is due and payable monthly in arrears and all amounts outstanding under the term note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,666.67 are due and payable on the term note monthly in arrears on the last day of each month and continuing until the maturity date.  The balance of the term loan is $8,500,000 at September 30, 2012.

The financing arrangement discussed above is secured by all of the assets of the Company.  The loan contains certain restrictive covenants including a Fixed Charge Coverage Ratio, as defined in the agreement , of at least 1.25 to 1.00, Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00 and a Minimum Net Worth, as defined in the agreement, of at least $10,000,000. The Company believes it was in compliance of all aspects of the agreement at September 30, 2012.

NOTE 5. STOCK BASED COMPENSATION

The stock based compensation cost that has been charged against income by the Company was $124,626 and $94,358 for the nine months ended September 30, 2012 and 2011, respectively, for options previously awarded by the Company.

Stock option activity for the nine months ended September 30, 2012 is summarized as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2011		3,073,334		$	5.46			7.00	$	990,995
Options exercised		(60,000	)		(1.55	)		-		(3,439	)
Options expired		(294,167	)		(1.21	)		-		(38,878	)
Options granted		225,000			1.91			10.00		197,146
Outstanding at September 30, 2012		2,944,167		$	5.69			6.75	$	1,145,824
Vested at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966
Exercisable at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966

F-6

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 2012 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)			Grant Date Fair Value
Outstanding at December 31, 2011		1,245,311		$	12.48			1.41		$	142,065
Warrants exercised		(12,500	)		(1.75	)		(3.50	)		(5,601	)
Warrants cancelled/forfeited/expired		(11,377	)		(25.00	)		-			(652	)
Warrants at September 30, 2012		1,221,434		$	12.47			.90		$	135,812
Vested at September 30, 2012		1,198,532		$	12.69			.87		$	133,722
Exercisable at September 30, 2012		1,198,532		$	12.69			.87		$	133,722

NOTE 6. EARNINGS (LOSS) PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the nine months ended September 30, 2012 includes the weighted average of common shares outstanding.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.  The calculation of diluted earnings per share for the nine months ended September 30, 2012 does not include options to purchase 1,769,869 shares and warrants to purchase 1,065,203 shares due to their anti-dilutive effect.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2012 and 2011:

	2012		2011
Basic Earnings per Share
Numerator:
Income  available to common shareholders	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Basic earnings per share	$	0.35	$	0.42
Diluted Earnings per Share
Numerator:
Income	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Effect of dilutive securities
Stock options and warrants		1,140,337		1,329,073
Preferred stock		3,133,147		4,452,167
Diluted weighted-average shares outstanding		14,358,691		14,503,882
Diluted earnings per share	$	0.25	$	0.25

F-7

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

NOTE 7. COMMON STOCK

The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2012, there were 15,315,208 common shares issued and outstanding.

During the nine months ending September 30, 2012, 1,293,492 shares of the Company's Series A Preferred Stock were converted into 1,293,492 shares of the Company's common stock; warrants and options to purchase 57,500 shares of our common stock were exercised for cash proceeds of $93,875; options to purchase 15,000 shares of common stock were exercised for a net of 3,835 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $23,250 in connection with such exercises) and 3,835 shares of common stock were issued to the option holder in connection with such exercises; and 4,545,455 restricted shares were issued as consideration for the Acquisition, described in Note 10.

NOTE 8.  PREFERRED STOCK

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Preferred Stock is 5,000,000 (“Series A Preferred”).  The total number of designated shares of the Company’s Series B Preferred Stock is 2,000,000. As of September 30, 2012, there were 3,133,147 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

NOTE 9.  LICENSING AGREEMENT

Until the Acquisition (described in Note 10, below), the Company operated under an operating and licensing agreement with a related party that is majority-owned and controlled by the Company’s Chief Executive Officer and Chairman, Benjamin P. Cowart, that provided for an irrevocable, non-transferable, royalty-free, perpetual right to use TCEP to re-refine certain used oil feedstock and associated operations of this technology on a global basis.  This included the right to utilize the technology in any future production facilities built by the Company. 

The initial valuation of the license was based upon the cost to acquire the use of TCEP and its processes. It was also assessed over time for changes in the valuation. Additional development costs capitalized during the nine months ended September 30, 2012 and 2011 were $209,062 and $232,214, respectively. The Company is amortizing the value of the license agreement over a fifteen year period.  Amortization expense was $95,478 and $108,212 for the nine months ending September 30, 2012 and 2011, respectively.  The unamortized basis of the licensing agreement was reclassified to intangible assets at the acquisition, as discussed in Footnote 10.

F-8

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

NOTE 10.  ACQUISITION

On September 11, 2012, but effective August 31, 2012, the Company acquired 100% of the outstanding equity interests of Vertex Acquisition Sub, LLC (“Acquisition Sub” and the "Acquisition"), a special purpose entity consisting of substantially all of the assets of Vertex LP and real-estate properties of B & S Cowart Family L.P. ("B&S LP") in consideration for $28,791,000, consisting of $16,500,000 plus a working capital adjustment of approximately $467,000, 4,545,455 restricted shares of common stock valued at $7,113,000, and contingent consideration of $4,711,000. Prior to closing the acquisition, Vertex LP contributed to Acquisition Sub substantially all of its assets and liabilities relating to the business of transporting, storing, processing and re-refining petroleum products, crudes and used lubricants, including all of the outstanding equity interests in Vertex LP’s wholly-owned operating subsidiaries, Cedar Marine Terminals, L.P., Crossroad Carriers, L.P., Vertex Recovery L.P. and H&H Oil, L.P. and B&S LP contributed real estate associated with the operations of H&H Oil, L.P.

The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer, and the operating results of the Acquisition Sub have been included in the Company's consolidated financial statements as of the closing date of the acquisition. Under the purchase method of accounting, the aggregate amount of consideration paid by the Company was allocated to the Acquisition Sub’s net tangible assets and intangible assets based on their estimated fair values as of August 31, 2012.  The excess purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The goodwill has been allocated to the Refining and Marketing reporting segment.  The Company retained an independent third-party appraiser to assist management in its valuation. The allocation of the purchase price is based on the best estimates of management.

The following information summarizes the allocation of the fair values assigned to the assets at the purchase date.  The allocation of fair values are preliminary and are subject to change in the future during the measurement period.

	(in thousands)
Cash and cash equivalents	$	663
Accounts receivable		1,853
Inventory		13
Prepaid expenses		61
Property, plant and equipment		8,659
Land		1,995
Other assets		32
Intangible assets		14,212
Goodwill		3,516
Total identifiable net assets		31,004
Less liabilities assumed	$	(2,213	)
Total purchase price		28,791

The Company incurred approximately $1,154,612 in costs associated with the Acquisition. These included legal, accounting, environmental, investment banking, and related party transaction committee costs.

The following table summarizes the cost of amortizable intangible assets related to the acquisition of Vertex Holdings:

	Estimated Cost (in thousands)		Useful life (years)
Customer relations	$	343		5
Vendor relations		4,064		10
H&H Oil Trademark/Trade name		775		16
TCEP Technology/Patent		8,957		15
Non-competes		73		3
Total	$	14,212

F-9

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

The following unaudited pro-forma consolidated results of operations for the three and nine month periods ended September 30, 2012 and 2011 assume the acquisition occurred as of January 1, 2011. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2011 or of results that may occur in the future (amounts in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012			September 30, 2011
Revenue	$	32,474	$	37,837	$	109,943		$	84,504
Cost of goods sold		27,395		33,097		96,491			69,756
Gross profit		5,079		4,741		13,452			14,748
Selling, general and administrative expenses		2,367		2,531		7,645			6,346
Income from operations		-		-		5,807			8,402
Other income and expense		-		-		(768	)		(727	)
Net income		2,711		2,209		5,039			7,675
Earnings per common share-Basic		0.30		0.18		0.50			0.88
Earnings per common share-Diluted		0.17		0.13		0.35			0.53

NOTE 11.  CONTINGENT CONSIDERATION

As part of the consideration paid related to the acquisition discussed in Footnote 10, if certain earnings targets are met the Company has to pay the seller approximately $2,233,000 annually in 2013, 2014 and 2015.  The Company has recorded contingent consideration of $4,711,000, which is the discounted cash flows of the earn out payments.

NOTE 12.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil and Refining & Marketing divisions.  Segment information for the nine months ended September 30, 2012 and 2011, are as follows:

NINE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	25,841,948		$	76,474,754	$	102,316,702
Income from operations	$	(830,048	)	$	2,770,757	$	1,940,709
Total Assets	$	22,620,722		$	27,960,111	$	50,580,833
NINE MONTHS ENDED SEPTEMBER 30, 2011
				Refining &
	Black Oil			Marketing		Total
Revenues	$	15,101,466		$	63,299,623	$	78,401,089
Income from operations	$	330,072		$	3,408,489	$	3,738,561

F-10

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	7,317,484		$	28,878,086	$	36,195,570
Income (loss) from operations	$	(1,401,764	)	$	1,820,642	$	418,878

THREE MONTHS ENDED SEPTEMBER 30, 2011
			Refining &
	Black Oil		Marketing		Total
Revenues	$	6,253,317	$	24,048,009	$	30,301,326
Income from operations	$	290,823	$	743,995	$	1,034,818

NOTE 13. SUBSEQUENT EVENTS

Subsequent to September 30, 2012, the available credit on the line of credit is $10,000,000.  As of November 9, 2012, the outstanding balance drawn on the line of credit is $5,500,000  leaving an available balance for draw downs of $4,500,000.

Subsequent to the nine months ended September 30, 2012 and through November 9, 2012, a total of 1,432,082 shares of the Company's Series A Preferred Stock were converted into shares of our common stock on a one-for-one basis and warrants and options to purchase 5,000 shares of the Company's common stock were exercised for cash proceeds of $2,250.

F-11

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:

• risks associated with our outstanding credit facility, including amounts owed, restrictive covenants and security interests thereon;

• the level of competition in our industry and our ability to compete;

• our ability to respond to changes in our industry;

• the loss of key personnel or failure to attract, integrate and retain additional personnel;

• our ability to protect our intellectual property and not infringe on others’ intellectual property;

• our ability to scale our business;

• our ability to maintain supplier relationships and obtain adequate supplies of feedstocks;

• our ability to obtain and retain customers;

• our ability to produce our products at competitive rates;

• our ability to execute our business strategy in a very competitive environment;

• trends in, and the market for, the price of oil and gas and alternative energy sources;

• our ability to maintain our relationship with KMTEX, Ltd.;

• the impact of competitive services and products;

• our ability to maintain insurance;

• pending and potential future litigation, judgments and settlements;

• rules and regulations making our operations more costly or restrictive;

• changes in environmental and other laws and regulations and risks associated with such laws and regulations;

• economic downturns both in the United States and globally;

• risk of increased regulation of our operations and products;

• negative publicity and public opposition to our operations;

• disruptions in the infrastructure that we and our partners rely on;

• an inability to identify attractive acquisition opportunities, successfully negotiate acquisition terms or effectively integrate acquired companies or businesses;

• interruptions at our facilities;

• unexpected changes in our anticipated capital expenditures resulting from unforeseen required maintenance, repairs, or upgrades;

• our ability to effectively manage our growth;

• the lack of capital available on acceptable terms to finance our continued growth; and

• other risk factors included under “Risk Factors” below and in our Annual Report on Form 10-K.

You should read the matters described in “Risk Factors” below and disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on March 29, 2012, and the other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

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Please see the “Glossary of Selected Terms” incorporated by reference hereto as Exhibit 99.1, for a list of abbreviations and definitions used throughout this Report.

In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the refining, re-refining, used oil and oil and gas industries in general from market research reports, analyst reports and other publicly available information.  Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

Corporate History of the Registrant:

Vertex Energy, Inc. (the “Company,” “we,” “us,” and “Vertex”) was formed as a Nevada corporation on May 14, 2008.  Pursuant to an Amended and Restated Agreement and Plan of Merger dated May 19, 2008, by and between Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), a Texas limited partnership ("Holdings"), us, World Waste Technologies, Inc., a California corporation (“WWT” or “World Waste”), Vertex Merger Sub, LLC, a California limited liability company and our wholly-owned subsidiary ("Merger Subsidiary"), and Benjamin P. Cowart, our Chief Executive Officer, as agent for our shareholders (as amended from time to time, the “Merger Agreement”). Effective on April 16, 2009, World Waste merged with and into Merger Subsidiary, with Merger Subsidiary continuing as the surviving corporation and becoming our wholly-owned subsidiary (the "Merger"). In connection with the Merger, (i) each outstanding share of World Waste common stock was cancelled and exchanged for 0.10 shares of our common stock; (ii) each outstanding share of World Waste Series A preferred stock was cancelled and exchanged for 0.4062 shares of our Series A preferred stock; and (iii) each outstanding share of World Waste Series B preferred stock was cancelled and exchanged for 11.651 shares of our Series A preferred stock.

Additionally, as a result of the Merger, as the successor entity of World Waste, we assumed World Waste’s filing obligations with the Securities and Exchange Commission and our common stock began trading on the Over-The-Counter Bulletin Board under the symbol “VTNR.OB” effective May 4, 2009.  The previous trading symbol on the Over-The-Counter Bulletin Board was “WDWT.OB”.  Finally, as a result of the Merger, the common stock of World Waste was effectively reversed one for ten (10) as a result of the exchange ratios set forth in the Merger, and unless otherwise noted, the impact of such effective reverse stock split, created by the exchange ratio set forth above, is retroactively reflected throughout this report.  Effective July 23, 2012, we were automatically delisted from the Over-The-Counter Bulletin Board due to the fact that no market maker quoted our common stock for a period of more than 4 days.  We may take steps in the future to re-quote our common stock on the Over-The-Counter Bulletin Board.  Our common stock currently trades on the OTCQB market.

Recent Acquisition

On September 11, 2012, but effective as of August 31, 2012, we acquired 100% of the outstanding equity interests of Vertex Acquisition Sub, LLC (the “Acquisition” and “Acquisition Sub”), a special purpose entity consisting of substantially all of the assets of Holdings and real-estate properties of B & S Cowart Family L.P. (“B&S LP”).  Prior to closing the Acquisition, Holdings contributed to Acquisition Sub substantially all of its assets and liabilities relating to the business of transporting, storing, processing and re-refining petroleum products, crudes and used lubricants, including all of the outstanding equity interests in Holdings’ wholly-owned operating subsidiaries, Cedar Marine Terminals, L.P. (“CMT”), Crossroad Carriers, L.P. (“Cross Road”), Vertex Recovery L.P. (“Vertex Recovery”) and H&H Oil, L.P. (“H&H Oil”), and B&S LP contributed real estate associated with the operations of H&H Oil.

· Cedar Marine Terminals, L.P.  CMT operates a 19-acre bulk liquid storage facility on the Houston Ship Channel. The terminal serves as a truck-in, barge-out facility and provides throughput terminal operations. CMT is also the site of our Thermal Chemical Extraction Process (“TCEP”) technology assets.

4

· Crossroad Carriers, L.P.  Crossroad is a third-party common carrier that provides transportation and logistical services for liquid petroleum products, as well as other hazardous materials and waste streams.

· Vertex Recovery L.P. Vertex Recovery collects and recycles used oil and residual materials from large regional and national customers throughout the US and Canada. It facilitates its services through a network of independent recyclers and franchise collectors.

· H&H Oil, L.P. H&H Oil collects and recycles used oil and residual materials from customers based in Austin, Baytown, San Antonio and Corpus Christi, Texas.

Through the Acquisition we have executed on our vertical integration strategy by entering the used motor oil and petroleum by-product collection market.  The Acquisition also establishes our own re-refinery and transportation fleet, which we previously managed on an outsourced basis.  We believe the Acquisition is strategic because it provides us the following benefits:

· Access to feedstock at the point of generation;

· Expansion of total feedstock supply volume and diversification of our supplier network;

· Operation of our own re-refinery and transportation fleet;

· Ownership of the TCEP intellectual property;

· Enhances our size, scale and asset base;

· Expected to increase cash flow and improve operating margins; and

· Eliminates related-party transactions between the Company and Holdings.

We paid the following consideration for 100% of the equity interests in Acquisition Sub (the “Purchase Price”): (i) to Holdings, (a) $14.8 million in cash and assumed debt; and (b) 4,545,455 million restricted shares of our common stock; and (ii) to B&S LP, $1.7 million cash consideration, representing the appraised value of certain real estate contributed by B&S LP to Acquisition.  Additionally, for each of the three one-year periods following the closing date of the transaction, Holdings will be eligible to receive earn-out payments of $2.23 million, up to $6.7 million in the aggregate (the “Earn-Out Payments”), contingent on the combined company achieving EBITDA targets of $10.75 million, $12.0 million and $13.5 million, respectively, in those periods. $1.0 million of the purchase price will be held in escrow for 18 months to satisfy indemnity claims.  We borrowed the funds used to acquire Acquisition Sub with the Credit Facility and Notes described in greater detail below under “Liquidity and Capital Resources”.

We had numerous relationships and related-party transactions with Holdings and its subsidiaries prior to the closing of the Acquisition, including the lease of a storage facility, subletting of office space, operating agreement for Holdings’ TCEP facility on our behalf, transportation of feedstock to re-refiners and our storage facility, and delivery from the TCEP re-refinery to end customers. The closing of the Acquisition eliminates these related-party transactions moving forward.  The description of our operations below reflects the closing of the Acquisition, unless otherwise stated or the discussion requires otherwise.

Pro forma Financial Information Reflecting the Holdings Acquisition

The following unaudited pro forma results of operations for the three months and nine months ended September 30, 2012 and 2011, respectively, assumes that the Acquisition was completed at the beginning of the periods presented.  The pro forma results include adjustments to reflect revenue and cost of revenue eliminations that took place between Vertex Energy, Inc. and the Acquisition Sub.  In addition the pro forma results include adjustments to reflect costs deemed to be non-recurring in nature related to the acquisition.

5

	Three Months Ended September 30,
	2012		2011
Pro forma revenues	$	37,837,297	$	32,473,821
Pro forma cost of revenues	$	33,096,661	$	27,395,280
Pro forma gross profit	$	4,740,636	$	5,078,541
Pro forma selling, general and administrative expenses	$	810,355	$	2,367,317
Pro forma net income	$	3,930,281	$	2,711,224
Earning per Common Share
Basic	$	0.32	$	0.30
Diluted	$	0.24	$	0.17

The pro forma financial information presented above for the three months ended September 30, 2012 and 2011, and below for the nine months ended September 30, 2012 and 2011, is not necessarily indicative of either the results of operations that would have occurred had the Acquisition been effective as of July 1, 2012 (as to the information presented for the three months ended September 30, 2012) or January 1, 2012 (as to the information presented for the nine months ended September 30, 2012), or of future operations of the Company. 

	Nine Months Ended September 30,
	2012		2011
Pro forma revenues	$	109,943,118	$	84,504,495
Pro forma cost of revenues	$	96,490,677	$	69,756,473
Pro forma gross profit	$	13,452,441	$	14,748,022
Pro forma selling, general and administrative expenses	$	5,534,074	$	7,067,962
Pro forma net income	$	7,918,367	$	7,680,060
Earning per Common Share
Basic	$	0.79	$	0.88
Diluted	$	0.55	$	0.53

Description of Business Activities:

We are an environmental services company that recycles industrial waste streams and off-specification commercial chemical products. Our primary focus is recycling used motor oil and other petroleum by-products.  We are engaged in operations across the entire petroleum recycling value chain including collection, aggregation, transportation, storage, refinement, and sales of aggregated feedstock and re-refined products to end users.    Our Company operates in two divisions. Our Black Oil division collects and purchases used motor oil directly from third-party generators, aggregates used motor oil from an established network of local and regional collectors, and sells used motor oil to our customers for use as a feedstock or replacement fuel for industrial burners. Our Refining and Marketing division aggregates and manages the re-refinement of used motor oil and other petroleum by-products and sells the re-refined products to our customers.  We operate a refining facility that uses our proprietary TCEP technology and we also utilize third-party processing facilities.

6

Black Oil Division

Our Black Oil division is engaged in the collection, aggregation, and sale of used motor oil, as well as related transportation and storage activities.  We collect and purchase used oil directly from generators such as oil change service stations, automotive repair shops, manufacturing facilities, petroleum refineries, and petrochemical manufacturing operations.  We own a fleet of 13 collection vehicles which routinely visit generators to collect and purchase used motor oil.   We also aggregate used oil from a diverse network of approximately 50 suppliers who operate similar collection businesses to ours.  In 2011, H&H Oil collected approximately 9 million gallons of used motor oil directly from third-party generators. We acquired H&H Oil as a result of the closing of the Acquisition (described above).  Excluding volume we purchased from H&H Oil, we aggregated approximately 27.4 million gallons of used oil in 2011 through our network of local and regional third-party collectors.

We manage the logistics of transport, storage and delivery of used oil to our customers.   We own a fleet of 7 transportation trucks and more than 90 aboveground storage tanks with over 4.5 million gallons of storage capacity.  These assets are used by both the Black Oil Division and the Refining and Marketing Division.  In addition, we also utilize third parties for the transportation and storage of used oil feedstocks.  Typically, we sell used oil to our customers in bulk to ensure efficient delivery by truck, rail, or barge.  In many cases, we have contractual purchase and sale agreements with our suppliers and customers, respectively. We believe these contracts are beneficial to all parties involved because it ensures that a minimum volume is purchased from collectors and generators, a minimum volume is sold to our customers, and we are able to minimize our inventory risk by a spread between the costs to acquire used oil and the revenues received from the sale and delivery of used oil.

Refining and Marketing Division

               Our Refining and Marketing division is engaged in the aggregation of feedstock, re-refining it into higher value end products, and selling these products to our customers, as well as related transportation and storage activities. We aggregate a diverse mix of feedstock including used motor oil, petroleum distillates, transmix and other off-specification chemical products. These feedstock streams are purchased from pipeline operators, refineries, chemical processing facilities and third-party providers, and are also  transferred from our Black Oil division.  We operate our own re-refining operations at the Cedar Marine Terminal facility, which we acquired through the Acquisition, and have a toll-based processing  arrangement in place with KMTEX, Ltd. (“KMTEX”) to re-refine feedstock streams, under our direction, into various end products that we specify.  While our contractual agreement with KMTEX expired on June 30, 2011, we believe that we will be able to renew or extend such agreement in the future, as the parties have continued to operate under the terms of the agreement subsequent to its expiration. In connection with and pursuant to our arrangement with KMTEX, we pay KMTEX certain monthly tank rental fees, truck and rail car fees, and processing fees based on the weight of the material processed by KMTEX, as well as certain disposal fees and other fees.

We use our proprietary TCEP technology to re-refine used oil into marine fuel cutterstock and a higher-value feedstock for further processing.  KMTEX uses industry standard processing technologies to re-refine our feedstocks into pygas, gasoline blendstock and marine fuel cutterstock.  We sell all of our re-refined products directly to end-customers or to processing facilities for further refinement.

Biomass Renewable Energy

We are also continuing to work on joint development commercial projects which focus on the separation of municipal solid waste into feedstocks for energy production.  We are very selective in choosing opportunities that we believe will result in value for our shareholders.  We can provide no assurance that the ongoing venture will successfully bring any projects to a point of financing or successful construction and operation.

Thermal Chemical Extraction Process

We own the intellectual property for our patent-pending TCEP technology.  TCEP is a technology which uses thermal and chemical dynamics to extract impurities from used oil which increases the value of the feedstock.  We currently sell the TCEP final product as fuel oil cutterstock. We intend to continue to develop the TCEP technology and design with the goal of producing additional re-refined products including lubricating base oil.

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We currently estimate the cost to construct a new, fully-functional, commercial facility using our TCEP technology, with annual processing capacity of between 25 and 30 million gallons at another location would be approximately $2.5 to $5.0 million, which could fluctuate based on throughput capacity.  The facility infrastructure would require additional capitalized expenditures which would depend on the location and site specifics of the facility.

Strategy and Plan of Operations

The principal elements of our strategy include:

Expand Feedstock Supply Volume.  We intend to expand our feedstock supply volume by growing our collection and aggregation operations.  We plan to increase the volume of feedstock we collect directly by developing new relationships with generators and working to displace incumbent collectors; increasing the number of collection personnel, vehicles, equipment, and geographical areas we serve; and acquiring collectors in new or existing territories.  We intend to increase the volume of feedstock we aggregate from third-party collectors by expanding our existing relationships and developing new vendor relationships.  We believe that our ability to acquire large feedstock volumes will help to cultivate new vendor relationships because collectors often prefer to work with a single, reliable customer rather than manage multiple relationships and the uncertainty of excess inventory.

Broaden Existing Customer Relationships and Secure New Large Accounts.  We intend to broaden our existing customer relationships by increasing sales of used motor oil and re-refined products to these accounts. In some cases, we may also seek to serve as our customers’ primary or exclusive supplier.  We also believe that as we increase our supply of feedstock and re-refined products that we will secure larger customer accounts that require a partner who can consistently deliver high volumes.

