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 fiscal quarter ended March 31, 2014

¨ 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 001-11476

———————

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 ý 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  ý    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  ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes   ¨ No ý

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 22,514,739shares of common stock issued and outstanding as of May 7, 2014.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Consolidated  Financial Statements
	Consolidated  Balance Sheets (unaudited)	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	11
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
	PART II
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
	March 31, 2014		December 31, 2013
ASSETS
Current assets
Cash and cash equivalents	$	5,016,444	$	2,678,628
Accounts receivable, net	11,417,226		11,714,813
Inventory	7,554,364		8,540,459
Prepaid expenses	1,470,755		1,161,721
Total current assets	25,458,789		24,095,621
Noncurrent assets
Fixed assets, net	15,476,237		15,091,176
Intangible assets, net	14,835,694		15,172,816
Goodwill	4,922,353		4,502,743
Deferred federal income taxes	5,684,000		5,684,000
Total noncurrent assets	40,918,284		40,450,735
TOTAL ASSETS	$	66,377,073	$	64,546,356
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	15,288,497	$	14,096,185
Current portion of long-term debt	2,845,145		1,956,847
Total current liabilities	18,133,642		16,053,032
Long-term liabilities
Long-term debt	6,210,138		6,558,851
Contingent consideration	3,220,250		3,220,250
Deferred federal income tax	378,000		378,000
Total liabilities	27,942,030		26,210,133
Commitments and contingencies
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 1,279,342 and 1,319,002 issued
and outstanding at March 31, 2014 and December 31,
2013, respectively	1,279		1,319
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 21,267,658 and 21,205,609
issued and outstanding at March 31, 2014 and
December 31, 2013, respectively	21,268		21,206
Additional paid-in capital	19,882,694		19,579,732
Retained earnings	18,404,169		17,542,004
Total Vertex Energy, Inc. stockholders' equity	38,309,410		37,144,261
Non-controlling interest	125,633		1,191,962
Total equity	38,435,043		38,336,223
TOTAL LIABILITIES AND EQUITY	$	66,377,073	$	64,546,356

See accompanying notes to the consolidated financial statements

F-1

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2014 AND 2013
(UNAUDITED)
	March 31,			March 31,
	2014			2013
Revenues	$	47,349,658		$	33,254,801
Cost of revenues	42,205,170			29,785,043
Gross profit	5,144,488			3,469,758
Selling, general and administrative expenses   (exclusive of acquisition related expenses)	3,587,489			2,221,492
Acquisition related expenses	600,412			36,592
Total selling, general and    administrative expenses	4,187,901			2,258,084
Income from operations	956,587			1,211,674
Other income (expense)
Other income	370			25,289
Other expense	—			(40,726		)
Interest expense	(75,811		)	(106,140		)
Total other (expense)	(75,441		)	(121,577		)
Income before income tax	881,146			1,090,097
Income tax benefit (expense)	—			(6,502		)
Net income	$	881,146		$	1,083,595
Net income attributable to non-controlling interest	(18,981		)	—
Net income attributable to Vertex Energy, Inc.	$	862,165		$	1,083,595
Earnings  per common share
Basic	$	0.04		$	0.06
Diluted	$	0.04		$	0.05
Shares used in computing earnings per share
Basic	21,232,949			17,079,242
Diluted	23,738,018			20,139,182

See accompanying notes to the consolidated financial statements

F-2

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2014 AND 2013
(UNAUDITED)
	Three Months Ended
	March 31, 2014			March 31, 2013
Cash flows from operating activities
Net income	$	881,146		$	1,083,595
Adjustments to reconcile net income to cash   provided by operating activities
Stock based compensation expense	51,224			48,054
Depreciation and amortization	732,677			532,718
Deferred federal income tax	—			(10,000		)
Changes in operating assets and liabilities
Accounts receivable	297,587			(222,270		)
Inventory	986,095			(37,871		)
Prepaid expenses	(728,644		)	(26,731		)
Accounts payable	1,192,312			1,771,924
Net cash provided by operating activities	3,412,397			3,139,419
Cash flows from investing activities
Acquisition, net	—			(34,122		)
Refund of asset acquisition	—			675,558
Purchase of fixed assets	(780,616		)	(548,229		)
Net cash provided by (used in) investing activities	(780,616		)	93,207
Cash flows from financing activities
Line of credit payments, net	—			(2,250,000		)
Payments related to primary stock offering	(3,500		)	—
Proceeds from note payable	351,921			—
Payments on note payable	(666,386		)	(473,735		)
Proceeds from exercise of common stock warrants	24,000			—
Net cash used in financing activities	(293,965		)	(2,723,735		)
Net increase in cash and cash equivalents	2,337,816			508,891
Cash and cash equivalents at beginning of the period	2,678,628			807,940
Cash and cash equivalents at end of period	$	5,016,444		$	1,316,831
SUPPLEMENTAL INFORMATION
Cash paid for interest	$	75,811		$	76,706
Cash paid for income taxes	$	—		$	—
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	$	40		$	84
Note payable for acquisition of E-Source interest	$	854,050		$	—
Additional paid in capital for acquisition of E-Source interest	$	231,260		—

 See accompanying notes to the consolidated financial statements

F-3

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION AND NATURE OF OPERATIONS

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 25, 2014 (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 2013 as reported in Form 10-K, have been omitted.