Re-Refine Higher Value End Products.  We intend to develop, lease, or acquire technologies to re-refine our feedstock supply into higher-value end products, including assets or technologies which complement TCEP.  Currently, we are using TCEP to re-refine used oil feedstock into cutterstock for use in the marine fuel market.  We believe that the expansion of our TCEP facilities and our technology, and investments in additional technologies, will enable us to upgrade feedstock into end products, such as lubricating base oil, that command higher market prices than the current re-refined products we produce.

Expand TCEP Re-Refinement Capacity.  We intend to expand our TCEP capacity by building additional TCEP facilities to re-refine feedstock.  We believe the TCEP technology has a distinct competitive advantage over conventional re-refining technology because it produces a high-quality, fuel oil product, and the capital expenditures required to build a TCEP plant are significantly lower than a comparable conventional re-refining facility.  By continuing the transition from our historical role as a value-added logistics provider to operating as a re-refiner, we believe we will be able to leverage our feedstock supply network and aggregation capabilities to upgrade a larger percentage of our feedstock inventory into higher value end products which we believe should lead to increased revenue and gross margins. We intend to build TCEP facilities near the geographic location of substantial feedstock sources that we have relationships with through our existing operations or from an acquisition.  By establishing TCEP facilities near proven feedstock sources, we seek to lower our transportation costs and lower the risk of operating plants at low capacity.

Pursue Selective Strategic Relationships Or Acquisitions.  We plan to grow market share by consolidating feedstock supply through partnering with or acquiring collection and aggregation assets.  Such acquisitions and/or partnerships could increase our revenue and provide better control over the quality and quantity of feedstock available for resale and/or upgrading as well as providing additional locations for the implementation of TCEP.  In addition, we intend to pursue further vertical integration opportunities by acquiring complementary recycling and processing technologies where we can realize synergies by leveraging our customer and vendor relationships, infrastructure, and personnel, and by eliminating duplicative overhead costs.

8

Alternative Energy Project Development.We will continue to evaluate and potentially pursue various alternative energy project development opportunities.  These opportunities may be a continuation of the projects sourced originally by World Waste and/or may include new projects initiated by us.

In connection with the above elements of our business strategy,in order to further strengthen our foothold in the collection and re-refining business, improve profitability and simplify related party transactions, the Company acquired substantially all of the assets and liabilities of Holdings, effective August 31, 2011, on September 11, 2012 in connection with the Acquisition, described above.

RESULTS OF OPERATIONS

Description of Material Financial Line Items:

Revenues

We generate revenues from two existing operating divisions as follows:

BLACK OIL - Revenues for our Black Oil division are comprised primarily of feedstock sales (used motor oil) which are purchased from generators of used motor oil such as oil change shops and garages, as well as a network of local and regional suppliers.  Volumes are consolidated for efficient delivery and then sold to third-party re-refiners and fuel oil blenders for the export market.

REFINING AND MARKETING - The Refining and Marketing division generates revenues relating to the sales of finished products.  The Refining and Marketing division gathers hydrocarbon streams in the form of petroleum distillates, transmix and other chemical products that have become off-specification during the transportation or refining process. These feedstock streams are purchased from pipeline operators, refineries, chemical processing facilities and third-party providers, and then processed at a third-party facility under our direction. The end products are typically three distillate petroleum streams (gasoline blendstock, pygas and fuel oil cutterstock), which are sold to major oil companies or to large petroleum trading and blending companies. The end products are delivered by barge and truck to customers.  In addition, the Refining and Marketing division purchases black oil which is then re-refined through TCEP.  The finished product is then sold by barge as a fuel oil cutterstock and a feedstock component for major refineries.

Our revenues are affected by changes in various commodity prices including crude oil, natural gas and #6 oil.

Cost of Revenues

BLACK OIL - Cost of revenues for our Black Oil division are comprised primarily of feedstock purchases from a network of providers. Other cost of revenues include transportation costs, purchasing and receiving costs, analytical assessments, brokerage fees and commissions, surveying and storage costs.

REFINING AND MARKETING - The Refining and Marketing division incurs cost of revenues relating to the purchase of feedstock, purchasing and receiving costs, and inspection and processing costs for our TCEP finished product, as well as costs related to the feedstock into gasoline blendstock, pygas and fuel oil cutter by a third party. Cost of revenues also includes broker’s fees, inspection and transportation costs.

Our cost of revenues are affected by changes in various commodity indices, including crude oil, natural gas and #6 oil.  For example, if the price for crude oil increases, the cost of solvent additives used in the production of blended oil products, and fuel cost for transportation cost from third party providers will generally increase. Similarly, if the price of crude oil falls, these costs may also decline.

9

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and other employee-related benefits for executive, administrative, legal, financial and information technology personnel, as well as outsourced and professional services, rent, utilities, and related expenses at our headquarters, as well as certain taxes.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2011

Set forth below are our results of operations for the three months ended September 30, 2012, as compared to the same period in 2011.  In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without parentheses while decreases in revenue/income or increases in expense (unfavorable variances) are shown with parentheses in the “$ Change” and “% Change” columns.

	Three Months Ended September 30,
	2012			2011			$ Change			% Change
Revenues	$	36,195,570		$	30,301,326		$	5,894,244			19	%
Cost of Revenues		33,011,934			28,268,785			(4,743,149	)		(17	)%
Gross Profit		3,183,636			2,032,541			1,151,095			57	%
Selling, general and administrative expenses (exclusive of acquisition related expenses)		1,610,146			997,723			(612,423	)		(61	)%
Acquisition related expenses		1,154,612			-			(1,154,612	)		-
Total selling, general and administrative expenses		2,764,758			997,723			(1,767,035	)		(177	)%
Income from operations		418,878			1,034,818			(615,940	)		(60	)%
Other Income (expense)
Interest Income		949			-			949			-
Interest Expense		(28,972	)		(3,593	)		(25,379	)		(706	)%
Total other income (expense)		(28,023	)		(3,593	)		(24,430	)		(680	)%
Income before income tax		390,855			1,031,225			(640,370	)		(62	)%
Income tax (expense) benefit		1,714,813			(3,000	)		1,717,813			573	%
Net income (loss)		2,105,668			1,028,225			1,077,443			105	%

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Each of our segments’ gross profit during the three months ended September 30, 2012 and 2011 was as follows (increases in revenue and/or decreases in cost of revenues are shown without parentheses while decreases in revenue and/or increases in cost of revenues are shown with parentheses in the “$ Change” and “% Change” columns):

	Three Months Ended September 30,
Black Oil Segment	2012		2011		$ Change			% Change
Total revenue	$	7,317,484	$	6,253,317	$	1,064,167			17	%
Total cost of revenue	$	6,652,877	$	5,610,880		(1,041,997	)		(19	)%
Gross profit	$	664,607	$	642,437	$	22,170			3	%
Refining Segment
Total revenue	$	28,878,086	$	24,048,009	$	4,830,077			20	%
Total cost of revenue	$	26,359,057	$	22,657,905		(3,701,152	)		(16	)%
Gross profit	$	2,519,029	$	1,390,104	$	1,128,925			81	%

Our revenues and cost of revenues are significantly impacted by fluctuations in commodity prices; decreases in commodity prices typically result in decreases in revenue and cost of revenues.  Our gross profit is to a large extent a function of the market discount we are able to obtain in purchasing feedstock, as well as how efficiently management conducts operations.

Total revenues increased 19% for the third quarter of 2012, compared to the same period in 2011, due primarily to a 23% increase in overall volume during the third quarter of 2012, compared to the third quarter of 2011.

In addition to the increased volume and revenue for the three months ended September 30, 2012, our per barrel margin increased 27% relative to the three months ended September 30, 2011.  This increase was a result of decreases in operational expenses related to terminaling, transporting and overall processing costs for all products. Additionally, certain feedstock inventory purchased during the end of the second quarter of 2012 at the then prevailing benchmark prices, was not sold until the third quarter of 2012 after the benchmark prices had increased, which provided additional margin to the Company.

Our Black Oil division’s volume increased approximately 28% during the period ended September 30, 2012 compared to the same period in 2011.  Overall volume for the Refining and Marketing division increased 21% during the three month period ended September 30, 2012 as compared to the same period in 2011. This division experienced a decrease in production of 2% for its gasoline blendstock product for the three months ended September 30, 2012, compared to the same period in 2011.  Our Pygas production increased 115% for the three months ended September 30, 2012, compared to the same period in 2011.  Our fuel oil cutter volumes increased 37% for the three months ended September 30, 2012 as compared to the same period in 2011.  We experienced a 10% increase in the volume of our TCEP refined product during the three months ended September 30, 2012, compared to the same period in 2011.   In addition, commodity prices increased approximately 5% for the three months ended September 30, 2012, compared to the same period in 2011. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the three months ended September 30, 2012 decreased $1.20 per barrel from a three month average of $98.49 per barrel during the three months ended September 30, 2011 to $97.28 per barrel during the three months ended September 30, 2012.   

Overall gross profit increased and our margin per barrel increased approximately 27%.  This margin improvement was a result of increases in commodity prices from the end of the second quarter of 2012 to the third quarter of 2012, which was further positively impacted by the Company’s reduction of operating costs during the third quarter of 2012.

Our TCEP technology generated revenues of $15,790,419 during the three months ended September 30, 2012, with cost of revenues of $15,360,447, producing a gross profit of $429,973.  The per barrel margin for our TCEP product was down 23% as compared to the average margin during the previous six quarters.  This decrease was a result of two key components of our cost of goods sold; raw materials or feedstock and operating costs.  As discussed above, our margins are impacted by what we are able to pay for raw materials and what we are able to sell our finished products for.    Operating expenses during the three months ended September 30, 2012 decreased 7% as compared to the average operating expenses over the previous six quarters.  The Company is focused on decreasing overall operating expenses for TCEP during the next twelve month period.

11

The following table sets forth the high and low spot prices during the first nine months of 2011 for our key benchmarks.

Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.30	April 8	$	2.44	January 4
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.52	May 9	$	2.33	January 25
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	104.35	April 8	$	76.70	January 4
NYMEX Crude oil (dollars per barrel)	$	113.93	April 29	$	79.20	February 15
Reported in Platt's US Marketscan (Gulf Coast)

The following table sets forth the high and low spot prices during the first nine months of 2012 for our key benchmarks.

Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.27	February 24	$	2.54	June 28
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.43	April 2	$	2.49	June 28
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	114.35	March 1	$	82.60	June 21
NYMEX Crude oil (dollars per barrel)	$	109.77	February 24	$	77.69	June 28
Reported in Platt's US Marketscan (Gulf Coast)

We saw an increase during the first quarter of 2012 in each of the benchmark commodities we track through September 2012, followed by a sharp decrease during the second quarter of 2012, followed again by a modest increase during the third quarter of 2012 in such benchmarks.

Our margins are a function of the difference between what we are able to pay for raw materials and the market prices for the range of products produced.  The various petroleum products produced are typically a function of Crude Oil indices and are quoted on multiple exchanges such as the New York Mercantile Exchange (“NYMEX”).  These prices are determined by a global market and are subject to external factors over which the Company has no control, including but not limited to supply/demand, weather, politics, and global/regional inventory levels.  As such, we cannot provide any assurances regarding results of operations for any future periods, as numerous factors outside of our control affect the prices paid for raw materials and the prices (for the most part keyed to the NYMEX) that can be charged for such products.  Additionally, for the near term, results of operations will be subject to further uncertainty, as the global markets and exchanges, including the NYMEX, continue to experience volatility.

            During the three months ended September 30, 2012, gross profit increased 57% from the same period in 2011, primarily due to increases in commodity prices and increases in volume.  In addition, during the three month period ended September 30, 2012, the Company reduced its per barrel operating costs by 1%.

12

We had selling, general and administrative expenses (exclusive of acquisition related expenses) of $1,610,146 for the three months ended September 30, 2012, compared to $997,723 from the prior year’s period, an increase of $612,423 or 61% from the prior period.  This increase is primarily due to the additional selling, general and administrative expenses generated by the new business lines and additional compensation expenses associated with employees acquired as a result of the Acquisition during the month of September 2012 (the acquisition closed effective August 31, 2012).  The Company incurred an additional $1,154,612 of legal, accounting, auditing and investment banking expenses during the three months ended September 30, 2012 related to the Acquisition of Holdings.  We had net income from operations of $418,878 for the three months ended September 30, 2012, compared to net income from operations of $1,034,818 for the three months ended September 30, 2011, a decrease in net income of $615,940 or 60% from the prior year’s period.  The decrease in net income was mainly due to one-time acquisition related expenses of $1,154,612 incurred during the three months ending September 30, 2012.   We anticipate the Acquisition having a minimal impact on revenue; however we expect to see a reduction in our cost of revenues and consequently an improvement in our gross profit margin as well as our net income as a result of the Acquisition.  We had an income tax benefit of $1,714,813 for the three months ended September 30, 2012, compared to an income tax expense of $3,000 for the same period ended September 30, 2011.  The increase is due to a benefit for income taxes, for which for the Company has recorded a net deferred asset based on reducing our valuation allowance related to our approximately $36 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2011

Set forth below are our results of operations for the nine months ended September 30, 2012, as compared to the same period in 2011.  In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without parentheses while decreases in revenue/income or increases in expense (unfavorable variances) are shown with parentheses in the “$ Change” and “% Change” columns.

	Nine Months Ended September 30,
	2012			2011			$ Change			% Change
Revenues	$	102,316,702		$	78,401,089		$	23,915,613			31	%
Cost of Revenues		95,497,261			71,632,067			(23,865,194	)		(33	)%
Gross Profit		6,819,441			6,769,022			50,419			1	%
Selling, general and administrative expenses (exclusive of acquisition related expenses)		3,724,120			3,030,461			(693,659	)		(23	)%
Acquisition related expenses		1,154,612			-			(1,154,612	)		-
Total selling, general and administrative expenses		4,878,732			3,030,461			(1,848,271	)		(61	)%
Income (loss) from operations		1,940,709			3,738,561			(1,797,852	)		(48	)%
Other Income (expense)
Interest Income		1,582			-			1,582			-
Interest Expense		(29,016	)		(57,811	)		28,795			50	%
Total other income (expense)		(27,434	)		(57,811	)		30,377			53	%
Income before income taxes		1,913,275			3,680,750			(1,767,475	)		(48	)%
Income tax (expense) benefit		1,607,641			(45,689	)		1,653,330			3619	%
Net income		3,520,916			3,635,061			(114,145	)		(3	)%

13

Each of our segments’ gross profit during the nine months ended September 30, 2012 and 2011 was as follows (increases in revenue and/or decreases in cost of revenues are shown without parentheses while decreases in revenue and/or increases in cost of revenues are shown with parentheses in the “$ Change” and “% Change” columns):

	Nine Months Ended September 30,
Black Oil Segment	2012		2011		$ Change			% Change
Total revenue	$	25,841,948	$	15,101,466	$	10,740,482			71	%
Total cost of revenue	$	23,814,125	$	13,633,621		(10,180,504	)		(75	)%
Gross profit	$	2,027,823	$	1,467,845	$	559,978			38	%
Refining Segment
Total revenue	$	76,474,754	$	63,299,623	$	13,175,131			21	%
Total cost of revenue	$	71,683,136	$	57,998,446		(13,684,690	)		(24	)%
Gross profit	$	4,791,618	$	5,301,177	$	(509,559	)		(10	)%

Our revenues and cost of revenues are significantly impacted by fluctuations in commodity prices; decreases in commodity prices typically result in decreases in revenue and cost of revenues.  Our gross profit is to a large extent a function of the market discount we are able to obtain in purchasing feedstock, as well as how efficiently management conducts operations.

Total revenues increased 31% for the nine month period ended September 30, 2012, compared to the same period in 2011, due primarily to increases in volume and commodity prices during the nine months ended September 30, 2012, compared to the prior period.  The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the nine months ended September 30, 2012 increased $6.23 per barrel from a nine month average of $94.80 per barrel during the 2011 period to $101.03 per barrel during the 2012 period.  On average, prices we received for our products increased 5% for the nine month period ended September 30, 2012, compared to the same period during 2011, which resulted in a $24 million increase in revenue.

Our overall volume increased 24% for the nine months ended September 30, 2012, while our per barrel margin decreased approximately 19% from the nine months ended September 30, 2011.  This decrease was a result of an increase in operational costs related to terminaling, transporting and overall processing costs for all products as well as eroding margins related to higher priced feedstock purchased during the first quarter of 2012 which carried over through inventory into the second quarter of 2012.  Our Black Oil division’s volume increased approximately 24% during the nine months ended September 30, 2012 compared to the same period in 2011.  While the volume in the Black Oil division increased, our overall margins decreased by not being able to move this volume through our TCEP process, which experienced extended downtime during the second quarter related to process repairs and enhancements, which process produces a higher margin finished product for the Company.

Our Refining and Marketing division experienced an increase in production of 19% for its fuel oil cutter product for the nine months ended September 30, 2012, compared to the same period in 2011.  Our TCEP product experienced a 12% increase in volume during the nine months ended September 30, 2012, compared to the same period in 2011.  In addition, on average the commodity prices our revenues are tied to increased approximately 5% for the nine months ended September 30, 2012, compared to the same period in 2011.   

14

The TCEP technology generated revenues of $43,734,969 during the nine months ended September 30, 2012, with cost of revenues of $42,670,330, producing a gross profit of $1,064,639.  Due to the use of the TCEP technology, the Company’s income from operations has been positively affected for the nine months ended September 30, 2012.

As our competitors bring new technologies to the marketplace, which will likely enable them to obtain higher values for the finished products created through their technologies from purchased black oil feedstock, they will be able to pay more for feedstock due to the additional value received from their finished product (i.e., as their margins increase, they are able to increase the prices they are willing to pay for feedstock).  If we are not able to continue to refine the technology and gain efficiencies in the TCEP technology, we could be negatively impacted by the ability of our competitors to bring new processes to market which compete with our processes as well as their ability to outbid us for feedstock supplies.

If we are unable to effectively compete with additional technologies brought to market by our competitors, our finished products could be worth less and if our competitors are willing to pay more for feedstock than we are, they could drive up prices, which would cause our revenues to decrease, and cause our cost of sales to increase, respectively.  Additionally, if we are forced to pay more for feedstock, our cash flows will be negatively impacted and our margins will decrease.

Our Pygas production increased 47% for the nine months ended September 30, 2012, compared to the same period in 2011 and commodity prices increased approximately 5% for our finished Pygas product for the nine month period ended September 30, 2012, compared to the same period in 2011.

Our gasoline blendstock volumes decreased 8% for the nine month period ended September 30, 2012 as compared to the same period in 2011.  The overall increase in revenues associated with our Refining and Marketing division for the nine month period ended September 30, 2012, compared to the same period in 2011, was due to increases in volume coupled with a small increase in commodity prices during the nine month period ended September 30, 2012. Overall volume for the Refining and Marketing division increased 14% during the nine month period ended September 30, 2012 as compared to the same period in 2011.  The increase in volumes and prices was offset by a decrease in overall gross profit relating to a decrease in our margin per barrel of approximately 21%, which was mainly a result of increasing commodity prices during the first quarter for much of our inventory that carried over into the second quarter which when then sold by us, subsequent to a sharp decline in commodity prices, had a negative impact on our margins during the second quarter, which in turn affected margins for the nine months ended September 30, 2012.  The decrease in margins was also partly due to certain contractual obligations that the Company had to meet as well as increased operational costs.  Due to the Company being able to move more product during the three months ended September 30, 2012 as a result of the Acquisition, our margins were much improved over the prior period.

            During the nine month period ended September 30, 2012, gross profit increased 1% from the same period in 2011, primarily due to increases in commodity prices along with increased volumes.  In addition, during the nine month period ended September 30, 2012, two of the re-refineries we provide feedstock to had operational difficulties which in turn had a negative impact on our revenue and gross profit.

We had selling, general and administrative expenses of $3,724,120 for the nine month period ended September 30, 2012, compared to $3,030,461 from the prior year’s period, an increase of $693,659 or 23% from the prior period. We had net income of $3,520,916 for the nine month period ended September 30, 2012, compared to net income of $3,635,061 for the same period in 2011, a decrease in net income of $114,145 or 3% from the prior year’s period.  The decrease in net income was due to increased operating costs and decreases in commodity prices mainly experienced in the second quarter of 2012, as well as increased administrative expenses during the third quarter of 2012 related to the Acquisition and increased SG&A expense related to the additional employees acquired in the Acquisition during the three months ended September 30, 2012.  A 31% increase in revenues was offset by a 33% increase in cost of revenue, and a 23% increase in selling, general and administrative expenses incurred during the nine months ended September 30, 2012, compared to the nine month period ended September 30, 2011.  We had an income tax benefit of $1,607,641 for the nine months ended September 30, 2012, compared to an income tax expense benefit of $45,689 for the same period ended September 30, 2011.  The increase is due to a benefit for income taxes, for which for the Company has recorded a net deferred asset based on reducing our valuation allowance related to our approximately $36 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

15

Liquidity and Capital Resources

The success of our current business operations is not dependent on extensive capital expenditures, but rather on relationships with feedstock suppliers and end-product customers, and on efficient management of overhead costs.   Through these relationships, we have historically been able to achieve volume discounts in the procurement of our feedstock, thereby increasing the margins of our segments’ operations.  The resulting operating cash flow is crucial to the viability and growth of our existing business lines.

We had total assets of $50,580,833 as of September 30, 2012 compared to $16,733,971 at December 31, 2011.  This large increase was mostly due to Acquisition of Holdings’ assets (described above under “Recent Acquisition”) which included fixed assets of $10,770,902 consisting of five used oil collection branch locations and associated storage facilities and rolling stock (collection and transport trucks), a 19 acre tank terminal storage facility located on the Houston ship-channel, and a small trucking operation.  In addition it included $16,255,000 of intangible assets which represented the value of the purchase of the patents and technology related to the TCEP operation.  The increase was also due to the $3,520,916 of net income which was generated during the nine month period ended September 30, 2012, a $475,828 increase in cash and cash equivalents as of September 30, 2012, compared to December 31, 2011, along with the increase in our inventory of $98,437 between September 30, 2012 and December 31, 2011. The increase in inventory is partly due to commodity pricing which increases the carrying value of our inventory, all of which contributed to the increase in total assets as of September 30, 2012, compared to December 31, 2011.  Additionally contributing to the increase in total assets was a $2,926,736 increase in accounts receivable, net.

Total current assets as of September 30, 2012 of $16,369,954 consisted of cash and cash equivalents of $1,151,016, accounts receivable, net, of $8,362,742, inventory of $6,507,217, and prepaid expenses of $221,817.  Long term assets consisted of fixed assets, net, of $10,770,902, intangible assets consisting of patents and technology in the net amount of $16,255,000, which represents the value of the Company’s TCEP technology, net of amortization, and goodwill of $3,515,977 acquired in connection with the Acquisition.

As of September 30, 2012, as a result of the Acquisition, the Company owns outright and no longer licenses the TCEP technology.    In addition, as a result of the approximately $36 million of net operating losses that may be used to offset taxable income generated by the Company in future periods, the Company has recorded a deferred federal income tax asset of $3,669,000 and $2,006,000 as of September 30, 2012 and December 31, 2011, respectively.  Our cash, accounts receivable, inventory and accounts payable fluctuate and are somewhat tied to one another based on the timing of our inventory cycles and sales.

We had total liabilities of $30,393,169 as of September 30, 2012, compared to $7,396,474 at December 31, 2011.  This increase was largely due to liabilities assumed in connection with and funds borrowed in order to complete the Acquisition.  At September 30, 2012, current liabilities consisted of accounts payable and accrued liabilities of $10,055,679, accounts payable – related parties of $917,519, and $1,748,023 of current portion of long-term debt, representing the current portion of amounts due on the Notes, described below.  Accounts payable – related parties included amounts payable to Vertex Holdings, LP which entity is majority-owned and controlled by our Chief Executive Officer and Chairman, Benjamin P. Cowart.

16

We had long-term liabilities as of September 30, 2012 of $17,671,948, which included $6,860,948 of long-term debt representing amounts due on Term Note, described below, line of credit of $6,000,000, representing amounts borrowed under the Revolving Note (defined below), $4,711,000 of contingent consideration relating to the Earn-Out Payments associated with the Acquisition, described above, and $100,000 of deferred federal income tax.

We had working capital of $3,648,733 as of September 30, 2012.  Excluding current liabilities to and current assets relating to related parties, we had working capital of $4,566,252 as of September 30, 2012.  We had positive working capital of $5,353,780 as of December 31, 2011. Excluding current liabilities to related parties, our working capital was $5,972,045 as of December 31, 2011.  The reduction in working capital as of September 30, 2012, compared to December 31, 2011, is mainly due to liabilities assumed as a result of and incurred in connection with the Acquisition.

Our future operating cash flows will vary based on a number of factors, many of which are beyond our control, including commodity prices, the cost of recovered oil, and the ability to turn our inventory.  Other factors that have affected and are expected to continue to affect earnings and cash flow are transportation, processing, and storage costs.  Over the long term, our operating cash flows will also be impacted by our ability to effectively manage our administrative and operating costs.Additionally, we may incur future capital expenditures related to new TCEP facilities.

In September 2010, we entered into a loan agreement with Bank of America Merrill Lynch. Pursuant to the loan agreement, Bank of America Merrill Lynch agreed to loan up to $3,500,000 in the form of a revolving line of credit. The line of credit accrued interest at the bank’s LIBOR rate plus 3%, adjusted daily, and was originally due on September 16, 2011 (provided that the parties subsequently entered into various extensions of the line of credit, extending the due date to March 31, 2014).  As of September 11, 2012, we had not borrowed any funds under the line of credit of which $3,500,000 was available.  The line of credit was terminated pursuant to our entry into the Credit Agreement described below.

On September 11, 2012, we entered into a Credit Agreement with Bank of America, N.A. (“Bank of America”) effective as of August 31, 2012, pursuant to which the we borrowed $8,500,000 in the form of a term loan, which is evidenced by a Term Note, and Bank of America agreed to provide us with an additional $10,000,000 revolving credit facility (the “Credit Facility”), which is evidenced by a Revolving Note (the Term Note and the Revolving Note, collectively, the “Notes”).

Pursuant to the Credit Agreement, we were provided the right to request loans from time to time under the Credit Facility, subject to the terms and conditions of the Credit Agreement, provided that the total amount loaned pursuant to the Credit Facility cannot exceed the lesser of (a) $10,000,000 and (b) an amount equal to the total of (i) 80% of our accounts in which Bank of America has a first-priority perfected security interest; (ii) 80% of our finished-goods inventory in which Bank of America holds a first-priority perfected security interest, in each case subject to the terms and conditions of the Credit Agreement, plus (iii) $1,500,000 through December 31, 2012, and $0 thereafter.

Amounts borrowed under the Revolving Note bear interest at our option at the lesser of Bank of America’s prime commercial lending rate then in effect or the LIBOR rate in effect plus 2.75%.  Accrued and unpaid interest on the Revolving Note is due and payable monthly in arrears and all amounts outstanding under the Revolving Note are due and payable on August 31, 2014.

Amounts borrowed under the Term Note bear interest at our option at the lesser of Bank of America’s prime commercial lending rate then in effect or the LIBOR rate in effect plus 2.75%.  Accrued and unpaid interest on the Term Note is due and payable monthly in arrears and all amounts outstanding under the Term Note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,666.67 are due and payable on the Term Note, monthly in arrears on the last day of each month beginning September 30, 2012, and continuing thereafter until the maturity date.

17

We agreed to comply with certain standard affirmative and negative covenants in connection with the Credit Agreement and agreed to meet the following financial covenants at such time as any loans or other obligations are outstanding under the Credit Agreement, commencing with the quarter ending September 30, 2012: (i) the ratio of (a) our EBITDA minus cash taxes, minus distributions, minus unfinanced capital expenditures, in each case for the immediately preceding four fiscal-quarter period, to (b) the sum of our interest expense for the immediately preceding four fiscal-quarter period, plus our current maturities of long-term debt, in each case, as of the last day of such four fiscal-quarter period, all as determined in accordance with GAAP, may not at any time be less than 1.25 to 1.00 (calculated and tested quarterly); (ii) the ratio of total debt funded under the Credit Agreement to our EBITDA cannot be greater than 2.00 to 1.00 (calculated and tested quarterly); and (iii) the sum of our tangible net worth cannot be less than $10,000,000 as of the last day of each fiscal quarter.  We believe that we were in compliance with all covenants as of September 30, 2012.

The Credit Agreement includes customary events of default for facilities of similar nature and size as the Credit Agreement and also provides that an event of default occurs if (i) Benjamin P. Cowart, our Chief Executive Officer, President Chairman of the Board and largest shareholder, ceases to be actively involved in our day-to-day management or operation or if Mr. Cowart ceases to own and control at least 40% of our equity interests; (ii) we cease at any time to own and control 100% of the entities acquired pursuant to the closing of the Acquisition; Vertex II GP, LLC (“Vertex GP”), a newly formed wholly-owned subsidiary of the Company, ceases to be the sole general partner of the entities acquired as a result of the Acquisition; (iii) an agreement, letter of intent, or agreement in principle is executed with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, could reasonably be expected to result in either (i) or (ii), above; or (iv) a default occurs under the lease agreement for certain premises leased by CMT.

We agreed to pay Bank of America the following fees in connection with the Credit Agreement: (i) a fee equal to 0.25% of the actual daily amount by which (a) the committed amount of the Credit Facility exceeds (b) the amount outstanding under the Credit Facility plus the amount of any lines of credit issued by Bank of America to us, so long as the average daily amount drawn on the Credit Facility is less than $5,000,000, for the calendar quarter then-ended, payable quarterly in arrears beginning September 30, 2012; (ii) a closing fee in connection with the closing of the Credit Facility; and (iii) certain fees associated with lines of credit issued by Bank of America as described in greater detail in the Credit Agreement.

Our obligations under the Credit Agreement and Notes are secured by a first priority security interest in substantially all of our assets, including those assets and properties acquired in connection with the closing of the Acquisition, which was granted pursuant to our, and certain of our subsidiaries’, entry into security agreements with Bank of America. Additionally, certain of our subsidiaries guaranteed our obligations under the Credit Agreement and Notes pursuant to guarantees entered into in favor of Bank of America.

On September 11, 2012, we borrowed a total of $8.5 million under the Term Note and $8.75 million under the Revolving Note, the majority of which funds were used to pay Holdings the cash portion of the Purchase Price due in connection with the closing of the Acquisition, as described in greater detail above under “Recent Acquisition,” and to pay fees and costs associated with the closing of the Acquisition.

As of September 30, 2012, the Revolving Note had a balance of $6,000,000 and the Term Note had a balance of $8,500,000.

The management of the Company believes that with the Credit Agreement described above, in addition to projected earnings, we will have sufficient liquidity to fund our operations for the foreseeable future, although we may seek additional financing to fund acquisitions or other developments in the future.

18

Our re-refining business will require significant capital to design and construct any new facilities other than the existing facility in Baytown, Texas. We currently estimate that the cost to construct a new, fully functional full-scale commercial process at another location would be approximately $2.5 to $5.0 million, based on throughput capacity.  The facility infrastructure would be an additional capitalized expenditure to these proposed process costs and would depend on the location and site specifics of the facility.

Additionally, as part of our ongoing efforts to maintain a capital structure that is closely aligned with what we believe to be the potential of our business and future growth, which is subject to cyclical changes in commodity prices, we will be exploring additional sources of external liquidity.  The receptiveness of the capital markets to an offering of debt or equities cannot be assured and may be negatively impacted by, among other things, debt maturities, current market conditions, and potential stockholder dilution. The sale of additional securities, if undertaken by the Company and if accomplished, may result in dilution to our shareholders. We cannot assure you, however, that future financing will be available in amounts or on terms acceptable to us, or at all.

There is currently only a limited market for our common stock, and as such, we anticipate that such market will be illiquid, sporadic and subject to wide fluctuations in response to several factors moving forward, including, but not limited to:

(1)           actual or anticipated variations in our results of operations;

(2)           our ability or inability to generate new revenues; and 

(3)           the number of shares in our public float.

Furthermore, because our common stock is traded on the OTCQB, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. Additionally, at present, we have a limited number of shares in our public float, and as a result, there could be extreme fluctuations in the price of our common stock.  

We believe that our stock prices (bid, ask and closing prices) may be entirely arbitrary, may not relate to the actual value of the Company, and may not reflect the actual value of our common stock (and may reflect a lower value). Shareholders and potential investors in our common stock should exercise caution before making an investment in the Company, and should not rely on the publicly quoted or traded stock prices in determining our common stock value, but should instead determine the value of our common stock based on the information contained in the Company's public reports, industry information, and those business valuation methods commonly used to value private companies.

We may seek to explore the listing of our common stock on the NASDAQ, NYSE MKT exchanges or another national securities exchange in the future.  We believe that the listing of our securities on a national exchange will facilitate the Company’s access to capital, from which certain acquisitions and capital investments might be financed. Until meeting the listing requirements of a national securities exchange and our Board of Directors determining such listing is in our best interests, we expect that our common stock will continue to be eligible to trade on the OTCQB (or the OTCBB assuming we choose to re-quote our common stock on the OTCBB) or on the "pink sheets," where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock.

19

Cash flows for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

	Nine Months Ended September 30,
	2012			2011
Beginning cash and cash equivalents	$	675,188		$	744,313
Net cash provided by (used in):
Operating activities		1,993,288			(409,121	)
Investing activities		(1,605,308	)		(324,265	)
Financing activities		87,848			1,306,250
Net increase in cash and cash equivalents		475,828			572,864
Ending cash and cash equivalents	$	1,151,016		$	1,317,177

Operating activities provided cash of $1,993,288 for the nine months ended September 30, 2012 as compared to using $409,121 of cash during the corresponding period in 2011.  Our primary sources of liquidity are cash flows from our operations and the availability to borrow funds under our line of credit and term note with Bank of America, as described above.  The primary reasons for the increase in cash provided by operating activities are related to the net income of $3,520,916, the increase in accounts payable of $1,005,932, and the increase in prepaid expenses of $23,313, for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, offset by increases in inventory of $85,658 and $1,639,000 of deferred federal income tax benefit, and a decrease of $235,557 in deposits.  Additionally, non-cash expense related to stock compensation expense provided $124,626 of liquidity for the nine months ended September 30, 2012 and depreciation and amortization contributed $180,402 of net cash.

Investing activities used cash of $1,605,308 for the nine months ended September 30, 2012 as compared to having used $324,265 of cash during the corresponding period in 2011.  Investing activities for the nine months ended September 30, 2012 are comprised of $209,061 in cash payments related to the license of the TCEP, $1,319,015 of net cash used in the Acquisition and use of $77,232 towards the purchase of fixed assets.

Financing activities provided $87,848 during the nine months ended September 30, 2012 resulting from proceeds of $91,625 from the exercise of common stock warrants offset by $3,777 towards Note payable expense.

Net Operating Losses

We intend to take advantage of any potential tax benefits related to net operating losses (“NOLs”) acquired as part of the World Waste merger.  As a result of the merger we acquired approximately $42 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

It is possible that the Company may be unable to use these NOLs in their entirety.  The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Waste’s historical business, and the extent of the Company’s subsequent income. As of December 31, 2011, the Company had utilized approximately $6.6 million of these NOLs leaving approximately $35.4 million of potential NOLs of which we expect to utilize approximately $2 million for the nine months ended September 30, 2012.  The Company recorded a change in the valuation allowance as of September 30, 2012 of approximately $1,900,000.

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Critical Accounting Policies and Use of Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management regularly evaluates its estimates and judgments, including those related to revenue recognition, goodwill, intangible assets, long-lived assets valuation, and legal matters. Actual results may differ from these estimates.

The Company evaluates the carrying value and recoverability of its long-lived assets within the provisions of the FASB ASC regarding long-lived assets.  It requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets.  Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

Revenue Recognition.   Revenue for each of the Company’s divisions is recognized when persuasive evidence of an arrangement exists, goods are delivered, sales price is determinable, and collection is reasonably assured. Revenue is recognized upon delivery by truck and railcar of feedstock to its re-refining customers and upon product leaving the Company’s terminal facilities via barge.

Legal Matters.  Accruals are established for legal matters when, in our opinion, it is probable that a liability exists and the liability can be reasonably estimated. Actual expenses incurred in future periods can differ materially from accruals established.

Stock Based Compensation

The Company accounts for share-based expense and activity in accordance with FASB ASC Topic 718, which establishes accounting for equity instruments exchanged for services. Under this provision share-based compensation costs are measured at the grant date, based on the calculated fair value of the award, and are recognized as an expense over the employee’s requisite service period, generally the vesting period of the equity grant.

Share-based payments to non-employees are measured at the grant date, based on the calculated fair value of the award, and are recognized as an expense over the service period, generally the vesting period of the equity grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, expected option term, expected volatility of the stock over the option’s expected term, risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The Company believes that the valuation technique and approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the stock options granted.

Basic and Diluted Loss per Share

Basic and diluted loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.

License Agreement Development Costs

The Company capitalizes costs to improve any acquired intangible asset which is specifically identifiable, and has a definite life. All other costs are expensed as incurred.

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Income Taxes

The Company accounts for income taxes in accordance with the FASB ASC Topic 740.  The Company records a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and when temporary differences become deductible.  The Company considers, among other available information, uncertainties surrounding the recoverability of deferred tax assets, scheduled reversals of deferred tax liabilities, projected future taxable income, and other matters in making this assessment.

Recently Issued Accounting Pronouncements

In May 2011, the provisions of ASC Topic 820, “Fair Value Measurement,” were amended to clarify the application of existing fair value measurements and to change certain fair value measurement and disclosure requirements.  Amendments that change measurement and disclosure requirements relate to (i) fair value measurement of financial instruments that are managed within a portfolio, (ii) application of premiums and discounts in a fair value measurement, and (iii) additional disclosures about fair value measurements categorized with Level 3 of the fair value hierarchy.  These provisions are effective for the first interim or annual period beginning after December 31, 2011.  The adoption of this guidance effective January 1, 2012, did not affect our financial position or results of operations, but may result in additional disclosure.

In December 2011, the provisions of ASC Topic 210, “Balance Sheet,” were amended to require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of these arrangements on its financial position.  The guidance requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement.  These provisions are effective for interim and annual reporting periods beginning on January 1, 2013. The adoption of this guidance effective January 1, 2013 will not affect our financial position or results of operations, but may result in additional disclosures.

Market Risk

Our revenues and cost of revenues are affected by fluctuations in the value of energy related products.  We attempt to mitigate much of the risk associated with the volatility of relevant commodity prices by using our knowledge of the market to obtain feedstock at attractive costs, by efficiently managing the logistics associated with our products, by turning our inventory over quickly, and by selling our products into markets where we believe we can achieve the greatest value.  We believe that the current downward trend in natural gas prices coupled with increasing crude oil prices provides an attractive margin opportunity for our TCEP.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Based on our evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

On July 28, 2011, Buffalo Marine Service, Inc. (“Buffalo”) filed a complaint against Trafigura AG d/b/a Trafigura AG Inc. (“Trafigura”), KMTEX, Ltd. (“KMTEX”) and the Company in the United States District Court for the Southern District of Texas (Civil Action No. 4:11-cv-02544).

The current complaint alleges that certain maritime liquid cargo transported by Buffalo (as an operator of barges) contaminated Buffalo’s barges, which, in turn, caused damage to other vessels who later received other cargo from the same Buffalo barges.  The cargo was initially located at KMTEX’s facility, sold by the Company to Trafigura, and then transported by Buffalo.  The causes of actions set forth in the complaint include Breach of Contract against Trafigura, Breach of Warranty against Trafigura, KMTEX and the Company, and Negligence by Trafigura, KMTEX  and the Company.

The total amount of damages claimed by Buffalo is not currently known.  The Company has engaged legal counsel in the matter and filed an answer to the complaint denying Buffalo’s allegations.  We intend to vigorously defend ourselves against Buffalo’s claims; however, at this stage of the litigation the outcome cannot be predicted with any degree of reasonable certainty.

We are not currently involved in legal proceedings, other than the complaint described above,that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations other than as described above. We may become involved in material legal proceedings in the future.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on March 29, 2012, other than the below risk factors, and investors are encouraged to review such risk factors below and in the Form 10-K, prior to making an investment in the Company.

We face risks associated with the integration of the businesses, assets and operations recently acquired from Vertex Holdings.

As described above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Recent Acquisition”, we recently acquired substantially all of the assets and operations of Holdings.  Those assets and operations included: CMT, which operates a 19-acre bulk liquid storage facility on the Houston Ship Channel; Crossroad, which is a third-party common carrier that provides transportation and logistical services for liquid petroleum products, as well as other hazardous materials and waste streams; Vertex Recovery which collects and recycles used oil and residual materials from large regional and national customers throughout the U.S. and Canada; and H&H Oil, which collects and recycles used oil and residual materials from customers based in Austin, Baytown, and Corpus Christi, Texas.  These represent new business lines and operations for us and while our management has significant prior experience in connection with the operations and management of these acquired businesses, we cannot assure you that we will be able to successfully integrate the acquisitions into our operations or that such acquisitions will positively affect our operations and cash flow. Acquisitions such as these involve numerous risks, including difficulties in the assimilation of the acquired businesses. The consolidation of our operations with the operations of the acquired companies, including the consolidation of systems, procedures, personnel and facilities and the achievement of anticipated cost savings, economies of scale and other business efficiencies presents significant challenges to our management. The acquisition of the acquired businesses and/or our failure to successfully integrate the acquired businesses could have an adverse effect on our liquidity, financial condition and results of operations.

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We may be required to pay substantial additional amounts of consideration to Holdings in the event certain adjusted EBITDA targets are met by the Company.  There may also be actual or perceived conflicts of interest with management regarding such targets and amounts due in connection therewith.

The Company acquired substantially all of the assets and liabilities of Holdings on September 11, 2012 pursuant to the Acquisition. Concurrent with the closing of the transactions contemplated in the Acquisition, the Company paid the following Purchase Price to Holdings, (a) $14.8 million in cash (less the escrow amount described below) and assumed debt and (b) 4,545,455 restricted shares of our common stock; and to B&S LP, approximately $1.7 million in cash, representing the appraised value of certain owned real property.  Additionally, for each of the three one-year periods following the closing date, Holdings will be eligible to receive Earn-Out Payments of up to $2.23 million, up to $6.7 million in the aggregate, contingent on the combined company achieving adjusted EBITDA targets of $10.75 million, $12.0 million and $13.5 million, respectively, in those periods.  In the event we meet the required adjusted EBITDA targets and are required to pay Holdings the Earn-Out Payments, it could have a material adverse effect on our liquidity, the funds we have available for future expansion and our results of operations.

Holdings is a related party controlled by Benjamin P. Cowart, our President, Chairman and largest shareholder, who owns directly or indirectly a 77% interest in Holdings.  Additionally, Chris Carlson, our Chief Financial Officer, owns a 10% interest in Holdings and certain other of our employees (including Greg Wallace, our Vice President of Refining and Marketing) have a beneficial ownership interest in Holdings. Due to the structure of the earn-out payments, Mr. Cowart, Mr. Carlson and the other employees who will receive these payments have an incentive to increase our EBITDA in the periods covered in order to facilitate earn-out payments. They may therefore have an incentive to take steps to increase our EBITDA in the relevant periods at the expense of our future growth and long-term expansion.  Consequently, the earn-out payments and/or the structure thereof may cause actual or perceived conflicts of interest between Mr. Cowart, Mr. Carlson and certain of our other employees, our Company and our other shareholders.

We have substantial indebtedness which could adversely affect our financial flexibility and our competitive position.

We have a significant amount of outstanding indebtedness. As of September 30, 2012, we owed approximately $10.9 million in accounts payable.  Additionally, as of September 30, 2012, we owed $8.6 million under the Term Note and $6.0 million under the Revolving Note (described above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Liquidity and Capital Resources”). Amounts borrowed under the Notes bear interest at our option at the lesser of Bank of America’s prime commercial lending rate then in effect or the LIBOR rate in effect plus 2.75%.  Accrued and unpaid interest on the Term Note is due and payable monthly in arrears and all amounts outstanding under the Term Note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,666.67 are due and payable on the Term Note, monthly in arrears on the last day of each month until the maturity date. Accrued and unpaid interest on the Revolving Note is due and payable monthly in arrears and all amounts outstanding under the Revolving Note are due and payable on August 31, 2014.

Our substantial indebtedness could have important consequences and significant effects on our business. For example, it could:

• increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

  • require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

  • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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  • restrict us from taking advantage of business opportunities;

  • make it more difficult to satisfy our financial obligations;

  • place us at a competitive disadvantage compared to our competitors that have less debt obligations; and

  • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes on satisfactory terms or at all.

We may need to raise additional funding in the future to repay or refinance the Term Note and Revolving Note and our accounts payable, and as such may need to seek additional debt or equity financing. Such additional financing may not be available on favorable terms, if at all. If debt financing is available and obtained, our interest expense may increase and we may be subject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it may result in our shareholders experiencing significant dilution. If such financing is unavailable, we may be forced to curtail our operations, which may cause the value of our securities to decline in value and/or become worthless.

Our failure to comply with the covenants in the documents governing our existing and future indebtedness could materially adversely effect our financial condition and liquidity.

In connection with the Credit Agreement evidencing the Term Note and Revolving Note, we agreed to comply with certain standard affirmative and negative covenants and agreed to meet the following financial covenants at such time as any loans or other obligations are outstanding under the Credit Agreement, commencing with the quarter ending September 30, 2012: (1) the ratio of (a) our EBITDA minus cash taxes, minus distributions, minus unfinanced capital expenditures, in each case for the immediately preceding four fiscal-quarter periods, to (b) the sum of our interest expense for the immediately preceding four fiscal-quarter period plus our current maturities of long-term debt, in each case, as of the last day of such four fiscal-quarter period, all as determined in accordance with GAAP, may not at any time be less than 1.25 to 1.00 (calculated and tested quarterly); (2) the ratio of total debt funded under the Credit Agreement to our EBITDA cannot be greater than 2.00 to 1.00 (calculated and tested quarterly); and (3) the sum of our tangible net worth cannot be less than $10,000,000 as of the last day of each fiscal quarter. We believe that we were in compliance with all covenants as of September 30, 2012.

The Credit Agreement also includes customary events of default for facilities of similar nature and size as the Credit Agreement and also provides that an event of default occurs if (a) Benjamin P. Cowart, our Chief Executive Officer, Chairman of the Board and largest shareholder, ceases to be actively involved in the day-to-day management or operation of the Company or if Mr. Cowart ceases to own and control at least 40% of the equity interests of the Company; (b) the Company ceases at any time to own and control 100% of the assets acquired from Holdings or Vertex II GP, LLC (“Vertex GP”), a newly formed wholly- owned subsidiary of the Company, ceases to be the sole general partner of the partnerships acquired; (c) an agreement, letter of intent, or agreement in principle is executed with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, could reasonably be expected to result in either (a) or (b), above; or (d) a default occurs under the lease agreement for certain premises leased by CMT.

A breach of any of the covenants above or covenants in future agreements, if uncured, could lead to an event of default under any such document, which in some circumstances could give our creditors the right to demand that we accelerate repayment of amounts due. This would likely in turn trigger cross-acceleration or cross-default rights in other documents governing our indebtedness. Therefore, in the event of any such breach, we may need to seek covenant waivers or amendments from our creditors or seek alternative or additional sources of financing, and we cannot assure you that we would be able to obtain any such waivers or amendments or alternative or additional financing on acceptable terms, if at all. In addition, any covenant breach or event of default could harm our credit rating and our ability to obtain additional financing on acceptable terms. The occurrence of any of these events could have a material adverse effect on our financial condition and liquidity.

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Our obligations under the Credit Agreement and related Notes are secured by a first priority security interest in substantially all of the assets of the Company.

Our obligations under the Credit Agreement and Notes are secured by a first priority security interest in substantially all of our assets, including those assets and properties acquired in connection with the closing of the Acquisition, which was granted pursuant to our and certain of our subsidiaries’ entry into security agreements with Bank of America.  Additionally, substantially all of our subsidiaries agreed to guarantee our obligations under the Credit Agreement. As such, if an event of default occurs under the Credit Agreement, Bank of America may enforce its security interest over the assets of the Company and/or our subsidiaries which secure the repayment of such obligation, and we could be forced to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company could become worthless.

If we are unable to maintain a credit facility, it could have an adverse effect on our business.

We have historically been able to maintain lines of credit and other credit facilities similar to the Credit Agreement with Bank of America.  We rely heavily on the availability and utilization of these lines of credit and credit facilities for its operations and for the purchase of inventory.  If we are unable to renew or replace our facility or we are unable to borrow funds under such facility, either due to having no available funds remaining under the facility and/or upon any default of the facility, we may be forced to curtail or abandon our current and/or future planned business operations.

We may be required to pay significant bonuses to a material employee of the Company.

Pursuant to our employment agreement with Greg Wallace, the Vice President of Refining and Marketing of the Company, as amended, in the event we earn “Adjusted Gross Margin” (equal to gross margin  minus general and administrative overhead directly related to the segments of our Refining and Marketing divisions which relate to business conducted in Port Arthur, Texas, and which are managed by Mr. Wallace and excluding TCEP), for the years ended December 31, 2011, 2012, 2013 or 2014, we agreed to pay Mr. Wallace a bonus equal to 10% of such Adjusted Gross Margin for each applicable year.  The payment of the bonus is paid based on the payment schedule set forth in the addendums.  For the year ended December 31, 2011, a total of $247,739 will be paid to Mr. Wallace in connection with the bonus, which bonus shall be paid during 2012 (of which $123,869 has been paid to date).  Additionally, in the event that year-end Adjusted Gross Margin exceeds certain pre-approved thresholds ($2,477,393 in the 2012 year), Mr. Wallace is able to earn an additional bonus equal to 5% of Adjusted Gross Margin.  We also agreed to pay Mr. Wallace a bonus of 15% of any Adjusted Gross Margin for the year ended December 31, 2015.  Mr. Wallace ceases to earn any bonuses upon such time as his employment with us is terminated.  As such, Mr. Wallace may have an incentive to take steps to increase Adjusted Gross Margin at the expense of our future growth and long-term expansion.  Consequently, Mr. Wallace’s bonus structure may cause actual or perceived conflicts of interest between Mr. Wallace, us and our other shareholders. Payment of the bonuses to Mr. Wallace could have a material adverse effect on our liquidity, the funds we have available for future expansion and our results of operations.

We may be subject to citizen opposition and negative publicity due to public concerns over hazardous waste and re-refining operations, which could have a material adverse effect on our business, financial condition or results of operations.

        There currently exists a high level of public concern over hazardous waste and refining and re-refining operations, including with respect to the location and operation of transfer, processing, storage and disposal facilities. Part of our business strategy is to increase our re-refining capacity through the construction of new facilities in growth markets. Zoning, permit and licensing applications and proceedings, as well as regulatory enforcement proceedings, are all matters open to public scrutiny and comment. Accordingly, from time to time we may be subject to citizen opposition and publicity which may damage our reputation and delay or limit the planned expansion and development of future facilities or operations or impair our ability to renew existing permits, any of which could prevent us from implementing our growth strategy and have a material adverse effect on our business, financial condition or results of operations.

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Potential competition from our existing employees could negatively impact our profitability.

Although Mr. Cowart and other employees of ours are prohibited from competing with us (i) while they are employed with us and for six months thereafter, and (ii) in the business of transporting, storing, processing and refining petroleum products, crudes and lubricants in the states of Alabama, Arkansas, Arizona, California, Florida, Georgia, Iowa, Illinois, Kentucky, Louisiana, Michigan, North Carolina, Nevada, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee and Texas, until August 31, 2017, none of such individuals will be prohibited from competing with us after such six-month period ends, subject to the non-competition restriction expiring August 31, 2017. Accordingly, any of these individuals could be in a position to use industry experience gained while working with us to compete with us.  Such competition could increase our costs to obtain feedstock, and increase our costs for contracting use of operating assets and services such as third-party refining capacity, trucking services or terminal access. Furthermore, such competition could distract or confuse customers, reduce the value of our intellectual property and trade secrets, or result in a reduction in the prices we are able to obtain for our finished products. Any of the foregoing could reduce our future revenues, earnings or growth prospects.

Our business is subject to local, legal, political, and economic factors which are beyond our control.

We believe that the current political environment for construction of our planned additional re-refining facilities is sufficiently supportive to enable us to plan and implement the construction of such additional re-refining facilities, funding permitting, of which there can be no assurance. However, there are risks that conditions will change in an adverse manner. These risks include, but are not limited to, environmental issues, land use, air emissions, water use, zoning, workplace safety, restrictions imposed on the re-refining industry such as restrictions on production, substantial changes in product quality standards, restrictions on feedstock supply, price controls and export controls. Any changes in financial incentives, investment regulations, policies or a shift in political attitudes are beyond our control and may adversely affect our business, plans for future re-refining facilities, and future financial results.

Additionally, the U.S. Departments of Transportation, Coast Guard and Homeland Security and various federal, state, local and foreign agencies exercise broad powers over our transportation operations, generally governing such activities as authorization to engage in motor carrier operations, safety and permits to conduct transportation business. We may also become subject to new or more restrictive regulations that the Departments of Transportation and Homeland Security, the Occupational Safety and Health Administration, the Environmental Protection Agency or other authorities impose, including regulations relating to engine exhaust emissions, the hours of service that our drivers may provide in any one-time period, security and other matters. Compliance with these regulations could increase our costs and adversely affect our results of operations.

Our business may be harmed by anti-terrorism measures.

In the aftermath of the terrorist attacks on the United States and increased concerns regarding future terrorist attacks, federal, state and municipal authorities have implemented and are implementing various security measures, including checkpoints and travel restrictions on large trucks. Although many companies will be adversely affected by any slowdown in the availability of freight transportation, the negative impact could affect our business disproportionately. For example, if the security measures disrupt or impede the timing of our deliveries of feedstock, we may not have sufficient feedstock to run our re-refining process at full capacity, or may incur increased expenses to do so. We cannot assure you that these measures will not significantly increase our costs and reduce our operating margins and income.

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Our business is geographically concentrated and is therefore subject to regional economic downturns.

Our operations and customers are concentrated principally in the U.S. Gulf Coast. Therefore, our business, financial condition and results of operations are susceptible to regional economic downturns and other regional factors, including state regulations and budget constraints and severe weather conditions. In addition, as we seek to expand in our existing markets, opportunities for growth within this region may become more limited and the geographic concentration of our business may increase.

Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

From time to time, we are involved in lawsuits, regulatory inquiries and may be involved in governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our results of operations and liquidity.

Claims above our insurance limits, or significant increases in our insurance premiums, may reduce our profitability.

We currently employ 29 full-time and two part-time drivers. From time to time, some of these employee drivers are involved in automobile accidents. We currently carry liability insurance of $1,000,000 for our drivers, subject to applicable deductibles, and carry umbrella coverage up to $10,000,000.  However, claims against us may exceed the amounts of available insurance coverage. If we were to experience a material increase in the frequency or severity of accidents, liability claims or workers' compensation claims or unfavorable resolutions of claims, our operating results could be materially affected.

Fluctuations in fuel costs could impact our operating expenses and results.

We operate a fleet of transportation, collection and aggregation trucks to collect and transport used oil and re-refined oil products, among other things. The price and supply of fuel is unpredictable and fluctuates based on events beyond our control, including, among others, geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil producing countries and regional production patterns. We have experienced increases in the cost of fuel over the past several years. Although in the past, we have been able to pass-through some of these costs to our customers, we cannot assure you that we will be able to continue to do so in the future. Fuel or other transportation costs may continue to increase significantly in fiscal year 2013 and beyond. A significant increase in our fuel or other transportation costs could lower our operating margins and negatively impact our profitability.

We face competition from other common carriers and transportation providers.

Crossroad is a common carrier that provides transportation and logistical services for liquid petroleum products, as well as other hazardous materials and waste streams. We face competition from trucking companies, railroads, motor carriers and, to a lesser extent, ships and barges. In addition to price competition, we face competition with respect to transit times and quality and reliability of service. Any future improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of transportation, and/or increased competition from competitors, including competitors with more resources than us, could have a material adverse effect on our results of operations, financial condition, and liquidity. Additionally, any future consolidation of the trucking industry could materially affect the competitive environment in which we operate.

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Our Chief Executive Officer has significant voting control over us, including the appointment of Directors.

Due to Mr. Cowart’s beneficial ownership of approximately 47.0% of our common stock and 42.5% of our total voting stock, Mr. Cowart exercises significant control in determining the outcome of corporate transactions or other matters, including the election of Directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Mr. Cowart may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other shareholders.

Our obligation to make Earn-Out Payments in connection with our acquisition of Vertex Acquisition Sub in August 2012 may prevent a change of control of us.

Our obligations regarding the Earn-Out Payments could also prevent a change of control of us since a possible buyer may not be interested in making these earn-out payments.  The existence of the requirement to pay the Earn-Out Payments could also cause the value of our common stock to decline and/or be valued at less than a similarly sized company that does not have a required Earn-Out Payment structure in place.

We may become subject to additional financial and other reporting and corporate governance requirements that may be difficult for or costly for us to satisfy in the event we choose to list our common stock on the NYSE MKT, Nasdaq Stock Market or similar exchange in the future.

We are currently required to file annual and quarterly information and other reports with the Securities and Exchange Commission that are specified in Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended; however, the OTCQB market, where our common stock is currently quoted, does not require that we maintain independent directors or require any other corporate governance requirements for companies to quote their securities and does not charge any annual fees to quote a company’s securities.  In the event we decide to list our common stock on the NYSE Mkt., Nasdaq Stock Market or another similar exchange in the future, we will become subject to rules requiring that certain of our Directors be independent, that we pay annual listing and stock issuance fees, that we comply with additional corporate governance requirements and that shareholders approve certain corporate actions and issuances, which obligations we are not currently required to comply with. These obligations will require a commitment of additional resources including, but not limited, to additional expenses, and may result in the diversion of our senior management’s time and attention from our day-to-day operations. These obligations may also increase our expenses and/or make it more complicated or time consuming for us to undertake certain corporate actions due to the fact that we may require exchange (or market listing) approval for such transactions and/or such exchange (or market) may require us to obtain shareholder approval for such transactions. In particular, we may be required to:

• create or expand the roles and duties of our Board of Directors, our board committees and management;

• appoint new independent directors, including a “financial expert” to the audit committee;

• institute a more comprehensive financial reporting and disclosure compliance function;

• establish additional controls and procedures for compliance with required listing rules and regulations; and/or

• establish new internal policies.

           We may not be successful in complying with these obligations, and compliance with these obligations could be time consuming and expensive.

30

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

During the nine months ended September 30, 2012, a total of 1,293,492 shares of the Company's Series A Preferred Stock were converted into 1,291,329 shares of our common stock on a one-for-one basis.  Additionally, warrants and options to purchase 57,500 shares of our common stock were exercised for cash proceeds of $93,875 and 62,500 shares of common stock were issued to the option and warrant holders in connection with such exercises. Finally, options to purchase 15,000 shares of our common stock were exercised for a net of 3,835 shares of our common stock (when adjusting for a cashless exercise of such options and the payment in shares of our common stock, of an aggregate exercise price of $23,250 in connection with such exercises) and 3,835 shares of our common stock were issued to the option holder in connection with such exercises.

From October 1, 2012 and through November 7, 2012, a total of 1,423,082 shares of the Company's Series A Preferred Stock were converted into 1,423,082 shares of our common stock on a one-for-one basis (including 1,249,546 shares converted by entities affiliated with Trellus Management Company, LLC, a significant shareholder of the Company) and warrants and options to purchase 5,000 shares of the Company's common stock were exercised for cash proceeds of $2,250, and 5,000 shares of common stock were issued in connection with such exercises.

We claim an exemption from registration afforded by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Act”), for the above conversions and cashless exercises, as the securities were exchanged by the Company with its existing security holders exclusively in transactions where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange and Section 4(2) of the Act for the cash exercises, since the issuances did not involve a public offering, the recipients took the securities for investment and not resale and we took appropriate measures to restrict transfer.

In connection with the closing of the transactions contemplated in the Acquisition (described in greater detail above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Recent Acquisition”), we agreed to issue to the equity owners of Holdings, as a component of the Purchase Price, an aggregate of 4,545,455 restricted shares of our common stock, which included (i) 45,454 shares issued to VTX, Inc., which is beneficially owned by Benjamin P. Cowart, our Chief Executive Officer, Chairman and largest shareholder; (ii) 3,483,637 shares issued to Mr. Cowart directly; (iii) 454,091 shares issued to Chris Carlson, our Chief Financial Officer; (iv) 284,091 shares issued to Gregory Wallace, a significant employee of us, and (v) 278,182 shares issued to three limited partners of Holdings unaffiliated with us.

The shares were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) of the Act. We made this determination based on the representations and warranties delivered by each of the equity owners of Holdings, which included, in pertinent part, that each equity owner of Holdings is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act, that each equity owner of Holdings acquired the shares for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution or resale in connection with any distribution within the meaning of the Securities Act, and that each equity owner of Holdings has agreed not to sell or otherwise transfer the shares unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

31

Item 5.  Other Information.

None.

Item 6. Exhibits

Exhibit Number	Description of Document
2.1(1)	Unit Purchase Agreement by and among Vertex Energy, Inc., Vertex Acquisition Sub, LLC, Vertex Holdings, L.P. and B & S Cowart Family L.P. dated as of August 14, 2012
2.2(2)	First Amendment to Unit Purchase Agreement by and among Vertex Energy, Inc., Vertex Acquisition Sub, LLC, Vertex Holdings, L.P. and B & S Cowart Family L.P. dated as of September 11, 2012
3.1(3)	Articles of Incorporation (and amendments thereto) of Vertex Energy, Inc.
3.2(4)	Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Vertex Energy, Inc.'s Series A Convertible Preferred Stock.
3.3(3)	Bylaws of Vertex Energy, Inc.

10.1(3) Employment Agreement with Benjamin P. Cowart effective April 16, 2009 ***

10.2(3)	Employment Agreement with Matthew Lieb effective April 16, 2009 ***
10.3(6)	Loan Agreement with Bank of America dated September 16, 2010
10.4(6)	Security Agreement with Bank of America dated September 16, 2010
10.5(7)(+)	Tolling (Processing) Agreement with KMTEX effective July 1, 2009
10.6(7)(+)	First Amendment to Processing Agreement with KMTEX effective July 1, 2010
10.7(7)	Amended and Restated Employment Agreement with Chris Carlson dated March 29, 2011 and effective April 1, 2010***
10.8(7)	First Amendment to Employment Agreement with Benjamin P. Cowart dated March 25, 2011 and effective as of December 15, 2010***
10.9(7)	First Amendment to Employment Agreement with Matt Lieb dated February 1, 2011 and effective March 28, 2011***
10.10(8)	Addendum to The Employment Agreement Between Vertex Energy, Inc. and Greg Wallace dated July 5, 2011***
10.11*	Second Addendum to The Employment Agreement Between Vertex Energy, Inc. and Greg Wallace - June 2012***
10.12*	Employment Agreement with John Strickland - July 2012***
10.13(2)	Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012

32

10.14(2)	$10,000,000 Revolving Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012
10.15(2)	$8,500,000 Term Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012
10.16(2)	Security Agreement with Bank of America, N.A. dated August 31, 2012
10.17(2)	Corporate Guaranty in favor of Bank of America, N.A. dated August 31, 2012
10.18*	First Amendment to Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012
10.19*	Non-Competition and Non-Solicitation Agreement by Vertex Holdings, L.P., B & S Cowart Family L.P., Benjamin P. Cowart, Chris Carlson and Greg Wallace in favor of Vertex Energy, Inc., dated August 31, 2012***
10.20*	Second Addendum to Employment Agreement with Benjamin P. Cowart, dated August 31, 2012***
10.21*	First Addendum to Amended and Restated Employment Agreement with Chris Carlson, dated August 31, 2012***
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2*	Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
32.2*	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1(3)	Glossary of Selected Terms
101.INS++	XBRL Instance Document
101.SCH++	XBRL Taxonomy Extension Schema Document
101.CAL++	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF++	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB++	XBRL Taxonomy Extension Label Linkbase Document
101.PRE++	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

***  Indicates management contract or compensatory plan or arrangement.

33

(1) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on August 15, 2012, and incorporated herein by reference (File No. 000-53619).

(2) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on September 22, 2012, and incorporated herein by reference (File No. 000-53619).

(3) Filed as an exhibit to the registrant’s Report on Form 8-K/A. filed with the Commission on June 26, 2009, and incorporated herein by reference (File No. 000-53619).

(4) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on July 16, 2010, and incorporated herein by reference (File No. 000-53619).

(5) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on July 31, 2009, and incorporated herein by reference (File No. 000-53619).

(6) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on September 24, 2010, and incorporated herein by reference (File No. 000-53619).

(7) Filed as an exhibit to the registrant’s Report on Form 10-K, filed with the Commission on March 31, 2011, and incorporated by reference herein (File No. 000-53619).

(8) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 1, 2011, and incorporated herein by reference (File No. 000-53619).

+ Certain portions of these documents as filed herewith (which portions have been replaced by "X's") have been omitted in connection with a request for Confidential Treatment.   This entire exhibit including the omitted confidential information has been filed separately with the Commission.

++  XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

	VERTEX ENERGY, INC.
Date: November 13, 2012	By: /s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)
Date: November 13, 2012	By: /s/ Chris Carlson
	Chris Carlson
	Chief Financial Officer
	(Principal Financial Officer)

35

EXHIBIT INDEX

Exhibit Number	Description of Document
2.1(1)	Unit Purchase Agreement by and among Vertex Energy, Inc., Vertex Acquisition Sub, LLC, Vertex Holdings, L.P. and B & S Cowart Family L.P. dated as of August 14, 2012
2.2(2)	First Amendment to Unit Purchase Agreement by and among Vertex Energy, Inc., Vertex Acquisition Sub, LLC, Vertex Holdings, L.P. and B & S Cowart Family L.P. dated as of September 11, 2012
3.1(3)	Articles of Incorporation (and amendments thereto) of Vertex Energy, Inc.
3.2(4)	Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Vertex Energy, Inc.'s Series A Convertible Preferred Stock.
3.3(3)	Bylaws of Vertex Energy, Inc.

10.1(3) Employment Agreement with Benjamin P. Cowart effective April 16, 2009 ***

10.2(3)	Employment Agreement with Matthew Lieb effective April 16, 2009 ***
10.3(6)	Loan Agreement with Bank of America dated September 16, 2010
10.4(6)	Security Agreement with Bank of America dated September 16, 2010
10.5(7)(+)	Tolling (Processing) Agreement with KMTEX effective July 1, 2009
10.6(7)(+)	First Amendment to Processing Agreement with KMTEX effective July 1, 2010
10.7(7)	Amended and Restated Employment Agreement with Chris Carlson dated March 29, 2011 and effective April 1, 2010***
10.8(7)	First Amendment to Employment Agreement with Benjamin P. Cowart dated March 25, 2011 and effective as of December 15, 2010***
10.9(7)	First Amendment to Employment Agreement with Matt Lieb dated February 1, 2011 and effective March 28, 2011***
10.10(8)	Addendum to The Employment Agreement Between Vertex Energy, Inc. and Greg Wallace dated July 5, 2011***
10.11*	Second Addendum to The Employment Agreement Between Vertex Energy, Inc. and Greg Wallace - June 2012***
10.12*	Employment Agreement with John Strickland - July 2012***
10.13(2)	Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012
10.14(2)	$10,000,000 Revolving Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012

36

10.15(2)	$8,500,000 Term Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012
10.16(2)	Security Agreement with Bank of America, N.A. dated August 31, 2012
10.17(2)	Corporate Guaranty in favor of Bank of America, N.A. dated August 31, 2012
10.18*	First Amendment to Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012
10.19*	Non-Competition and Non-Solicitation Agreement by Vertex Holdings, L.P., B & S Cowart Family L.P., Benjamin P. Cowart, Chris Carlson and Greg Wallace in favor of Vertex Energy, Inc., dated August 31, 2012***
10.20*	Second Addendum to Employment Agreement with Benjamin P. Cowart, dated August 31, 2012***
10.21*	First Addendum to Amended and Restated Employment Agreement with Chris Carlson, dated August 31, 2012***
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2*	Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
32.2*	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1(3)	Glossary of Selected Terms
101.INS++	XBRL Instance Document
101.SCH++	XBRL Taxonomy Extension Schema Document
101.CAL++	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF++	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB++	XBRL Taxonomy Extension Label Linkbase Document
101.PRE++	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

***  Indicates management contract or compensatory plan or arrangement.

(1) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on August 15, 2012, and incorporated herein by reference (File No. 000-53619).

(2) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on September 22, 2012, and incorporated herein by reference (File No. 000-53619).

37

(3) Filed as an exhibit to the registrant’s Report on Form 8-K/A. filed with the Commission on June 26, 2009, and incorporated herein by reference (File No. 000-53619).

(4) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on July 16, 2010, and incorporated herein by reference (File No. 000-53619).

(5) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on July 31, 2009, and incorporated herein by reference (File No. 000-53619).

(6) Filed as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission on September 24, 2010, and incorporated herein by reference (File No. 000-53619).

(7) Filed as an exhibit to the registrant’s Report on Form 10-K, filed with the Commission on March 31, 2011, and incorporated by reference herein (File No. 000-53619).

(8) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 1, 2011, and incorporated herein by reference (File No. 000-53619).

+ Certain portions of these documents as filed herewith (which portions have been replaced by "X's") have been omitted in connection with a request for Confidential Treatment.   This entire exhibit including the omitted confidential information has been filed separately with the Commission.

++  XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

38

EX-10.11

Exhibit 10.11

SECOND ADDENDUM TO THE EMPLOYMENT AGREEMENT BETWEEN

VERTEX ENERGY, INC.

and

GREG WALLACE

THIS SECOND ADDENDUM (this “Addendum”) made this 15th day of June, 2012 by and between GREG WALLACE (hereinafter “Wallace”) and VERTEX ENERGY, INC., a Nevada corporation, (hereinafter referred to as the “Company”), to the Employment Agreement originally executed on or about January 1, 2007, amended on or about February 22, 2010, and modified by that certain Addendum to Employment Agreement entered into on July 5, 2011, as amended, modified and added to from time to time, the "Agreement" between the same parties.

W I T N E S S E T H:

WHEREAS, both parties have agreed to make the following Addendum to the Agreement simultaneously with the execution thereof;

NOW THEREFORE, in consideration of the contractual terms and conditions agreed in the Agreement, as amended by this Addendum, and of the mutual terms, conditions and covenants of the parties set forth in the Agreement as amended, and this Addendum thereto, the parties hereto amend the Agreement as follows, which Addendum shall control over any inconsistent terms elsewhere in the Agreement; and

Effective with the execution of this Addendum, the Agreement incorporates into and makes a part of the Agreement the additions and modifications as follows, which additions and modifications are approved, acknowledged and ratified by each Party.

1.           The Following Section shall be considered added to and as a part of the Agreement for all purposes, with the execution of this Addendum, to wit:

“2012 – 2015 Commission Compensation”

The Company hereby sets the bonus compensation for the period from January 1, 2012 to December 31, 2014 as provided below.  Commission compensation will be provided to Wallace if and only if the Company earns Adjusted Gross Margin (as defined below) recorded in the Company’s General Ledger.

Period:  January 1, 2012 to December 31, 2014 (each calendar year, a “Commission Year”)

Commission Compensation -

The Company agrees to pay commissions to Wallace for each Commission Year, calculated at 10% of the Commission Year's "Adjusted Gross Margin" on the Vertex Refining and Marketing book of business managed by Greg Wallace (the “Earned Bonus Commission”).  In addition to Earned Bonus Commission, in the event that year end Adjusted Gross Margin exceeds $2,477,393 (for the 2012 Commission Year) (the “Adjusted Gross Margin Limit”) in any Commission Year, Wallace shall earn (in addition to the Earned Bonus Commission), commission on the amount exceeding such Adjusted Gross Margin Limit (“Exceeded Commission”) at a rate of 5%, which will be paid out according to the detailed schedule provided below similar to the Earned Bonus Commission.  Exceeded Commission levels will be established and documented on a yearly basis.  Commissions shall be calculated and paid based on quarterly and year-end reports.  "Adjusted Gross Margin" is defined as Gross Margin minus general and administrative overhead directly related to the segments of Vertex Refining and Marketing which relates to business conducted in Port Arthur and managed by Wallace and excludes the re-refining of certain oil feedstock referred to as the “Thermal/chemical extraction process” (“TCEP”).  Final year-end commission calculations shall be made after year-end close of accounting records and no later than April 20th of each year following the applicable Commission Year in which the Commission Compensation is to be earned (i.e., 2013 for Commission Compensation earned in the 2012 Commission Year, each a “Payment Year”).

Payments of Commissions due for each Payment Year shall be paid in three (3) installments according to the following schedule and adjusted annually subject to earnings criteria and cash flows available, to wit (the “Installment Payments”):

· The First Installment shall be payable on May 25th of the applicable Payment Year, in the amount of 25% of the prior Commission Year’s Earned Bonus Commission and Exceeded Commission (the “First Installment Payment”); provided however, that such First Installment Payment will not exceed 50% of the cumulative Adjusted Gross Margin for the first quarter of the applicable Payment Year.

· The Second Installment shall be payable on August 25th of the applicable Payment Year, in the amount of 25% of the prior Commission Year’s Earned Bonus Commission and Exceeded Commission, plus any accumulated and unpaid carried forward bonus not paid in the First Installment (the “Second Installment Payment”); provided however, that such Second Installment Payment will not exceed 50% of the cumulative Adjusted Gross Margin for the second quarter of the applicable Payment Year.

· The Third Installment shall be payable on November 25th of the applicable Payment Year, in the amount of 50% of the prior Commission Year’s Earned Bonus Commission and Exceeded Commission, plus any accumulated and unpaid carried forward bonus not paid in the First and Second Installments (the “Third Installment Payment”); provided however, such Third Installment Payment will not exceed 50% of the cumulative Adjusted Gross Margin for the third quarter of the applicable Payment Year. Any excess commission due and payable after the payment of the Third Installment, shall accumulate and carry forward for payment calculations applicable to the First Installment due for the following Payment Year.”

Period:  January 1, 2015 to December 31, 2015 (“2015 Commission Year”)

Commission Compensation –

The Company agrees to pay commissions to Wallace for the 2015 Commission Year, calculated at 15% of the Commission Year's "Adjusted Gross Margin" on the Vertex Refining and Marketing book of business managed by Greg Wallace (the “Earned Bonus Commission”).  All payment schedules and installments to be the same as prior years.

2.           Installment Payments shall continue to be due pursuant to the schedule above for each Payment Year applicable to a Commission Year, ending on the earlier of (a) the termination date of Wallace’s employment with the Company, provided that Wallace shall earn commission compensation for the then Commission Year due to Wallace through the date of such termination only; and (b) November 25, 2015 (the “Final Regular Payment Date”).  In the event that any accrued and unpaid Earned Bonus Commission or Exceeded Commission remains outstanding on the Final Regular Payment Date, such remaining Earned Bonus Commission and Exceeded Commission (the “Remaining Bonus”) shall continue to accrue to Wallace and be paid based on the Installment Payments above with the “prior Commission Year’s Earned Bonus Commission and Exceeded Commission” being substituted with the Remaining Bonus for any and all purposes and the “Payment Year” being the applicable calendar year, with any unpaid amount of the Remaining Bonus continuing to accrue year after year until paid pursuant to the Installment Payments described above, if ever; provided further that the Company’s obligation to pay any Remaining Bonus or accrued and unpaid bonus to Wallace shall cease on the second anniversary of the termination date of Wallace’s employment with the Company (“Bonus Payment Termination Date”), and any Remaining Bonus or accrued and unpaid bonus not paid by such Bonus Payment Termination Date shall be automatically forgiven and waived, and Wallace shall be deemed to have automatically released the Company’s obligation to make such payment (“Forgiveness” which shall refer to Wallace’s release of the Company’s obligation to make any such payment and confirmation that no such payment is due).

3.           All unpaid and accrued installment payments will accrue interest at the rate of LIBOR + 3% per annum until paid or subject to Forgiveness (LIBOR to be determined as of May 25th  of each Commission Year).  Any unpaid interest will accrue to the next payment, subject to the limitations described above or Forgiveness.

4.           Each of the parties agrees and confirms by signing below that they have received valid consideration in connection with this Addendum and the transactions contemplated herein.

5.           The parties hereby reaffirm all terms, conditions, covenants, representations and warranties made in the Agreement, to the extent the same are not amended, modified or added to hereby.

6.           Upon the effectiveness of this Addendum, each reference in the Agreement to “Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to such Agreement as modified hereby.

7.           Except as specifically modified or added to herein, the Agreement and the terms and conditions thereof shall remain in full force and effect.

8.           This Addendum may be executed in several counterparts, each of which is an original.  It shall not be necessary in making proof of this Addendum or any counterpart hereof to produce or account for any of the other counterparts.  A copy of this Addendum signed by one party and faxed to another party shall be deemed to have been executed and delivered by the signing party as though an original.  A photocopy of this Addendum shall be effective as an original for all purposes.

IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the day and year first above written.

COMPANY:

Vertex Energy, Inc.

By: /s/ Benjamin P. Cowart              

Name:    Benjamin P. Cowart

Title:      President

WALLACE:

Greg Wallace

/s/ Greg Wallace                                 

EX-10.12

Exhibit 10.12

VERTEX ENERGY, INC.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made this 17th day of August 2012 (the “Execution Date”), to be effective as of the Effective Date as defined below, between Vertex Energy, Inc., a Nevada corporation (the “Company”), and John Strickland (“Employee”) (each of Company and Employee is referred to herein as a “Party,” and collectively referred to herein as the “Parties”).

W I T N E S S E T H:

WHEREAS, the Company desires to obtain the services of Employee, and Employee desires to be employed by the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises, the agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as of August 17, 2012 (the “Effective Date”) as follows:

ARTICLE I.

EMPLOYMENT; TERM; DUTIES

1.1.           Employment. Pursuant to the terms and conditions hereinafter set forth, the Company hereby employs Employee, and Employee hereby accepts such employment, as the Manager of Supply and Trading of the Company for a period of five (5) years beginning on the Effective Date (the “Initial Term”); provided that this Agreement shall automatically extend for additional one (1) year periods (each renewal date being defined herein as an “Automatic Renewal Date”) after the Initial Term (each an “Automatic Renewal Term”) in the event that neither party provides the other written notice of their intent not to automatically extend such Agreement at least sixty (60) days prior to such Automatic Renewal Date. It is understood by the Company and Employee that Employee shall perform duties from his home or at an office in Georgia.

1.2.           Duties and Responsibilities.  Employee, as Manager of the Company’s Black Oil Division, shall perform such administrative, managerial and Employee duties for the Company (i) as are prescribed by applicable job specifications for an Employee of a public company the size and nature of the Company specifically including but not limited to those enumerated in Exhibit A attached, (ii) as may be prescribed by the Bylaws of the Company, and (iii) as are customarily vested in and incidental to such position.

1.3.           Non-Competition.  For $10 and other good and valuable consideration which Employee acknowledges the receipt and sufficiency of, Employee agrees to devote substantially all of Employee’s business time, energy and efforts to the business of the Company, and will use Employee’s best efforts and abilities faithfully and diligently to promote the business interests of the Company.  For so long as Employee is employed hereunder, and for a period of six months following the last payment received by Employee from the Company thereafter (the “Non-Compete Period”), Employee shall not, directly or indirectly, either as an employee, employer, consultant, agent, investor, principal, partner, stockholder (except as the holder of less than 1% of the issued and outstanding stock of a publicly held corporation), corporate officer or director, or in any other individual or representative capacity, engage or participate in any business that is in competition in any manner whatsoever with the business of the Company, as such business of the Company is now or hereafter conducted.  The Employee confirms and acknowledges that the Non-Compete Period and the terms and conditions set forth herein are fair and reasonable.  The Company further confirms that it would not have agreed to the terms and conditions of this Agreement if not for the Employee specifically agreeing to the terms and conditions of this Section 1.3.

1.4.           Covenants of Employee.

1.4.1           Best Efforts.  Employee shall devote his best efforts to the business and affairs of the Company.  Employee shall perform his duties, responsibilities and functions to the Company hereunder to the best of his abilities in a diligent, trustworthy, professional and efficient manner and shall comply, in all material respects, with all rules and regulations of the Company (and special instructions of the Board, if any) and all other rules, regulations, guides, handbooks, procedures and policies applicable to the Company and its business in connection with his duties hereunder, including all United States federal and state securities laws applicable to the Company.

1.4.2           Records.  Employee shall use his best efforts and skills to truthfully, accurately, and promptly prepare, maintain, and preserve all records and reports that the Company may, from time to time, request or require, fully account for all money, records, equipment, materials, or other property belonging to the Company of which he may have custody, and promptly pay and deliver the same whenever he may be directed to do so by the Board.

1.4.3           Compliance.  Employee shall use his best efforts to cause the Company to remain in compliance with all rules and regulations of the Securities and Exchange Commission (“SEC”), and reporting requirements for publicly-traded companies, including, without limitation, assist in the filing with the SEC of all periodic reports the Company is required to file under the Exchange Act of 1934 (as amended, the “Exchange Act”).  Employee shall at all times comply, and endeavor to cause the Company to comply, with the then-current good corporate governance standards and practices as prescribed by the SEC, any exchange on which the Company’s capital stock or other securities may be traded and any other applicable governmental entity, agency or organization.  Notwithstanding the foregoing or any other provision herein to the contrary, the Company agrees and acknowledges that the Employee is not personally responsible for any filings made with the SEC or any other governmental agency, and that such filings are the ultimate responsibility of the Company’s CEO and CFO, who will be responsible for signing any certifications relating thereto required by the Sarbanes-Oxley Act.

ARTICLE II.

COMPENSATION AND OTHER BENEFITS

2.1.           Base Salary.  So long as this Agreement remains in effect, for all services rendered by Employee hereunder and all covenants and conditions undertaken by the Parties pursuant to this Agreement, the Company shall pay, and Employee shall accept, as compensation, an annual base salary (“Base Salary”) of $150,000.  The Base Salary shall be payable in regular installments in accordance with the normal payroll practices of the Company, in effect from time to time, but in any event no less frequently than on a monthly basis. For so long as Employee is employed hereunder, beginning on the first anniversary of the Effective Date, and on each anniversary thereafter, the Base Salary may be increased as determined by the Compensation Committee of the Board (the “Compensation Committee”), in its sole and absolute discretion.

2.2.           Options.  Effective as of the Execution Date of this Agreement (the “Grant Date”), Employee has been granted options to acquire up to one hundred fifty thousand (150,000) shares of the Company’s common stock (the “Options”) pursuant to the stock option agreements attached hereto as Exhibit B.  The specific terms of these Options shall  include: (i) Options to purchase 37,500 shares vesting on the execution date of this Agreement, and (ii) the remaining Options to purchase 112,500 shares vesting at a rate of 1/3rd of such remaining Options annually upon the expiration of each year that lapses from the Grant Date (with options to purchase the first 37,500 shares vesting on August 17, 2013), assuming that Employee is employed by the Company as an Employee on such dates; and provided further that the vesting of all granted and unvested Options shall be fully accelerated in the event the Company is sold or has any other change of control event (as defined in the option agreements), or in the event Employee is terminated by the Company for any reason other than for Cause as defined in Section 3.2.1 herein.

2.3.           Bonus Compensation.  For each year this Agreement is in effect, Employee will be eligible to earn a bonus in the sole discretion of the Compensation Committee.

2.4.           Business Expenses.  So long as this Agreement is in effect, the Company shall reimburse Employee for all reasonable, out-of-pocket business expenses incurred in the performance of his duties hereunder consistent with the Company’s policies and procedures, in effect from time to time, with respect to travel, entertainment, communications, technology/equipment and other business expenses customarily reimbursed to senior Employees of the Company in connection with the performance of their duties on behalf of the Company.

2.5.           Vacation.  Employee will be entitled to 15 days of paid time-off (PTO) per year. PTO days shall accrue beginning on the 1st of January for each year during the term of this Agreement. Unused PTO days shall be determined in accordance with the companies benefits and standard PTO guidelines.

2.6.           Other Benefits.  Employee shall be entitled to participate in the Company’s employee stock option plan, life, health, accident, disability insurance plans, pension plans and retirement plans, in effect from time to time (including, without limitation, any incentive program or discretionary bonus program of the Company which may be implemented in the future by the Board), to the extent and on such terms and conditions as the Company customarily makes such plans available to its similarly situated Employees.

2.7.           Withholding.  The Company may deduct from any compensation payable to Employee (including payments made pursuant to this Section 2 or in connection with the termination of employment pursuant to Article III of this Agreement) amounts sufficient to cover Employee’s share of applicable federal, state and/or local income tax withholding, social security payments, state disability and other insurance premiums and payments.

ARTICLE III.

TERMINATION OF EMPLOYMENT

3.1.           Termination of Employment.  Employee’s employment pursuant to this Agreement shall terminate on the earliest to occur of the following:

3.1.1           upon the death of Employee;

3.1.2           upon the delivery to Employee of written notice of termination by the Company if Employee shall suffer a physical or mental disability which renders Employee, in the reasonable judgment of the Compensation Committee, unable to perform his duties and obligations under this Agreement for either 90 consecutive days or 180 days in any 12-month period;

3.1.3           upon the expiration of the Initial Term, unless a notice of termination pursuant to Section 1.1 is not given by either party, in which case upon the expiration of the first Automatic Renewal Term that such a notice of termination is given with respect to either party (if any);

3.1.4           upon delivery to the Company of written notice of termination by Employee for any reason other than for Good Reason;

3.1.5           upon delivery to Employee of written notice of termination by the Company for Cause;

3.1.6           upon delivery of written notice of termination from Employee to the Company for Good Reason, provided, however, prior to any such termination by Employee pursuant to this Section 3.1.6, Employee shall have advised the Company in writing within fifteen (15) days of the occurrence of any circumstances that would constitute Good Reason, and the Company has not cured such circumstances within 15 days following receipt of Employee’s written notice, with the exception of only five (5) days written notice in the event the Company reduces Employee’s salary without Employee’s Consent, or fails to pay Employee any compensation due him; or

3.1.7            upon delivery to Employee of written notice of termination by the Company without Cause.

3.2.         Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

3.2.1           “Cause” shall mean, in the context of a basis for termination by the Company of Employee’s employment with the Company, that:

(i)               Employee materially breaches any obligation, duty, covenant or agreement under this Agreement, which breach is not cured or corrected within thirty (30) days of written notice thereof from the Company (except for breaches of Article IV of this Agreement, which cannot be cured and for which the Company need not give any opportunity to cure); or

(ii)               Employee commits any material act of misappropriation of funds or embezzlement; or

(iii)              Employee commits any material act of fraud; or

(iv)             Employee is convicted of, or pleads guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or a felony under federal or applicable state law.

3.2.2            “Good Reason” shall mean, in the context of a basis for termination by Employee of his employment with the Company (a) without Employee’s consent, his position or duties are modified by the Company to such an extent that his duties are no longer consistent with the position of Manager of the Black Oil Division of the Company, (b) there has been a material breach by the Company of a material term of this Agreement or Employee reasonably believes that the Company is violating any law which would have a material adverse effect on the Company’s operations and such violation continues uncured following thirty (30) days after written notice of such violation or breach by the Company, (c) Employee’s compensation as set forth hereunder is reduced without Employee’s consent,  (d) Employee is forced by the Company to permanently move more than thirty (30) miles from his current location, or (e) the Company fails to pay to Employee any compensation due to him hereunder upon five (5) days written notice from Employee informing the Company of such failure.

3.3.           “Termination Date” shall mean the date on which Employee’s employment with the Company hereunder is terminated.

3.4.           Effect of Termination.  In the event that Employee’s employment hereunder is terminated in accordance with the provisions of this Agreement, Employee shall be entitled to the following:

3.4.1           If Employee’s employment is terminated pursuant to Sections 3.1.1 (death), 3.1.2 (disability), 3.1.3 (five-year anniversary or any subsequent anniversary of an Automatic Renewal Term, with notice from either party as provided above), 3.1.4 (without Cause by the Employee), or 3.1.5 (by the Company for Cause), Employee shall be entitled to salary accrued through the Termination Date, including but not limited to any Options which have vested as of the Termination Date (exercisable for the period of time set forth in the option agreements evidencing such Options),  and no other benefits other than as required under the terms of employee benefit plans in which Employee was participating as of Termination Date.

3.4.2           If Employee’s employment is terminated pursuant to Section 3.1.7 (without Cause by the Company) or by Employee pursuant to Section 3.1.6 (Good Reason), Employee shall be entitled to salary accrued through the Termination Date and to continue to receive salary at the rate in effect upon the Termination Date of employment for six weeks after the Termination Date; payable in accordance with the Company’s normal payroll practices and policies, as if Employee’s employment had not terminated.  Any unvested Options held by Employee shall immediately vest as of the Termination Date of this Agreement and be exercisable for the period of time set forth in the option agreements evidencing such Options.  Employee shall be entitled to no other post-employment benefits except for benefits payable under applicable benefit plans in which Employee is entitled to participate pursuant to Section 2.5 hereof through the Termination Date, subject to and in accordance with the terms of such plans.

3.4.3           As a condition to Employee’s right to receive any benefits pursuant to Section 3.4 of this Agreement, (A) Employee must execute and deliver to the Company a written release in customary form and substance reasonably satisfactory to the Company, of any and all claims against the Company and all directors and officers of the Company with respect to all matters arising out of Employee’s employment hereunder, or the termination thereof (other than claims for entitlements under the terms of this Agreement or plans or programs of the Company in which Employee has accrued a benefit); and (B) Employee must not breach any of his covenants and agreements under Section 1.3 and Article IV of this Agreement, which continue following the Termination Date.

3.4.4           Upon termination of Employee’s employment hereunder, or on demand by the Company during the term of this Agreement, Employee will promptly deliver to the Company, and will not keep in his possession, recreate or deliver to anyone else, any and all Company property, as well as all devices and equipment belonging to the Company (including computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings blueprints, sketches, materials, photographs, charts, all documents and property, and reproductions of any of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by Employee in connection with his employment with the Company, or otherwise belonging to the Company, its successors or assigns, including, without limitation, those records maintained pursuant to this Agreement.

3.4.5           Employee also agrees to keep the Company advised of his home and business address for a period of twelve (12) months after termination of Employee’s employment hereunder, so that the Company can contact Employee regarding his continuing obligations provided by this Agreement.  In the event that Employee’s employment hereunder is terminated, Employee agrees to grant consent to notification by the Company to Employee’s new employer about his obligations under this Agreement.

3.5.           Consulting.  During the period that Employee is receiving payments pursuant to subsection 3.4.2 above, Employee shall be available, subject to his other reasonable commitments or obligations made or incurred in mitigation of the termination of his employment, by telephone, email or fax, as a consultant to the Company, without further compensation, to consult with its officers and directors regarding projects and/or tasks as defined by the Board.

ARTICLE IV.

INVENTIONS; CONFIDENTIAL/TRADE SECRET INFORMATION AND RESTRICTIVE COVENANTS

4.1.           Inventions.  All processes, technologies and inventions relating to the business of the Company (collectively, “Inventions”), including new contributions, improvements, ideas, discoveries, trademarks and trade names, conceived, developed, invented, made or found by Employee, alone or with others, during his employment by the Company, whether or not patentable and whether or not conceived, developed, invented, made or found on the Company’s time or with the use of the Company’s facilities or materials, shall be the property of the Company and shall be promptly and fully disclosed by Employee to the Company.  Employee shall perform all necessary acts (including, without limitation, executing and delivering any confirmatory assignments, documents or instruments requested by the Company) to assign or otherwise to vest title to any such Inventions in the Company and to enable the Company, at its sole expense, to secure and maintain domestic and/or foreign patents or any other rights for such Inventions.

4.2.           Confidential/Trade Secret Information/Non-Disclosure.

4.2.1   Confidential/Trade Secret Information Defined.  During the course of Employee’s employment, Employee will have access to various Confidential/Trade Secret Information of the Company and information developed for the Company.  For purposes of this Agreement, the term “Confidential/Trade Secret Information” is information that is not generally known to the public and, as a result, is of economic benefit to the Company in the conduct of its business, and the business of the Company’s subsidiaries.  Employee and the Company agree that the term “Confidential/Trade Secret Information” includes but is not limited to all information developed or obtained by the Company, including its affiliates, and predecessors, and comprising the following items, whether or not such items have been reduced to tangible form (e.g., physical writing, computer hard drive, e-mail, disk, tape, etc.):  all methods, techniques, processes, ideas, research and development, product designs, engineering designs, plans, models, production plans, business plans, add-on features, trade names, service marks, slogans, forms, pricing structures, menus, business forms, marketing programs and plans, layouts and designs, financial structures, operational methods and tactics, cost information, the identity of and/or contractual arrangements with suppliers and/or vendors, accounting procedures, and any document, record or other information of the Company relating to the above.  Confidential/Trade Secret Information includes not only information directly belonging to the Company which existed before the date of this Agreement, but also information developed by Employee for the Company, including its subsidiaries, affiliates and predecessors, during the term of Employee’s employment with the Company.  Confidential/Trade Secret Information does not include any information which (a) was in the lawful and unrestricted possession of Employee prior to its disclosure to Employee by the Company, its subsidiaries, affiliates or predecessors, (b) is or becomes generally available to the public by lawful acts other than those of Employee after receiving it, or (c) has been received lawfully and in good faith by Employee from a third party who is not and has never been an Employee of the Company, its subsidiaries, affiliates or predecessors, and who did not derive it from the Company, its subsidiaries, affiliates or predecessors.

4.2.2        Restriction on Use of Confidential/Trade Secret Information.  Employee agrees that his use of Confidential/Trade Secret Information is subject to the following restrictions for an indefinite period of time so long as the Confidential/Trade Secret Information has not become generally known to the public:

(i)            Non-Disclosure.  Employee agrees that he will not publish or disclose, or allow to be published or disclosed, Confidential/Trade Secret Information to any person without the prior written authorization of the Company unless pursuant to or in connection with Employee’s job duties to the Company under this Agreement; and

(ii)           Non-Removal/Surrender.  Employee agrees that he will not remove any Confidential/Trade Secret Information from the offices of the Company or the premises of any facility in which the Company is performing services, except pursuant to his duties under this Agreement.  Employee further agrees that he shall surrender to the Company all documents and materials in his possession or control which contain Confidential/Trade Secret Information and which are the property of the Company upon the termination of his employment with the Company, and that he shall not thereafter retain any copies of any such materials.

4.2.3        Prohibition Against Unfair Competition/ Non-Solicitation of Customers.  Employee agrees that at no time after his employment with the Company will he engage in competition with the Company while making any use of the Confidential/Trade Secret Information, or otherwise exploit or make use of the Confidential/Trade Secret Information. Employee agrees that during the twelve-month period following the Termination Date, he will not directly or indirectly accept or solicit, in any capacity, the business of any customer of the Company with whom Employee worked or otherwise had access to the Confidential/Trade Secret Information pertaining to the Company’s business with such customer during the last year of Employee’s employment with the Company, or solicit, directly or indirectly, or encourage any of the Company’s customers or suppliers to terminate their business relationship with the Company, or otherwise interfere with such business relationships.

4.3.           Non-Solicitation of Employees.  Employee agrees that during the twelve-month period following the Termination Date, he shall not, directly or indirectly, solicit or otherwise encourage any employees of the Company to leave the employ of the Company, or solicit, directly or indirectly, any of the Company’s employees for employment.

4.4.           Non-Solicitation During Employment.  During his employment with the Company, Employee shall not: (a) interfere with the Company’s business relationship with its customers or suppliers, (b) solicit, directly or indirectly, or otherwise encourage any of the Company’s customers or suppliers to terminate their business relationship with the Company, or (c) solicit, directly or indirectly, or otherwise encourage any employees of the Company to leave the employ of the Company, or solicit any of the Company’s employees for employment.

4.5.           Conflict of Interest.  During Employee’s employment with the Company, Employee must not knowingly engage in any work, paid or unpaid, that creates an actual conflict of interest with the Company.  If the Company or the Employee have any question as to the actual or apparent potential for a conflict of interest, either shall raise the issue formally to the other, and if appropriate and necessary the issue shall be put to the Related Party Transaction Committee of the Company and/or Board of Directors for consideration and approval or non-approval, which approval or non-approval the Employee agrees shall be binding on the Employee.

4.6.           Breach of Provisions.  If Employee materially breaches any of the provisions of this Article IV, or in the event that any such breach is threatened by Employee, in addition to and without limiting or waiving any other remedies available to the Company at law or in equity, the Company shall be entitled to immediate injunctive relief in any court, domestic or foreign, having the capacity to grant such relief, to restrain any such breach or threatened breach and to enforce the provisions of this Article IV.

4.7.           Reasonable Restrictions.  The Parties acknowledge that the foregoing restrictions, as well as the duration and the territorial scope thereof as set forth in this Article IV, are under all of the circumstances reasonable and necessary for the protection of the Company and its business.

4.8.           Specific Performance.  Employee acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Sections 1.3, 4.2, 4.3 or 4.4 hereof would be inadequate and, in recognition of this fact, Employee agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

ARTICLE V.

ARBITRATION

5.1.           Scope.  To the fullest extent permitted by law, Employee and the Company agree to the binding arbitration of any and all controversies, claims or disputes between them arising out of or in any way related to this Agreement, the employment relationship between the Company and Employee and any disputes upon termination of employment, including but not limited to breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law.  For the purpose of this agreement to arbitrate, references to “Company” include all subsidiaries or related entities and their respective Employees, supervisors, officers, directors, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this agreement to arbitrate shall apply to them to the extent Employee’s claims arise out of or relate to their actions on behalf of the Company.

5.2.           Arbitration Procedure.  To commence any such arbitration proceeding, the party commencing the arbitration must provide the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims.  In no event shall this notice for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations.  The arbitration will be conducted in a neutral location, by a single neutral arbitrator and in accordance with the then-current rules for resolution of employment disputes of the American Arbitration Association (“AAA”).  The Arbitrator and location are to be selected by the mutual agreement of the Parties.  If the Parties cannot agree, the Superior Court will select the arbitrator.  The parties are entitled to representation by an attorney or other representative of their choosing.  The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the presiding State, and only such power, and shall follow the law.  The award shall be binding and the Parties agree to abide by and perform any award rendered by the arbitrator.  The arbitrator shall issue the award in writing and therein state the essential findings and conclusions on which the award is based.  Judgment on the award may be entered in any court having jurisdiction thereof.  Each Party in the arbitration hearing shall bear its own costs of the arbitration filing and hearing fees and the losing Party shall bear the cost of the arbitrator.

ARTICLE VI.

MISCELLANEOUS

6.1.           Binding Effect; Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, heirs, successors and assigns.  Employee may not assign any of his rights or obligations under this Agreement.  The Company may assign its rights and obligations under this Agreement to any successor entity with the written agreement of the Employee, which shall not be unreasonably withheld, conditioned or delayed.

6.2.           Notices.  Any notice provided for herein shall be in writing and shall be deemed to have been given or made (a) when personally delivered or (b) when sent by telecopier and confirmed within 48 hours by letter mailed or delivered to the party to be notified at its or his address set forth herein; or three (3) days after being sent by registered or certified mail, return receipt requested (or by equivalent currier with delivery documentation such as FEDEX or UPS) to the address of the other party set forth or to such other address as may be specified by notice given in accordance with this section 6.2:

If to the Company: Vertex Energy, Inc. 1331 Gemini , Suite 250 Houston, Texas 77058 Telephone:       866-660-8156 Facsimile:          281-754-4185 Attention:         Benjamin P. Cowart  

If to the Employee: John Strickland __________________ __________________   Telephone:   _____________ Facsimile:      ____________ Attention:     John Strickland  

6.3.           Severability.  If any provision of this Agreement, or portion thereof, shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall attach only to such provision or portion thereof, and shall not in any manner affect or render invalid or unenforceable any other provision of this Agreement or portion thereof, and this Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof were not contained herein.  In addition, any such invalid or unenforceable provision or portion thereof shall be deemed, without further action on the part of the parties hereto, modified, amended or limited to the extent necessary to render the same valid and enforceable.

6.4.           Waiver.  No waiver by a Party of a breach or default hereunder by the other party shall be considered valid, unless expressed in a writing signed by such first party, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or any other nature.

6.5.           Entire Agreement.  This Agreement, including the Exhibits hereto, sets forth the entire agreement between the Parties with respect to the subject matter hereof, and supersedes any and all prior agreements between the Company and Employee, whether written or oral, relating to any or all matters covered by and contained or otherwise dealt with in this Agreement.  This Agreement does not constitute a commitment of the Company with regard to Employee’s employment, express or implied, other than to the extent expressly provided for herein.

6.6.           Amendment.  No modification, change or amendment of this Agreement or any of its provisions shall be valid, unless in writing signed by the Parties and approved by the Compensation Committee.

6.7.           Authority.  The Parties each represent and warrant that it/he has the power, authority and right to enter into this Agreement and to carry out and perform the terms, covenants and conditions hereof.

6.8.           Attorneys’ Fees.  If either party hereto commences an arbitration or other action against the other party to enforce any of the terms hereof or because of the breach by such other party of any of the terms hereof, the prevailing party shall be entitled, in addition to any other relief granted, to all actual out-of-pocket costs and expenses incurred by such prevailing party in connection with such action, including, without limitation, all reasonable attorneys’ fees, and a right to such costs and expenses shall be deemed to have accrued upon the commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment.

6.9.           Captions.  The captions, headings and titles of the sections of this Agreement are inserted merely for convenience and ease of reference and shall not affect or modify the meaning of any of the terms, covenants or conditions of this Agreement.

6.10.         Governing Law.  This Agreement, and all of the rights and obligations of the Parties in connection with the employment relationship established hereby, shall be governed by and construed in accordance with the substantive laws of the State of Texas without giving effect to principles relating to conflicts of law.

6.11.         Survival.  The termination of Employee’s employment with the Company pursuant to the provisions of this Agreement shall not affect Employee’s obligations to the Company hereunder which by the nature thereof are intended to survive any such termination, including, without limitation, Employee’s obligations under Section 1.3 and Article IV of this Agreement.

 [Signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written to be effective as of the Effective Date.

“COMPANY”	VERTEX ENERGY, INC., a Nevada corporation By: /s/ Benamin P. Cowart       Name: Benjamin P. Cowart Title:
“EMPLOYEE”	/s/ John Strickland                    John Strickland

EXHIBIT A

1. Employee shall report to the Chief Operating Officer of the Company and work closely with the management team.

2. Employee shall serve as Manager of the Black Oil Division.

3. Employee will develop and expand the Company’s Black Oil Division

4. Operations

a. Responsible for the effective operational management of the Company’s Black Oil Division including full responsibility for its profit and loss statement.

EX-10.18

Exhibit 10.18

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of October 10, 2012 (the “Effective Date”), between VERTEX ENERGY, INC., a Nevada corporation (“Borrower”), and BANK OF AMERICA, N.A. (“Lender”).  Capitalized terms used but not defined in this Amendment have the meanings given them in the Credit Agreement (defined below).

RECITALS

A.           Borrower and Lender entered into that certain Credit Agreement dated as of August 31, 2012 (as amended, restated, or supplemented from time to time, the “Credit Agreement”).

B.           Borrower and Lender have agreed to amend the Credit Agreement, subject to the terms and conditions of this Amendment.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the undersigned hereby agree as follows:

1.           Amendment to Credit Agreement.  Section 1.1 (Definitions) of the Credit Agreement is amended to delete the defined term “Change of Control” in its entirety and to replace it with the following:

“Change of Control means (a) Benjamin P. Cowart ceases to own and control at least 25% of the Equity Interests of Borrower, (b) following the Acquisition, Borrower at any time ceases to own and control 100% of the Equity Interests of Target or Vertex-GP, (c) following the Acquisition, Target at any time ceases to own 100% of the Equity Interests of CMT, Crossroad Carriers, Vertex Recovery, or H&H or (d) following the Acquisition, Vertex-GP ceases to be the sole general partner of CMT, Crossroad Carriers, Vertex Recovery, or H&H.”

2.           Conditions.  This Amendment shall be effective as of the Effective Date once each of the following has been delivered to Lender, in each case, in Proper Form:

(a) this Amendment executed by Borrower and Lender;

(b) Guarantors’ Consent and Agreement executed by Guarantors; and

(c) such other documents as Lender may reasonably request.

3.           Representations and Warranties.  Borrower represents and warrants to Lender that (a) it possesses all requisite power and authority to execute, deliver and comply with the terms of this Amendment, (b) this Amendment has been duly authorized and approved by all requisite corporate action on the part of Borrower, (c) no other consent of any Person (other than Lender) is required for this Amendment to be effective, (d) the execution and delivery of this Amendment does not violate its organizational documents, (e) the representations and warranties in each Loan Document to which it is a party are true and correct in all material respects on and as of the date of this Amendment as though made on the date of this Amendment (except to the extent that such representations and warranties speak to a specific date), (f) it is in full compliance with all covenants and agreements contained in each Loan Document to which it is a party, and (g) no Default or Potential Default has occurred and is continuing.  The representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment.  No investigation by Lender is required for Lender to rely on the representations and warranties in this Amendment.

4.           Scope of Amendment; Reaffirmation; Release.  All references to the Credit Agreement shall refer to the Credit Agreement as amended by this Amendment.  Except as affected by this Amendment, the Loan Documents are unchanged and continue in full force and effect.  However, in the event of any inconsistency between the terms of the Credit Agreement (as amended by this Amendment) and any other Loan Document, the terms of the Credit Agreement shall control and such other document shall be deemed to be amended to conform to the terms of the Credit Agreement.  Borrower hereby reaffirms its obligations under the Loan Documents to which it is a party and agrees that all Loan Documents to which it is a party remain in full force and effect and continue to be legal, valid, and binding obligations enforceable in accordance with their terms (as the same are affected by this Amendment).  As a material part of the consideration for Lender entering into this Amendment, Borrower hereby releases and forever discharges Lender (and its successors, assigns, affiliates, officers, managers, directors, employees, and agents) from any and all claims, demands, damages, causes of action, or liabilities for actions or omissions (whether arising at law or in equity, and whether direct or indirect) in connection with the Credit Agreement and the other Loan Documents prior to the date of this Amendment, whether or not heretofore asserted, and which Borrower or any Company may have or claim to have against Lender.

5.           Miscellaneous.

(a) No Waiver of Defaults.  This Amendment does not constitute (i) a waiver of, or a consent to, (A) any provision of the Credit Agreement or any other Loan Document not expressly referred to in this Amendment, or (B) any present or future violation of, or default under, any provision of the Loan Documents, or (ii) a waiver of Lender’s right to insist upon future compliance with each term, covenant, condition and provision of the Loan Documents.

(b) Form.  Each agreement, document, instrument or other writing to be furnished Lender under any provision of this Amendment must be in form and substance satisfactory to Lender and its counsel.

(c) Headings.  The headings and captions used in this Amendment are for convenience only and will not be deemed to limit, amplify or modify the terms of this Amendment, the Credit Agreement, or the other Loan Documents.

(d) Costs, Expenses and Attorneys’ Fees.  Borrower agrees to pay or reimburse Lender on demand for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, and execution of this Amendment, including, without limitation, the reasonable fees and disbursements of Lender’s counsel.

(e) Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of each of the undersigned and their respective successors and permitted assigns.

(f) Multiple Counterparts.  This Amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document.  All counterparts must be construed together to constitute one and the same instrument.  This Amendment may be transmitted and signed by facsimile or portable document format (PDF).  The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as manually-signed originals and shall be binding on Borrower and Lender.  Lender may also require that any such documents and signatures be confirmed by a manually-signed original; provided that the failure to request or deliver the same shall not limit the effectiveness of any facsimile or PDF document or signature.

(g) Governing Law.  This Amendment and the other Loan Documents must be construed, and their performance enforced, under Texas law.

(h) Arbitration.  Upon the demand of any party to this Amendment, any dispute shall be resolved by binding arbitration as provided for in Section 13.9 of the Credit Agreement.

(i) Entirety.The Loan Documents (as amended hereby) Represent the Final Agreement Between Borrower and Lender and May Not Be Contradicted by Evidence of Prior, Contemporaneous, or Subsequent Oral Agreements by the Parties.  There Are No Unwritten Oral Agreements among the Parties.

[Signatures are on the following page.]

The Amendment is executed as of the date set out in the preamble to this Amendment.

BORROWER:

VERTEX ENERGY, INC.,

a Nevada corporation

By:    /s/ Chris Carlson                                                                       

 Chris Carlson

 Chief Financial Officer and Secretary

LENDER:

BANK OF AMERICA, N.A.

By:   /s/ Shawyna Jarret                                                                

 Shawyna Jarrett

 Vice President

GUARANTORS’ CONSENT AND AGREEMENT

TO

FIRST AMENDMENT TO CREDIT AGREEMENT

As an inducement to Lender to execute, and in consideration of Lender’s execution of, this Amendment, each of the undersigned hereby consents to this Amendment and agrees that this Amendment shall in no way release, diminish, impair, reduce or otherwise adversely affect the obligations and liabilities of the undersigned under the Guaranty executed by the undersigned in connection with the Credit Agreement, or under any Loan Documents, agreements, documents or instruments executed by the undersigned to create liens, security interests or charges to secure any of the Obligation, all of which are in full force and effect.  Each of the undersigned further represent and warrant to Lender that (a) the representations and warranties in each Loan Document to which the undersigned is a party are true and correct in all material respects on and as of the date of this Amendment as though made on the date of this Amendment (except to the extent that such representations and warranties speak to a specific date), (b) the undersigned is in full compliance with all covenants and agreements contained in each Loan Document to which it is a party, and (c) no Default or Potential Default has occurred and is continuing.  Each Guarantor hereby releases Lender from any liability for actions or omissions in connection with the Loan Documents prior to the date of this Amendment.  This Consent and Agreement shall be binding upon each of the undersigned, and its respective legal representatives and permitted assigns, and shall inure to the benefit of Lender, and its successors and assigns.

GUARANTORS:

VERTEX ACQUISITION SUB, LLC,

a Nevada limited liability company

By:   /s/ Chris Carlson                                                  

 Chris Carlson

 Chief Financial Officer and Secretary

CEDAR MARINE TERMINALS, LP,

a Texas limited partnership

By:          Vertex II GP, LLC,

a Nevada limited liability company,

its general partner

By:  /s/ Chris Carlson

 Chris Carlson

 Chief Financial Officer and Secretary

CROSSROAD CARRIERS, L.P.,

a Texas limited partnership

By:           Vertex II GP, LLC,

a Nevada limited liability company,

its general partner

By: /s/ Chris Carlson

 Chris Carlson

 Chief Financial Officer and Secretary

VERTEX RECOVERY, L.P.,

a Texas limited partnership

By:          Vertex II GP, LLC,

a Nevada limited liability company,

its general partner

By:  /s/ Chris Carlson

 Chris Carlson

 Chief Financial Officer and Secretary

H & H OIL, L.P.,

a Texas limited partnership

By:          Vertex II GP, LLC,

a Nevada limited liability company,

its general partner

By:  /s/ Chris Carlson

 Chris Carlson

 Chief Financial Officer and Secretary

VERTEX II GP, LLC,

a Nevada limited liability company

By:       /s/ Chris Carlson                                               

 Chris Carlson

 Chief Financial Officer and Secretary

EX-10.19

Exhibit 10.19

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (this “Agreement”) dated as of August 31, 2012 (the “Effective Date”), is by and among Vertex Energy, Inc., a Nevada corporation (the “Protected Party”), Vertex Holdings, L.P., a Texas limited partnership (“Holdings”), B & S Cowart Family L.P., a Texas family liability partnership (“B&S LP” and together with Holdings, the “Sellers”), Benjamin P. Cowart, an individual (“Cowart”), Chris Carlson, an individual (“Carlson”), and Greg Wallace, an individual (“Wallace” and together with the Sellers, Cowart and Carlson, the “Restricted Parties” and each a “Restricted Party”). The Protected Party and each of the Restricted Parties are each individually referred to herein as a “Party” and together collectively referred to herein as the “Parties”.  Capitalized terms used and not otherwise defined herein have the meanings set forth in the Purchase Agreement (as defined below).

RECITALS

WHEREAS, as of the date hereof, the Protected Party purchased from the Sellers all of the issued and outstanding units representing membership interests (the “Units”) of Vertex Acquisition Sub, LLC, a Nevada limited liability company (“Target”), pursuant to that certain Unit Purchase Agreement dated as of August 14, 2012 (together with the exhibits and schedules thereto, and the documents and instruments to be delivered pursuant thereto, the “Purchase Agreement”) by and among the Protected Party, Target and the Sellers;

WHEREAS, as a material inducement to the Protected Party to enter into the Purchase Agreement and consummate the transactions contemplated thereunder, the Protected Party requires that the Restricted Parties agree not to compete with or against the Protected Party or any of its Affiliates in the Business (as defined below) in the Protected Area (as defined below) during the Term (as defined below) pursuant to the terms of this Agreement; and

WHEREAS, each Restricted Party will derive substantial direct and indirect benefits from the transactions contemplated in the Purchase Agreement, including such Restricted Party’s direct or indirect percentage share of the Purchase Price.

NOW, THEREFORE, in consideration of the foregoing, the premises, and the mutual covenants and agreements set forth below and in the Purchase Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

1.1           Certain Defined Terms. As used in this Agreement:

1.1.1           “Affiliate” means (a) any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, or (b) any Person in which Restricted Party is an officer, director, employee, manager, advisor, consultant or broker.  For purposes of this definition, “control” of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities or ownership interests, by contract or otherwise, and specifically with respect to a corporation, partnership or limited liability company, means direct or indirect ownership of more than twenty percent (20%) of the voting securities in such corporation or of the voting interest in a partnership or limited liability company.

1.1.2           “Business” means the business of transporting, storing, processing and refining petroleum products, crudes and used lubricants.

1.1.3           “Competition” means directly or indirectly conducting, controlling or participating in the Business, either independently or in association with any Affiliate of the Restricted Parties, excluding any activities conducted by the Protected Party.

1.1.4           “Person” means any individual, corporation, partnership, limited liability company, trust, estate or any other entity.

1.1.5           “Protected Area” means the States of Alabama, Arkansas, Arizona, California, Florida, Georgia, Iowa, Illinois, Kentucky, Louisiana, Michigan, North Carolina, Nevada, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee and Texas.

1.1.6           “Term” means the period beginning as of the date hereof and ending on the fifth anniversary of the date hereof, inclusive of that date.

1.2           Other Defined Terms.  Capitalized terms used herein but not defined have the meanings assigned to such terms in the Purchase Agreement.

ARTICLE II

NON-COMPETITION

2.1           Covenant Not to Compete.  Each Restricted Party agrees that during the Term, neither such Restricted Party nor any of its Affiliates shall directly or indirectly, for any Restricted Party’s or its respective Affiliate’s account, engage (or assist any other Person) in Competition with the Protected Party or any Affiliate of the Protected Party in the Protected Area or enter into discussions or negotiations to do any of the foregoing.  Notwithstanding anything herein to the contrary, the Parties acknowledge and agree that the Restricted Parties may own or hold, as a passive investment, not more than two percent (2%) of the outstanding securities of any Person engaged in the Business in the Protected Area if the securities of such Person are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended.

2.2           Affiliates of Restricted Parties.  At all times during the Term of this Agreement, each Restricted Party shall cause its Affiliates to comply with the terms of this Agreement as if such Affiliates were a “Restricted Party” under this Agreement.

ARTICLE III

NON-SOLICITATION

3.1           Non-Solicitation.  Each Restricted Party agrees that during the Term, neither such Restricted Party nor any of its Affiliates shall: (a) solicit, induce or attempt to induce, persuade or entice any employee of Target or its Subsidiaries that was an employee of Target or its Subsidiaries immediately prior to the Protected Party’s purchase of the Units and remained an employee of Target or its Subsidiaries immediately after the Protected Party’s purchase of the Units to leave such Person’s employ to work for a competitor of any such Person in the same or similar capacity as the employee worked for Target or its Subsidiaries at the time the Protected Party purchased the Units, provided, however, that this restriction shall not apply to any solicitations contained in an advertisement directed generally to the public or the trade; or (b) solicit, induce or attempt to induce any supplier of Target or its Subsidiaries who provided services to Target or its Subsidiaries in the twelve-month period immediately preceding the date hereof, to terminate, or otherwise alter, its relationship with Target or its Subsidiaries.  If any Restricted Party or any of its Affiliates is found to have breached any promise made in this Agreement, the Term shall automatically be extended by the period of time for which such Person was in breach so that the Protected Party is provided the benefit of the full Term.

ARTICLE IV

RELIEF

4.1           Restrictions Reasonable.  Each Restricted Party acknowledges that the Term, the Protected Area and the nature of the restrictions agreed upon pursuant to this Agreement are reasonable and necessary for the protection of the Protected Party and its Affiliates.  It is expressly understood that if a court of competent jurisdiction shall find the foregoing restrictive covenants to be invalid or unenforceable by reason of being too broad in scope, then any or all of such invalid or unenforceable provisions shall be amended by said court so as to cause said restrictive covenant to be valid and enforceable to the fullest extent permitted by law.

4.2           Injunctive Relief.  The Restricted Parties agree and acknowledge that a remedy at law for any breach or attempted breach of this Agreement hereof will be inadequate and that any such breach or attempted breach will result in irreparable harm to the Protected Party and its Affiliates for which no adequate remedy at law exists.  Accordingly, the Protected Party shall, in addition to any other remedy that may be available, be entitled to obtain injunctive relief and specific performance, including temporary restraining orders, preliminary injunctions and permanent injunctions, requiring compliance with the terms of this Agreement.

4.3           Attorney’s Fees.  If any suit or other action is brought with respect to the interpretation or enforcement of this Agreement, the prevailing Party shall be entitled to receive, among other remedies, reimbursement for its reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees.

ARTICLE V

GENERAL TERMS

5.1           Acknowledgement.  The Restricted Parties acknowledge and agree that this Agreement, including the rights, covenants, restrictions and remedies set forth in ARTICLE II, ARTICLE III and ARTICLE IV above, (a) are ancillary to and part of the consummation of the transactions described in the Purchase Agreement, (b) contain reasonable limitations as to time, geographical area and scope of activity, (c) do not impose a greater restraint than is necessary to protect the goodwill and other business interests in and to the Units and the Business transferred at Closing by the Sellers under the terms of the Purchase Agreement, (d) comply with and are enforceable as of the date hereof under Section 15.50 et. seq. of the Texas Business and Commerce Code and (e) are an essential element of Buyer’s agreeing to acquire the Units and to pay the Purchase Price directly or indirectly to each Restricted Party as set forth in the Purchase Agreement, and that Buyer would not have done so but for the agreement by each Restricted Party to comply with the terms and provisions hereof.  The Restricted Parties agree and acknowledge that on and after the date hereof they have and shall derive substantial direct and indirect benefit from the transaction contemplated by the Purchase Agreement, including the direct or indirect receipt of such Restricted Parties’ percentage share of the Purchase Price.

5.2           Governing Law.  All matters relating to the interpretation, construction, validity and enforcement of this Agreement shall be governed by and construed in accordance with the domestic Laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than the State of Texas.

5.3           Consent to Jurisdiction and Service of Process.  The Parties submit to the exclusive jurisdiction of the state courts located in Houston, Texas or the courts of the United States located in Houston, Texas in respect of the interpretation and enforcement of the provisions of this Agreement and any related agreement, certificate or other document delivered in connection herewith and by this Agreement waive, and agree not to assert, any defense, in any Action for the interpretation or enforcement of this Agreement and any related agreement, certificate or other document delivered in connection herewith, that they are not subject thereto or that such Action may not be brought or is not maintainable in such courts or that this Agreement may not be enforced in or by such courts or that their property is exempt or immune from execution, that the Action is brought in an inconvenient forum, or that the venue of the Action is improper.  Service of process with respect thereto may be made upon any Party by mailing a copy thereof by registered or certified mail, postage prepaid, to such Party at its address as provided in Section 5.8.

5.4           Waiver of Jury Trial.  Each Party acknowledges and agrees that any controversy that may arise under this Agreement is likely to involve complicated and difficult issues, and therefore each such Party herein irrevocably and unconditionally waives any right such Party may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated in this Agreement.  Each Party certifies and acknowledges that (i) no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) such Party understands and has considered the implications of this waiver, (iii) such Party makes this waiver voluntarily, and (iv) such Party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 5.4.

5.5           Non-Circumvention.   No Restricted Party or any Affiliate of any Restricted Party shall enter into any agreement, contract or arrangement with any Affiliate or third party with respect to the State of Texas or take any other action or enter into or cause an Affiliate to enter into any alternative transaction with the purpose of circumventing the intent and obligations of the Parties hereunder.

5.6           Entire Agreement.  This Agreement, the Purchase Agreement and the other Transaction Documents constitute the entire understanding among the Parties, their respective members, partners, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all written or oral negotiations and discussions and prior agreements and understandings relating to such subject matter.

5.7           Binding Effect.  This Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respective successors and assigns.

5.8           Notices.  All notices and other communications required under this Agreement shall (unless otherwise specifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service which provides a receipt, by telecopier (with receipt acknowledged), or by registered or certified mail (postage prepaid), at the following addresses:

If to the Restricted Parties:

c/o Vertex Holdings, L.P.

1331 Gemini Street, Suite 250

Houston, TX 77058

Facsimile:  (281) 486-0217

Attention:  Benjamin P. Cowart and Chris Carlson

If to the Protected Party:

Vertex Energy, Inc.

1331 Gemini Street, Suite 250

Houston, TX 77058

Facsimile:  (281) 486-0217

Attention:  David L. Phillips, Director and Chairman,

Related Party Transaction Committee

5.9           Amendments and Waivers.  Except for waivers specifically provided for in this Agreement, this Agreement may not be modified or amended nor any rights hereunder waived except by an instrument in writing signed by all Parties that specifically references this Agreement, states that it is intended to modify or amend this Agreement or waive a right hereunder and specifies the provision(s) to be modified, amended or waived.  No waiver of, or consent to a change in, any provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

5.10           Severability.  The Parties hereby expressly agree and contract that it is not the intention of any Party to violate any public policy, statutory or common law, and that if any sentence, paragraph, clause or combination of the same of this Agreement is in violation of the law of any state where applicable, such sentence, paragraph, clause or combination of same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph and this Agreement shall remain binding on the Parties to make the covenants of this Agreement binding only to the extent that it may be lawfully done under existing applicable laws.  In the event that any part of any covenant of this Agreement is determined by a court of law to be overly broad thereby making the covenant unenforceable, the Parties agree, and it is their desire, that such court shall substitute a judicially enforceable limitation in its place, and that as so modified the covenant shall be binding upon the Parties as if originally set forth herein.

5.11           Counterpart Execution.  This Agreement may be executed in counterparts, all of which are identical and all of which constitute one and the same instrument.  It shall not be necessary for the Protected Party and the Restricted Parties to sign the same counterpart.  Facsimile copies of signatures shall constitute original signatures for all purposes of this Agreement and any enforcement hereof.

5.12           Interpretation.  In this Agreement: (a) captions are for convenience only and shall not be considered a part of, or affect the construction or interpretation of, any provision of this Agreement; (b) references to the singular includes the plural, and vice versa; (c) reference to any Article or Section means an Article or Section of this Agreement; (d) unless expressly provided to the contrary, “hereunder”, “hereof”, “herein” and words of similar import are references to this Agreement as a whole and not any particular Section or other provision of this Agreement; and (e) “include” and “including” shall mean include or including without limiting the generality of the description preceding such term.

[Signature pages follow.]

IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as of the date set forth above.

RESTRICTED PARTIES:

VERTEX HOLDINGS, L.P., a Texas limited partnership

By:           VTX, Inc., a Texas corporation, its general

 partner

By:           /s/ Benjamin P. Cowart

Name:      Benjamin P. Cowart, President

VTX, INC., a Texas corporation

By:           /s/ Benjamin P. Cowart

Name:      Benjamin P. Cowart, President

B & S COWART FAMILY L.P., a Texas limited partnership

By: B&S Cowart Investments, LC, a Texas limited liability company, its general partner

By:           /s/ Benjamin P. Cowart

Name:      Benjamin P. Cowart, Manager

BENJAMIN P. COWART

/s/ Benjamin P. Cowart

Benjamin P. Cowart

CHRIS CARLSON

/s/ Chris Carlson

Chris Carlson

GREG WALLACE

/s/ Greg Wallace

Greg Wallace

PROTECTED PARTY:

VERTEX ENERGY, INC., a Nevada corporation

By: /s/ David L. Phillips              

Name: David L. Phillips

Director and Chairman,

Related Party Transaction Committee

EX-10.20

Exhibit 10.20

SECOND ADDENDUM TO

EXECUTIVE EMPLOYMENT AGREEMENT

This Second Addendum to Executive Employment Agreement (this “Agreement”) dated to be effective as of August 31, 2012 (the “Effective Date”), is by and between Vertex Energy, Inc., a Nevada corporation (“Vertex”) and Benjamin P. Cowart, an individual(“Executive”), each referred to herein as a “Party” and collectively the “Parties”.

W I T N E S S E T H:

WHEREAS, the Parties previously entered into an Executive Employment Agreement (the “Executive Employment Agreement”) dated as of February 20, 2009, as amended by that certain First Addendum to Executive Employment Agreement dated to be effective as of December 15, 2010;

WHEREAS, pursuant to that certain Unit Purchase Agreement dated as of August 14, 2012 (the “Purchase Agreement”) by and among Vertex, Vertex Holdings, L.P., a Texas limited partnership (“Holdings”), B&S Cowart Family, L.P., a Texas liability partnership (“B&S LP” and together with Holdings, the “Sellers”), and Vertex Acquisition Sub, LLC, a Nevada limited liability company (“Target”), Vertex agreed to purchase from the Sellers all of the issued and outstanding units representing membership interests (the “Units”) of Target;

WHEREAS, it is a condition to Vertex’s obligation under the Purchase Agreement to purchase the Units that Vertex and Executive shall have executed and delivered this Agreement;

WHEREAS, Executive will derive substantial direct and indirect benefits from the transactions contemplated in the Purchase Agreement, including Executive’s indirect percentage share of the Purchase Price (as defined in the Purchase Agreement);

WHEREAS, capitalized terms used herein shall have the meaning ascribed to such terms in the Executive Employment Agreement, unless otherwise stated herein or the context requires otherwise; and

WHEREAS, the Parties desire to enter into this Agreement to modify certain provisions, terms and conditions to the Executive Employment Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, and considerations herein contained, and other consideration, which consideration the Parties hereby acknowledge and confirm the sufficiency thereof, the Parties hereto agree as follows:

1.           Amendment to Executive Employment Agreement.

(a)           Section 1.3 of the Executive Employment Agreement is hereby amended by adding the following sentence at the end of such section:

“In the event that any covenant contained in this Agreement should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable law.”

(b)           Section 1.4 of the Executive Employment Agreement is hereby amended and restated in its entirety to read as follows:

“1.4.           Other Activities. Subject to the foregoing prohibition and the terms and conditions of that certain Non-Competition and Non-Solicitation Agreement dated as of August 31, 2012 by and among Vertex, Vertex Holdings, L.P., B&S Cowart Family, L.P., Chris Carlson and Executive, and provided such services or investments do not violate any applicable law, regulation or order, or interfere in any way with the faithful and diligent performance by Executive of the services to the Company otherwise required or contemplated by this Agreement, the Company expressly acknowledges that Executive may:

1.4.1           make and manage personal business investments of Executive’s choice without consulting the Board;

1.4.2           serve in any capacity with any non-profit civic, educational or charitable organization; and

1.4.3           spend up to a total of twenty (20) hours per month in fulfilling his duties as officer, director and/or manager of any of the private companies with whom Executive is currently affiliated, namely Vertex Holdings, L.P., VTX, Inc., Arrow, Vertex Residual Management, B&S Cowart Family, L.P.,  Vertex Green, LP and Vertex Processing, pursuant to Exhibit A.”

(c)           The Executive Employment Agreement is hereby amended by replacing Exhibit A thereto with Exhibit A to this Agreement.

2.           Reconfirmation of Executive Employment Agreement.  The Parties hereby reaffirm all terms, conditions, covenants, representations and warranties made in the Executive Employment Agreement, to the extent the same are not amended hereby.

3.           Effect of Agreement.  Upon the effectiveness of this Agreement, each reference in the Executive Employment Agreement to “Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to such Executive Employment Agreement as modified or waived hereby.

4.           Executive Employment Agreement to Continue in Full Force and Effect.  Except as specifically modified herein, the Executive Employment Agreement and the terms and conditions thereof shall remain in full force and effect.

5.           Effect of Facsimile and Photocopied Signatures.  This Agreement may be executed in several counterparts, each of which is an original.  It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.  A copy of this Agreement signed by one Party and faxed to another Party shall be deemed to have been executed and delivered by the signing Party as though an original.  A photocopy of this Agreement shall be effective as an original for all purposes.

[Signature Page Follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be effective as of the Effective Date.

VERTEX:

VERTEX ENERGY, INC., a Nevada corporation

By:           /s/ David L. Phillips                                     

Name:      David L. Phillips

Director and Chairman,

Related Party Transaction Committee

EXECUTIVE:

/s/ Benjamin P. Cowart

Benjamin P. Cowart

EXHIBIT A

It is acknowledged and agreed that the following actions, business transactions, agreements and undertakings may be undertaken by Executive:

· Executive can serve as an officer, director or manager of any of the private companies with whom he is currently affiliated, including Vertex Holdings, L.P., VTX, Inc., Arrow, Vertex Residual Management, B&S Cowart Family, L.P., Vertex Green, LP or Vertex Processing (collectively, the “Affiliated Companies”);

· Executive may own an interest in or shares or membership units in any of the Affiliated Companies. Executive may earn a fee for providing services to the Affiliated Companies;

· Any Affiliated Party may sell products, equipment or materials to the Company on terms mutually agreeable between the Company and such Affiliated Party;

· Vertex Residual Management may contract with the Company or with Vertex LP on behalf of the Company to provide the Company environmental compliance, regulation and oversight services on terms mutually agreeable between the parties;

· Vertex Green may focus on the development of renewable energy such as biodiesel, which entity shall be outside of the Company; and

· Any other actions, business transactions, agreements and undertakings which the Executive has received approval of a majority of the independent members of the Board of Directors to enter into and/or undertake.

EX-10.21

Exhibit 10.21

FIRST ADDENDUM TO

EXECUTIVE EMPLOYMENT AGREEMENT

This First Addendum to Amended and Restated Executive Employment Agreement (this “Agreement”) dated to be effective as of August 31, 2012 (the “Effective Date”), is by and between Vertex Energy, Inc., a Nevada corporation (“Vertex”) and Chris Carlson, an individual(“Executive”), each referred to herein as a “Party” and collectively the “Parties”.

W I T N E S S E T H:

WHEREAS, the Parties previously entered into an Amended and Restated Executive Employment Agreement (the “Executive Employment Agreement”) on March 29, 2011, effective as of April 1, 2010;

WHEREAS, pursuant to that certain Unit Purchase Agreement dated as of August 14, 2012 (the “Purchase Agreement”) by and among Vertex, Vertex Holdings, L.P., a Texas limited partnership (“Holdings”), B&S Cowart Family, L.P., a Texas liability partnership (“B&S LP” and together with Holdings, the “Sellers”), and Vertex Acquisition Sub, LLC, a Nevada limited liability company (“Target”), Vertex agreed to purchase from the Sellers all of the issued and outstanding units representing membership interests (the “Units”) of Target;

WHEREAS, it is a condition to Vertex’s obligation under the Purchase Agreement to purchase the Units that Vertex and Executive shall have executed and delivered this Agreement;

WHEREAS, Executive will derive substantial direct and indirect benefits from the transactions contemplated in the Purchase Agreement, including Executive’s indirect percentage share of the Purchase Price (as defined in the Purchase Agreement);

WHEREAS, capitalized terms used herein shall have the meaning ascribed to such terms in the Executive Employment Agreement, unless otherwise stated herein or the context requires otherwise; and

WHEREAS, the Parties desire to enter into this Agreement to modify certain provisions, terms and conditions to the Executive Employment Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, and considerations herein contained, and other consideration, which consideration the Parties hereby acknowledge and confirm the sufficiency thereof, the Parties hereto agree as follows:

1.Amendment to Executive Employment Agreement.

(a)Section 1.3 of the Executive Employment Agreement is hereby amended by adding the following sentence at the end of such section:

“In the event that any covenant contained in this Agreement should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable law.”

(b)Section 1.4 of the Executive Employment Agreement is hereby amended and restated in its entirety to read as follows:

“1.4.           Other Activities. Subject to the foregoing prohibition and the terms and conditions of that certain Non-Competition and Non-Solicitation Agreement dated as of August 31, 2012 by and among Vertex, Vertex Holdings, L.P., B&S Cowart Family, L.P., Benjamin P. Cowart and Executive, and provided such services or investments do not violate any applicable law, regulation or order, or interfere in any way with the faithful and diligent performance by Executive of the services to the Company otherwise required or contemplated by this Agreement, the Company expressly acknowledges that Executive may:

1.4.1           make and manage personal business investments of Executive’s choice without consulting the Board;

1.4.2           serve in any capacity with any non-profit civic, educational or charitable organization; and

1.4.3           spend up to a total of twenty (20) hours per month in fulfilling his duties as officer, director and/or manager of any of the private companies with whom Executive is currently affiliated, namely Vertex Holdings, L.P., VTX, Inc., Arrow, Vertex Residual Management, B&S Cowart Family, L.P.,  Vertex Green, LP and Vertex Processing, pursuant to Exhibit A.”

(c)The Executive Employment Agreement is hereby amended by replacing Exhibit A thereto with Exhibit A to this Agreement.

2.Reconfirmation of Executive Employment Agreement.  The Parties hereby reaffirm all terms, conditions, covenants, representations and warranties made in the Executive Employment Agreement, to the extent the same are not amended hereby.

3.Effect of Agreement.  Upon the effectiveness of this Agreement, each reference in the Executive Employment Agreement to “Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to such Executive Employment Agreement as modified or waived hereby.

4.Executive Employment Agreement to Continue in Full Force and Effect.  Except as specifically modified herein, the Executive Employment Agreement and the terms and conditions thereof shall remain in full force and effect.

5.Effect of Facsimile and Photocopied Signatures.  This Agreement may be executed in several counterparts, each of which is an original.  It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.  A copy of this Agreement signed by one Party and faxed to another Party shall be deemed to have been executed and delivered by the signing Party as though an original.  A photocopy of this Agreement shall be effective as an original for all purposes.

[Signature Page Follows.]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be effective as of the Effective Date.

	VERTEX: VERTEX ENERGY, INC., a Nevada corporation
By: Name:	/s/ David L. Phillips                              David L. Phillips Director and Chairman, Related Party Transaction Committee EXECUTIVE: /s/ Chris Carlson Chris Carlson

EXHIBIT A

It is acknowledged and agreed that the following actions, business transactions, agreements and undertakings may be undertaken by Executive:

· Executive can serve as an officer, director or manager of any of the private companies with whom he is currently affiliated, including Vertex Holdings, L.P., VTX, Inc., Arrow, Vertex Residual Management, B&S Cowart Family, L.P., Vertex Green, LP or Vertex Processing (collectively, the “Affiliated Companies”);

· Executive may own an interest in or shares or membership units in any of the Affiliated Companies. Executive may earn a fee for providing services to the Affiliated Companies;

· Any Affiliated Party may sell products, equipment or materials to the Company on terms mutually agreeable between the Company and such Affiliated Party;

· Vertex Residual Management may contract with the Company or with Vertex LP on behalf of the Company to provide the Company environmental compliance, regulation and oversight services on terms mutually agreeable between the parties;

· Vertex Green may focus on the development of renewable energy such as biodiesel, which entity shall be outside of the Company; and

· Any other actions, business transactions, agreements and undertakings which the Executive has received approval of a majority of the independent members of the Board of Directors to enter into and/or undertake.

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin P. Cowart, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Vertex Energy, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2012	By:	/s/ Benjamin P. Cowart
		Benjamin P. Cowart Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Chris Carlson, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Vertex Energy, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2012
	By:	/s/ Chris Carlson
		Chris Carlson
		Chief Financial Officer (Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO18 U.S.C. SS. 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission (the "Report"), I, Benjamin P. Cowart, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

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

November 13, 2012	/s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO18 U.S.C. SS. 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission (the "Report"), I, Chris Carlson, Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

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

November 13, 2012	/s/ Chris Carlson
	Chris Carlson
	Chief Financial Officer (Principal Accounting Officer)

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SEGMENT REPORTING (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Revenues	$ 36,195,570	$ 30,301,326	$ 102,316,702	$ 78,401,089
Income from operations	418,878	1,034,818	1,940,709	3,738,561
Total Assets	50,580,833		50,580,833		16,733,971
Black Oil
Revenues	7,317,484	6,253,317	25,841,948	15,101,466
Income from operations	(1,401,764)	290,823	(830,048)	330,072
Total Assets	22,620,722		22,620,722
Refining & Marketing
Revenues	28,878,086	24,048,009	76,474,754	63,299,623
Income from operations	1,820,642	743,995	2,770,757	3,408,489
Total Assets	$ 27,960,111		$ 27,960,111

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PREFERRED STOCK (Details Narrative) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Series A Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	3,133,147	4,426,639
Preferred stock, shares outstanding	3,133,147	4,426,639
Series B Preferred Stock
Preferred stock, shares authorized	2,000,000

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Customer 1
Revenue, percentage	40.00%	48.00%
Receivables, percentage	0.00%	46.00%
Customer 2
Revenue, percentage	14.00%	12.00%
Receivables, percentage	11.00%	16.00%
Customer 3
Revenue, percentage	5.00%	10.00%
Receivables, percentage	4.00%	7.00%
Customer 4
Revenue, percentage	11.00%	10.00%
Receivables, percentage	1.00%	0.00%
Customer 5
Revenue, percentage	4.00%	1.00%
Receivables, percentage	0.00%	15.00%
Customer 6
Revenue, percentage	15.00%	5.00%
Receivables, percentage	56.00%	13.00%

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ACQUISITION (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2012
Estimated Cost (in thousands)	$ 16,255
Customer relations
Estimated Cost (in thousands)	343
Useful life (years)	5 years
Vendor relations
Estimated Cost (in thousands)	4,064
Useful life (years)	10 years
H&H Oil Trademark/Trade name
Estimated Cost (in thousands)	775
Useful life (years)	16 years
TCEP Technology/Patent
Estimated Cost (in thousands)	11,000
Useful life (years)	15 years
Non-competes
Estimated Cost (in thousands)	$ 73
Useful life (years)	3 years

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4. NOTES PAYABLE

In September 2010, the Company entered into a loan agreement and obtained a line of credit with Bank of America Merrill Lynch. On March 30, 2012, Bank of America renewed the line of credit through March 31, 2014. The balance on the line of credit was $0 at September 30, 2012. The loan agreement is guaranteed by CMT, a related party of the Company.  The most restrictive covenants of the loan require an interest coverage ratio of at least 1.5 to 1 and a Funded Debt to EBITDA ratio not to exceed 2 to 1. This line of credit was replaced with the new agreement dated September 2012, described below.

In September 2012, the Company entered into a credit agreement with Bank of America. Pursuant to the agreement, Bank of America agreed to loan the Company $8,500,000 in the form of a term loan and the lender agreed to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, which is expected to be used for feedstock purchases and general corporate purposes. The line of credit bears interest at the option of the Company of either the lender's prime commercial lending rate in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the revolving note is due and payable monthly in arrears and all amounts outstanding under the revolving note are due and payable on August 31, 2014.

Amounts borrowed under the term note bear interest at the option of the Company of either the lender's prime commercial lending rate then in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the term note is due and payable monthly in arrears and all amounts outstanding under the term note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,666.67 are due and payable on the term note monthly in arrears on the last day of each month and continuing until the maturity date.

The financing arrangement discussed above is secured by all of the assets of the Company.  The loan contains certain restrictive covenants including a Fixed Charge Coverage Ratio, as defined in the agreement , of at least 1.25 to 1.00, Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00 and a Minimum Net Worth, as defined in the agreement, of at least $10,000,000. The Company believes it was in compliance of all aspects of the agreement at September 30, 2012.

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STOCK BASED COMPENSATION (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2012
Notes to Financial Statements
Outstanding, beginning - Shares	1,245,311
Warrants exercised - Shares	(12,500)
Warrants cancelled/forfeited/expired - Shares	(11,377)
Outstanding, ending - Shares	1,221,434
Vested - Shares	1,198,532
Exercisable - Shares	1,198,532
Outstanding, beginning - Weighted Average Exercise Price	$ 12.48
Warrants exercised - Weighted Average Exercise Price	$ (1.75)
Warrants cancelled/forfeited/expired - Weighted Average Exercise Price	$ (25.00)
Outstanding, ending - Weighted Average Exercise Price	$ 12.47
Vested - Weighted Average Exercise Price	$ 12.69
Exercisable - Weighted Average Exercise Price	$ 12.69
Outstanding, beginning - Weighted Average Remaining Contractual Life (in Years)	1 year 5 months
Warrants exercised - Weighted Average Remaining Contractual Life (in Years)	3 years 6 months
Outstanding, ending - Weighted Average Remaining Contractual Life (in Years)	0 years 10 months
Vested - Weighted Average Remaining Contractual Life (in Years)	0 years 10 months
Exercisable - Weighted Average Remaining Contractual Life (in Years)	0 years 10 months
Outstanding, beginning - Grant Date Fair Value	$ 142,065
Warrants exercised - Grant Date Fair Value	$ (5,601)
Warrants cancelled/forfeited/expired - Grant Date Fair Value	$ (652)
Outstanding, ending - Grant Date Fair Value	$ 135,812
Vested - Grant Date Fair Value	$ 133,722
Exercisable - Grant Date Fair Value	$ 133,722

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STOCK BASED COMPENSATION (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Notes to Financial Statements
Outstanding, beginning - Shares	3,073,334
Options exercised - Shares	(60,000)
Options cancelled/forfeited/expired - Shares	(294,167)
Options granted - Shares	225,000
Outstanding, ending - Shares	2,944,167
Vested - Shares	2,216,049
Exercisable - Shares	2,216,049
Outstanding, beginning - Weighted Average Exercise Price	$ 5.46
Options exercised - Weighted Average Exercise Price	$ (1.55)
Options cancelled/forfeited/expired - Weighted Average Exercise Price	$ (1.21)
Options granted - Weighted Average Exercise Price	$ 1.91
Outstanding, ending - Weighted Average Exercise Price	$ 5.69
Vested - Weighted Average Exercise Price	$ 6.96
Exercisable - Weighted Average Exercise Price	$ 6.96
Outstanding, beginning - Weighted Average Remaining Contractual Life (in Years)	7 years
Options granted - Weighted Average Remaining Contractual Life (in Years)	10 years
Outstanding, ending - Weighted Average Remaining Contractual Life (in Years)	6 years 9 months
Vested - Weighted Average Remaining Contractual Life (in Years)	6 years 1 month
Exercisable - Weighted Average Remaining Contractual Life (in Years)	6 years 1 month
Outstanding, beginning - Grant Date Fair Value	$ 990,995
Options exercised - Grant Date Fair Value	(3,439)
Options cancelled/forfeited/expired - Grant Date Fair Value	$ (38,878)
Options granted - Grant Date Fair Value	$ 197,146
Outstanding, ending - Grant Date Fair Value	1,145,824
Vested - Grant Date Fair Value	661,966
Exercisable - Grant Date Fair Value	$ 661,966

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EARNINGS (LOSS) PER SHARE (Details Narrative)	9 Months Ended
	Sep. 30, 2012
Notes to Financial Statements
Options to purchase	1,769,869
Warrants to purchase	1,065,203

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EARNINGS (LOSS) PER SHARE (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Notes to Financial Statements
Income available to common shareholders			$ 3,520,916	$ 3,635,061
Weighted-average shares outstanding	12,255,372	9,187,227	10,085,206	8,722,642
Basic earnings per share	$ 0.17	$ 0.11	$ 0.35	$ 0.42
Income	$ 2,105,668	$ 1,028,225	$ 3,520,916	$ 3,635,061
Effect of dilutive securities
Stock options and warrants			1,140,337	1,329,073
Preferred stock			3,133,147	4,452,167
Diluted weighted-average shares outstanding	16,484,023	15,851,393	14,358,691	14,503,882
Diluted earnings per share	$ 0.13	$ 0.06	$ 0.25	$ 0.25

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

NOTE 3. CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

The Company has concentrated credit risk for cash by maintaining deposits in one bank.  These balances are insured by the Federal Deposit Insurance Corporation up to $250,000.  From time to time during the nine months ended September 30, 2012, the Company’s cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.

At September 30, 2012 and 2011 and for each of the nine months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2012		2011
	% of	% of	% of	% of
	Revenues	Receivables	Revenues	Receivables
Customer 1	40%	0%	48%	46%
Customer 2	14%	11%	12%	16%
Customer 3	5%	4%	10%	7%
Customer 4	11%	1%	10%	0%
Customer 5	4%	0%	1%	15%
Customer 6	15%	56%	5%	13%

The Company purchases goods and services from two companies that represented 11% and 11% of total purchases for the nine months ended September 30, 2012.

The Company has had various debt facilities available for use, of which there was $6,000,000 and $1,000,000 outstanding as of September 30, 2012 and 2011, respectively. See Note 4 for further details.

The Company’s revenue, profitability and future rate of growth are substantially dependent on prevailing prices for petroleum-based products.  Historically, the energy markets have been very volatile, and there can be no assurance that these prices will not be subject to wide fluctuations in the future.  A substantial or extended decline in such prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and access to capital and on the quantities of petroleum-based product that the Company can economically produce.

The Company, in its normal course of business, is involved in various other claims and legal action.  In the opinion of management, the outcome of these claims and actions will not have a material adverse impact upon the financial position of the Company.

We intend to take advantage of any potential tax benefits related to net operating losses (“NOLs”) acquired as part of the Company’s April 2009 merger with World Waste Technologies, Inc. (“World Waste”).  As a result of the merger we acquired approximately $42 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

It is possible that the Company may be unable to use these NOLs in their entirety.  The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Waste’s historical business, and the extent of the Company’s subsequent income. As of December 31, 2011, the Company had utilized approximately $6.6 million of these NOLs leaving approximately $35.4 million of potential NOLs of which we expect to utilize approximately $2 million for the nine months ended September 30, 2012. The Company recorded a change in the valuation allowance as of September 30, 2012 for approximately $2,378,000.

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COMMON STOCK (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	15,315,208	9,414,926
Common stock, shares outstanding	15,315,208	9,414,926
Preferred stock converted to common stock, shares	1,293,492
Warrants and options exercised, shares	57,500
Warrants and options exercised, value	$ 93,875
Options to purchase shares, exercised gross	15,000
Options to purchase shares, exercised net	3,835
Options to purchase shares, value	$ 23,250
Restricted shares issued for acquisition	4,545,455

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SUBSEQUENT EVENTS (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012
Line of credit, available	$ 10,000,000
Line of credit, balance	0
Preferred stock converted to common stock, shares	1,293,492
Warrants and options exercised, shares	57,500
Warrants and options exercised, value	93,875
Subsequent Events
Line of credit, available	10,000,000
Line of credit, balance	5,500,000
Line of credit, remaining capacity	4,500,000
Preferred stock converted to common stock, shares	1,432,082
Warrants and options exercised, shares	5,000
Warrants and options exercised, value	$ 2,250

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Current assets
Cash and cash equivalents	$ 1,151,016	$ 675,188
Accounts receivable, net	8,362,742	5,436,006
Accounts receivable- other	127,162
Accounts receivable- related party		2,459
Inventory	6,507,217	6,408,780
Prepaid expenses and other current assets	221,817	151,821
Total current assets	16,369,954	12,674,254
Noncurrent assets
Goodwill	3,515,977
Licensing agreement, net		1,929,549
Fixed assets, net	10,770,902	124,168
Intangible assets	16,255,000
Deferred federal income tax	3,669,000	2,006,000
Total noncurrent assets	34,210,879	4,059,717
TOTAL ASSETS	50,580,833	16,733,971
Current liabilities
Accounts payable and accrued expenses	10,055,679	6,464,193
Accounts payable-related party	917,519	620,724
Current portion of long-term debt	1,748,023
Deposits		235,557
Total current liabilities	12,721,221	7,320,474
Long-term liabilities
Long-term debt	6,860,948
Contingent consideration	4,711,000
Line of credit	6,000,000
Deferred federal income tax	100,000	76,000
Total liabilities	30,393,169	7,396,474
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized Series A Convertible Preferred stock, $0.001 par value, 5,000,000 authorized and 3,133,147 and 4,426,639 issued and outstanding at September 30, 2012 and December 31, 2011, respectively	3,133	4,427
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 15,315,208 and 9,414,926 issued and outstanding at September 30, 2012 and December 31, 2011, respectively	15,315	9,415
Additional paid-in capital	10,644,033	3,319,388
Retained earnings	9,525,183	6,004,267
Total stockholders' equity	20,187,664	9,337,497
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 50,580,833	$ 16,733,971

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2012

Basis Of Presentation

BASIS OF PRESENTATION

NOTE 1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements of Vertex Energy, Inc. (the “Company,” or “Vertex Energy”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual consolidated financial statements as filed with the SEC on Form 10-K on March 29, 2012 (the “Form 10-K”).  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform to current period presentation. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year 2011 as reported in Form 10-K, have been omitted.

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ACQUISITION (Details Narrative) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Notes to Financial Statements
Acquisition, Percent acquired	100.00%		100.00%
Acquisition, cash paid	$ 16,500,000		$ 16,500,000
Restricted shares issued for acquisition			4,545,455
Acquisition related expenses	$ 1,154,612		$ 1,154,612

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Company reportable segments

NINE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	25,841,948		$	76,474,754	$	102,316,702
Income from operations	$	(830,048	)	$	2,770,757	$	1,940,709
Total Assets	$	22,620,722		$	27,960,111	$	50,580,833
NINE MONTHS ENDED SEPTEMBER 30, 2011
				Refining &
	Black Oil			Marketing		Total
Revenues	$	15,101,466		$	63,299,623	$	78,401,089
Income from operations	$	330,072		$	3,408,489	$	3,738,561

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	7,317,484		$	28,878,086	$	36,195,570
Income (loss) from operations	$	(1,401,764	)	$	1,820,642	$	418,878

THREE MONTHS ENDED SEPTEMBER 30, 2011
			Refining &
	Black Oil		Marketing		Total
Revenues	$	6,253,317	$	24,048,009	$	30,301,326
Income from operations	$	290,823	$	743,995	$	1,034,818

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ACQUISITION (Details) (USD $)	Aug. 31, 2012
Notes to Financial Statements
Cash and cash equivalents	$ 663
Accounts receivable	1,853
Inventory	13
Prepaid insurance	31
Property, plant and equipment	8,659
Land	1,995
Other assets	32
Intangible assets	16,255
Total identifiable net assets	29,501
Goodwill	958
Total purchase price	30,459
Total liabilities assumed	$ 2,698

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Notes to Financial Statements
FDIC insurance amount	$ 250,000
Percentage of purchases of goods and services	11.00%
Line of credit	6,000,000		1,000,000
Net operating losses acquired as a result of a merger	42,000,000
NOL utilized		6,600,000
NOL remaining balance		35,400,000
NOL expected to be utilized	2,000,000
Change in valuation allowance		$ 2,378,000

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RELATED PARTIES

9 Months Ended

Sep. 30, 2012

Related Parties

RELATED PARTIES

NOTE 2.  RELATED PARTIES

Prior to the Acquisition (described below in Note 10), the Company had numerous transactions with Vertex Holdings, L.P., formerly Vertex Energy, L.P. (also defined herein as the “Partnership” or “Vertex LP”), including the lease of the Partnership’s storage facility, subletting of office space, transportation of feedstock to re-refiners and the Company’s storage facility, and delivery from the Company’s re-refinery to end customers. The pricing under these contracts is with certain wholly-owned subsidiaries of the Partnership and is priced at market, and is reviewed periodically from time to time by the Board of Director’s Related Party Transaction committee.  The Related Party Transaction committee includes at least two independent directors and will review and pre-approve any and all related party transactions. See Note 10 for additional details on the Acquisition.

The consolidated financial statements include revenues from related parties of $0 and $17,978 and inventory purchases from related parties of $9,569,772 and $9,632,599 for the nine months ended September 30, 2012 and 2011, respectively.  The Company also incurred process costs of $6,198,582 and $5,204,117 for the nine months ended September 30, 2012 and 2011, respectively.  The costs arise from the Thermal Chemical Extraction Process (“TCEP”) operating agreement with CMT (which entity was acquired as part of the Acquisition), whereby we paid up to $0.40 per gallon of processing costs.  In the past, both parties have agreed to share increased costs.

The Company subleased office space from Vertex L.P. Rental payments under the lease were $6,600 per month and the lease was to expire in June 2013 (the lease was acquired as part of the Acquisition).

The Company leased approximately 30,000 barrels in storage capacity for its Black Oil division at Cedar Marine Terminal, located in Baytown, Texas.  The monthly lease expense was $22,500 and the lease expired in March 2011; however, the parties agreed to an extension of the lease with the same terms and conditions, through June 2012.  CMT was acquired as part of the Acquisition.

The Company leased approximately 45,000 barrels in storage capacity for its TCEP division at CMT, located in Baytown, Texas.  The monthly lease expense was $45,000 and the lease expired in March 2011; however, the parties agreed to an extension of the leases with the same terms and conditions, through August 2012, other than an increase in the monthly lease expense to $49,500 in consideration for an additional rental of 3,000 barrels of capacity. CMT was acquired as part of the Acquisition

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	15,315,208	9,414,926
Common stock, shares outstanding	15,315,208	9,414,926
Series A Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	3,133,147	4,426,639
Preferred stock, shares outstanding	3,133,147	4,426,639

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 12. SUBSEQUENT EVENTS

Subsequent to September 30, 2012, the available credit on the line of credit is $10,000,000.  As of November 9, 2012, the outstanding balance drawn on the line of credit is $5,500,000  leaving an available balance for draw downs of $4,500,000.

Subsequent to the nine months ended September 30, 2012 and through November 9, 2012, a total of 1,432,082 shares of the Company's Series A Preferred Stock were converted into shares of our common stock on a one-for-one basis and warrants and options to purchase 5,000 shares of the Company's common stock were exercised for cash proceeds of $2,250.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 13, 2012
Document And Entity Information
Entity Registrant Name	Vertex Energy Inc.
Entity Central Index Key	0000890447
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		16,743,290
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Company revenues and receivables - customer concentrations

	2012		2011
	% of	% of	% of	% of
	Revenues	Receivables	Revenues	Receivables
Customer 1	40%	0%	48%	46%
Customer 2	14%	11%	12%	16%
Customer 3	5%	4%	10%	7%
Customer 4	11%	1%	10%	0%
Customer 5	4%	0%	1%	15%
Customer 6	15%	56%	5%	13%

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Statement of Cash Flows [Abstract]
Revenues	$ 36,195,570	$ 30,301,326	$ 102,316,702	$ 78,383,111
Revenues - related parties				17,978
[Revenues]	36,195,570	30,301,326	102,316,702	78,401,089
Cost of revenues	33,011,934	28,268,785	95,497,261	71,632,067
Gross profit	3,183,636	2,032,541	6,819,441	6,769,022
Selling, general and administrative expenses (exclusive of acquisition related expenses)	1,610,146	997,723	3,724,120	3,030,461
Acquisition related expenses	1,154,612		1,154,612
Total selling, general and administrative expenses	2,764,758	997,723	4,878,732	3,030,461
Income from operations	418,878	1,034,818	1,940,709	3,738,561
Other income (expense)
Interest income	949		1,582
Interest expense	(28,972)	(3,593)	(29,016)	(57,811)
Total other income (expense)	(28,023)	(3,593)	(27,434)	(57,811)
Income before income tax	390,855	1,031,225	1,913,275	3,680,750
Income tax (expense) benefit	1,714,813	(3,000)	1,607,641	(45,689)
Net income	$ 2,105,668	$ 1,028,225	$ 3,520,916	$ 3,635,061
Earnings per common share
Basic	$ 0.17	$ 0.11	$ 0.35	$ 0.42
Diluted	$ 0.13	$ 0.06	$ 0.25	$ 0.25
Shares used in computing earnings per share
Basic	12,255,372	9,187,227	10,085,206	8,722,642
Diluted	16,484,023	15,851,393	14,358,691	14,503,882

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COMMON STOCK

9 Months Ended

Sep. 30, 2012

Common Stock

COMMON STOCK

NOTE 7. COMMON STOCK

The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2012, there were 15,315,208 common shares issued and outstanding.

During the nine months ending September 30, 2012, 1,293,492 shares of the Company's Series A Preferred Stock were converted into 1,293,492 shares of the Company's common stock; warrants and options to purchase 57,500 shares of our common stock were exercised for cash proceeds of $93,875; options to purchase 15,000 shares of common stock were exercised for a net of 3,835 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $23,250 in connection with such exercises) and 3,835 shares of common stock were issued to the option holder in connection with such exercises; and 4,545,455 restricted shares were issued as consideration for the Acquisition, described in Note 10.

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2012

Earnings per common share

EARNINGS (LOSS) PER SHARE

NOTE 6. EARNINGS (LOSS) PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the nine months ended September 30, 2012 includes the weighted average of common shares outstanding.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.  The calculation of diluted earnings per share for the nine months ended September 30, 2012 does not include options to purchase 1,769,869 shares and warrants to purchase 1,065,203 shares due to their anti-dilutive effect.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2012 and 2011:

	2012		2011
Basic Earnings per Share
Numerator:
Income  available to common shareholders	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Basic earnings per share	$	0.35	$	0.42
Diluted Earnings per Share
Numerator:
Income	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Effect of dilutive securities
Stock options and warrants		1,140,337		1,329,073
Preferred stock		3,133,147		4,452,167
Diluted weighted-average shares outstanding		14,358,691		14,503,882
Diluted earnings per share	$	0.25	$	0.25

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RELATED PARTIES (Details Narrative) (USD $)	3 Months Ended		9 Months Ended				3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Office Space	Sep. 30, 2012 Black Oil Storage facility bbl	Mar. 31, 2011 TCEP Storage facility bbl	Sep. 30, 2012 TCEP Storage facility bbl
Revenues from related parties				$ 17,978
Inventory purchases from related parties			9,569,772	9,632,599
Process costs incurred			6,198,582	5,204,117
Processing cost per gallon	0.40		0.40
Storage capacity of leased property						30,000	45,000
Monthly lease expense					$ 6,600	$ 22,500	$ 45,000	$ 49,500
Increase in leased property capacity								3,000

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STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2012

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

Stock option activity

Stock option activity for the nine months ended September 30, 2012 is summarized as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2011		3,073,334		$	5.46			7.00	$	990,995
Options exercised		(60,000	)		(1.55	)		-		(3,439	)
Options expired		(294,167	)		(1.21	)		-		(38,878	)
Options granted		225,000			1.91			10.00		197,146
Outstanding at September 30, 2012		2,944,167		$	5.69			6.75	$	1,145,824
Vested at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966
Exercisable at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966

Stock warrant activity

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 2012 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)			Grant Date Fair Value
Outstanding at December 31, 2011		1,245,311		$	12.48			1.41		$	142,065
Warrants exercised		(12,500	)		(1.75	)		(3.50	)		(5,601	)
Warrants cancelled/forfeited/expired		(11,377	)		(25.00	)		-			(652	)
Warrants at September 30, 2012		1,221,434		$	12.47			.90		$	135,812
Vested at September 30, 2012		1,198,532		$	12.69			.87		$	133,722
Exercisable at September 30, 2012		1,198,532		$	12.69			.87		$	133,722

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ACQUISITION

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

ACQUISITION

NOTE 10.  ACQUISITION

On September 11, 2012, but effective August 31, 2012, the Company acquired 100% of the outstanding equity interests of Vertex Acquisition Sub, LLC (“Acquisition Sub” and the "Acquisition"), a special purpose entity consisting of substantially all of the assets of Vertex LP and real-estate properties of B & S Cowart Family L.P. ("B&S LP") in consideration for $16,500,000 and 4,545,455 restricted shares of common stock. Prior to closing the acquisition, Vertex LP contributed to Acquisition Sub substantially all of its assets and liabilities relating to the business of transporting, storing, processing and re-refining petroleum products, crudes and used lubricants, including all of the outstanding equity interests in Vertex LP’s wholly-owned operating subsidiaries, Cedar Marine Terminals, L.P., Crossroad Carriers, L.P., Vertex Recovery L.P. and H&H Oil, L.P. and B&S LP contributed real estate associated with the operations of H&H Oil, L.P.

The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer, and the operating results of the Acquisition Sub have been included in the Company's consolidated financial statements as of the closing date of the acquisition. Under the purchase method of accounting, the aggregate amount of consideration paid by the Company was allocated to the Acquisition Sub’s net tangible assets and intangible assets based on their estimated fair values as of August 31, 2012.  The excess purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The goodwill has been allocated to the Refining and Marketing reporting segment.  The Company retained an independent third-party appraiser to assist management in its valuation. The allocation of the purchase price is based on the best estimates of management.

The following information summarizes the allocation of the fair values assigned to the assets at the purchase date.

	(in thousands)
Cash and cash equivalents	$	663
Accounts receivable		1,853
Inventory		13
Prepaid insurance		31
Property, plant and equipment		8,659
Land		1,995
Other assets		32
Intangible assets		16,255
Total identifiable net assets		29,501
Goodwill		958
Total purchase price	$	30,459
Total liabilities assumed	$	2,698

The Company incurred approximately $1,154,612 in costs associated with the Acquisition. These included legal, accounting, environmental, investment banking, and related party transaction committee costs.

The following table summarizes the cost of amortizable intangible assets related to the acquisition of Vertex Holdings:

	Estimated Cost (in thousands)		Useful life (years)
Customer relations	$	343		5
Vendor relations		4,064		10
H&H Oil Trademark/Trade name		775		16
TCEP Technology/Patent		11,000		15
Non-competes		73		3
Total	$	16,255

The following unaudited pro-forma consolidated results of operations for the three and nine month periods ended September 30, 2012 and 2011 assume the acquisition occurred as of January 1, 2011. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2011 or of results that may occur in the future (amounts in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2012		September 30, 2012			September 30, 2011
Revenue	$	32,474	$	37,837	$	109,943		$	84,504
Cost of goods sold		27,395		33,097		96,491			69,756
Gross profit		5,079		4,741		13,452			14,748
Selling, general and administrative expenses		2,367		2,531		7,645			6,346
Income from operations		-		-		5,807			8,402
Other income and expense		-		-		(768	)		(727	)
Net income		2,711		2,209		5,039			7,675
Earnings per common share-Basic		0.30		0.18		0.50			0.88
Earnings per common share-Diluted		0.17		0.13		0.35			0.53

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PREFERRED STOCK

9 Months Ended

Sep. 30, 2012

Preferred Stock

PREFERRED STOCK

NOTE 8.  PREFERRED STOCK

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Preferred Stock is 5,000,000 (“Series A Preferred”).  The total number of designated shares of the Company’s Series B Preferred Stock is 2,000,000. As of September 30, 2012, there were 3,133,147 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

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LICENSING AGREEMENT

9 Months Ended

Sep. 30, 2012

Licensing Agreement

LICENSING AGREEMENT

NOTE 9.  LICENSING AGREEMENT

Until the Acquisition (described in Note 10, below), the Company operated under an operating and licensing agreement with a related party that is majority-owned and controlled by the Company’s Chief Executive Officer and Chairman, Benjamin P. Cowart, that provided for an irrevocable, non-transferable, royalty-free, perpetual right to use TCEP to re-refine certain used oil feedstock and associated operations of this technology on a global basis.  This included the right to utilize the technology in any future production facilities built by the Company. 

The initial valuation of the license was based upon the cost to acquire the use of TCEP and its processes. It was also assessed over time for changes in the valuation. Additional development costs capitalized during the nine months ended September 30, 2012 and 2011 were $209,062 and $232,214, respectively. The Company is amortizing the value of the license agreement over a fifteen year period.  Amortization expense was $95,478 and $108,212 for the nine months ending September 30, 2012 and 2011, respectively.  

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 11.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil and Refining & Marketing divisions.  Segment information for the nine months ended September 30, 2012 and 2011, are as follows:

NINE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	25,841,948		$	76,474,754	$	102,316,702
Income from operations	$	(830,048	)	$	2,770,757	$	1,940,709
Total Assets	$	22,620,722		$	27,960,111	$	50,580,833
NINE MONTHS ENDED SEPTEMBER 30, 2011
				Refining &
	Black Oil			Marketing		Total
Revenues	$	15,101,466		$	63,299,623	$	78,401,089
Income from operations	$	330,072		$	3,408,489	$	3,738,561

THREE MONTHS ENDED SEPTEMBER 30, 2012
				Refining &
	Black Oil			Marketing		Total
Revenues	$	7,317,484		$	28,878,086	$	36,195,570
Income (loss) from operations	$	(1,401,764	)	$	1,820,642	$	418,878

THREE MONTHS ENDED SEPTEMBER 30, 2011
			Refining &
	Black Oil		Marketing		Total
Revenues	$	6,253,317	$	24,048,009	$	30,301,326
Income from operations	$	290,823	$	743,995	$	1,034,818

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LICENSING AGREEMENT (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Notes to Financial Statements
Capitalized development costs	$ 209,062	$ 232,214
Amortization expense	$ 95,478	$ 108,212

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ACQUISITION (Tables)

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Fair Values at Purchase Date

The following information summarizes the allocation of the fair values assigned to the assets at the purchase date.

	(in thousands)
Cash and cash equivalents	$	663
Accounts receivable		1,853
Inventory		13
Prepaid insurance		31
Property, plant and equipment		8,659
Land		1,995
Other assets		32
Intangible assets		16,255
Total identifiable net assets		29,501
Goodwill		958
Total purchase price	$	30,459
Total liabilities assumed	$	2,698

Amortizable Intangible Assets

The following table summarizes the cost of amortizable intangible assets related to the acquisition of Vertex Holdings:

	Estimated Cost (in thousands)		Useful life (years)
Customer relations	$	343		5
Vendor relations		4,064		10
H&H Oil Trademark/Trade name		775		16
TCEP Technology/Patent		11,000		15
Non-competes		73		3
Total	$	16,255

Pro-Forma Results of Operations

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2012		September 30, 2012			September 30, 2011
Revenue	$	32,474	$	37,837	$	109,943		$	84,504
Cost of goods sold		27,395		33,097		96,491			69,756
Gross profit		5,079		4,741		13,452			14,748
Selling, general and administrative expenses		2,367		2,531		7,645			6,346
Income from operations		-		-		5,807			8,402
Other income and expense		-		-		(768	)		(727	)
Net income		2,711		2,209		5,039			7,675
Earnings per common share-Basic		0.30		0.18		0.50			0.88
Earnings per common share-Diluted		0.17		0.13		0.35			0.53

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NOTES PAYABLE (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012
Notes to Financial Statements
Line of credit, balance	$ 0
Line of credit, maximum borrowing capacity	10,000,000
Line of credit, interest rate description	The most restrictive covenants of the loan require an interest coverage ratio of at least 1.5 to 1 and a Funded Debt to EBITDA ratio not to exceed 2 to 1. The line of credit and term note bears interest at the option of the Company of either the lender's prime commercial lending rate in effect or the Bank of America LIBOR rate plus 2.75%.
Note payable	8,500,000
Note payable, monthly principal payments	$ 141,667

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows operating activities
Net income	$ 3,520,916	$ 3,635,061
Adjustments to reconcile net income to cash provided by (used in) operating activities
Stock based compensation expense	124,626	94,358
Depreciation and amortization	180,402	120,138
Deferred federal income tax benefit	(1,639,000)
Changes in assets and liabilities
Accounts receivable	(1,073,778)	(4,010,965)
Accounts receivable- other	(127,162)
Accounts receivable- related parties	2,459	(10,967)
Inventory	(85,658)	(4,864,249)
Prepaid expenses	23,313	(11,381)
Accounts payable	1,005,932	2,872,639
Accounts payable-related parties	296,795	685,968
Deposits	(235,557)	1,080,277
Net cash provided by (used in) operating activities	1,993,288	(409,121)
Cash flows from investing activities
Purchase of intangible assets	(209,061)	(232,214)
Acquisition, net	(1,319,015)
Purchase of fixed assets	(77,232)	(92,051)
Net cash used in investing activities	(1,605,308)	(324,265)
Cash flows from financing activities
Borrowing from (payments to) note payable	(3,777)	1,000,000
Proceeds from exercise of common stock warrants	91,625	306,250
Net cash provided by financing activities	87,848	1,306,250
Net increase in cash and cash equivalents	475,828	572,864
Cash and cash equivalents at beginning of the period	675,188	744,313
Cash and cash equivalents at end of period	1,151,016	1,317,177
SUPPLEMENTAL INFORMATION
Cash paid for interest during the period	1,005	78,505
Cash paid for income taxes during the period	6,187	56,000
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common shares	78	224
Conversion of Series B Preferred Stock into common stock		$ 600,000

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STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

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

STOCK BASED COMPENSATION

NOTE 5. STOCK BASED COMPENSATION

The stock based compensation cost that has been charged against income by the Company was $124,626 and $94,358 for the nine months ended September 30, 2012 and 2011, respectively, for options previously awarded by the Company.

In June 2011, we extended our consulting agreement for investor relations services.  The agreement was made effective as of April 15, 2011 and remained in effect until April 14, 2012 at which time it was renewed on a month to month basis.  We agreed to compensate the consultant with a monthly fee and reimbursement of expenses incurred in connection with and pursuant to the agreement.  The agreement may be terminated by either party at any time upon 30 days written notice.  In addition, the Company granted the consultant warrants to purchase 25,000 shares of our common stock, with cashless exercise rights, at an exercise price of $1.75 per share. On May 10, 2011, the date of grant, 6,250 shares vested immediately and the remainder vest at 33 1/3% per year.  The fair value of these warrants on the date of grant was $11,201. As of September 30, 2012, 12,500 of these warrants have been exercised.

Stock option activity for the nine months ended September 30, 2012 is summarized as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2011		3,073,334		$	5.46			7.00	$	990,995
Options exercised		(60,000	)		(1.55	)		-		(3,439	)
Options expired		(294,167	)		(1.21	)		-		(38,878	)
Options granted		225,000			1.91			10.00		197,146
Outstanding at September 30, 2012		2,944,167		$	5.69			6.75	$	1,145,824
Vested at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966
Exercisable at September 30, 2012		2,216,049		$	6.96			6.12	$	661,966

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 2012 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)			Grant Date Fair Value
Outstanding at December 31, 2011		1,245,311		$	12.48			1.41		$	142,065
Warrants exercised		(12,500	)		(1.75	)		(3.50	)		(5,601	)
Warrants cancelled/forfeited/expired		(11,377	)		(25.00	)		-			(652	)
Warrants at September 30, 2012		1,221,434		$	12.47			.90		$	135,812
Vested at September 30, 2012		1,198,532		$	12.69			.87		$	133,722
Exercisable at September 30, 2012		1,198,532		$	12.69			.87		$	133,722

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STOCK BASED COMPENSATION (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Notes to Financial Statements
Stock based compensation expense	$ 124,626	$ 94,358
Warrants granted to consultant		25,000
Warrants granted to consultant, exercise price		$ 1.75
Warrants granted to consultant, shares vested		6,250
Fair value of warrants		$ 11,201

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ACQUISITION (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Notes to Financial Statements
Revenue	$ 32,474	$ 37,837	$ 109,943	$ 84,504
Cost of goods sold	27,395	33,097	96,491	69,756
Gross profit	5,079	4,741	13,452	14,748
Selling, general and administrative expenses	2,367	2,531	7,645	6,346
Income from operations			5,807	8,402
Other income and expense			(768)	(727)
Net income	$ 2,711	$ 2,209	$ 5,039	$ 7,675
Earnings per common share-Basic	$ 0.30	$ 0.18	$ 0.50	$ 0.88
Earnings per common share-Diluted	$ 0.17	$ 0.13	$ 0.35	$ 0.53

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EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2012

Earnings per common share

Reconciliation of the numerator and denominator for basic and diluted earnings per share

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2012 and 2011:

	2012		2011
Basic Earnings per Share
Numerator:
Income  available to common shareholders	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Basic earnings per share	$	0.35	$	0.42
Diluted Earnings per Share
Numerator:
Income	$	3,520,916	$	3,635,061
Denominator:
Weighted-average shares outstanding		10,085,206		8,722,642
Effect of dilutive securities
Stock options and warrants		1,140,337		1,329,073
Preferred stock		3,133,147		4,452,167
Diluted weighted-average shares outstanding		14,358,691		14,503,882
Diluted earnings per share	$	0.25	$	0.25