NOTE 2.  CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At March 31, 2014 and 2013 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2014		2013
	% of Revenues	% of Receivables	% of Revenues	% of Receivables
Customer 1	42%	32%	—%	—%
Customer 2	21%	17%	59%	64%
Customer 3	15%	9%	3%	—%
Customer 4	—%	—%	8%	13%

The Company purchases goods and services from one company that represented 10% of total purchases for the three months ended March 31, 2014 and two companies that represented 13% and 10% each for the three months ended March 31, 2013.

The Company has had various debt facilities available for use, of which there was $9,055,283 and $8,515,698 outstanding as of March 31, 2014 and December 31, 2013, respectively. See Note 3 for further details.

In February 2013, Bank of America agreed to lease the Company up to $1,025,000 of equipment to enhance the Thermal Chemical Extraction Process (TCEP) operation, which went into effect in April 2013.  Under the current terms of the lease agreement, there are 60 monthly payments of approximately $13,328.

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 products 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,

F-4

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

2013, the Company had utilized approximately $11.25 million of these NOLs leaving approximately $30.75 million of potential NOLs of which we expect to utilize approximately $0.4 million for the three months ended March 31, 2014.  The Company recorded a change in valuation allowance for the three months ended March 31, 2014 for approximately $136,000.

NOTE 3. NOTES PAYABLE

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 to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, 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 was $0 at March 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 $141,667 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 was $5,808,333 at March 31, 2014.

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, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00. A tangible net worth requirement was included in the credit agreement in error. This requirement was waived and the credit agreement was amended in January 2013. The Company was in compliance with all aspects of the agreement at March 31, 2014.

The Company has notes payable to various financial institutions, bearing interest at rates ranging from 5% to 6.35%, maturing from November 2015 to April 2023. The balance of the notes payable is $2,392,900 at March 31, 2014.

Effective January 1, 2014, the Company purchased an additional 19% ownership interest in E-Source Holdings. In consideration for the additional interest the Company will pay $854,050 of which $200,000 was paid on April 11, 2014 and the remainder is to be paid monthly in $72,672 installments. The Company will also issue 207,743 shares of stock on January 31, 2015 if certain EBITDA criteria are met for 2014. As of the date of the transaction, the estimated value of the stock to be issued of approximately $231,000 was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

NOTE 4. STOCK-BASED COMPENSATION

Stock-based compensation expense was $51,224 and $48,054 for the three months ended March 31, 2014 and 2013, respectively, for options previously awarded by the Company.

Stock option activity for the three months ended March 31, 2014 is summarized as follows:

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	3,060,834		$	5.89		6.07	$	1,327,163
Options forfeited	(18,750	)	(2.10		)	—	(12,840		)
Options exercised	(26,250	)	(1.41		)	—	(15,589		)
Outstanding at March 31, 2014	3,015,834		$	5.95		5.80	$	1,298,734
Vested at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768
Exercisable at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768

F-5

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2014 is as follows: 

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	7,083		$	2.72		1.57	$	2,900
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at March 31, 2014	6,250		$	1.75		1.50	$	2,800
Vested at March 31, 2014	—		$	—		—	$	—
Exercisable at March 31, 2014	—		$	—		—	$	—

NOTE 5. EARNINGS 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 three months ended March 31, 2014 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 three months ended March 31, 2014 does not include options to purchase 817,667 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 three months ended March 31, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Basic earnings per share	$	0.04	$	0.06
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Effect of dilutive securities
Stock options and warrants	1,225,727		1,631,017
Preferred stock	1,279,342		1,428,923
Diluted weighted-average shares outstanding	23,738,018		20,139,182
Diluted earnings per share	$	0.04	$	0.05

NOTE 6. 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 March 31, 2014, there were 21,267,658 common shares issued and outstanding.

F-6

Each share of the Company's common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by the Company's board of directors.  No holders of any shares of the Company's common stock has a preemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject to redemption or convertible into other securities.  Upon liquidation, dissolution or winding-up of the Company and after payment of creditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-share basis among the holders of the Company's common stock.  Each share of the Company's common stock is entitled to one vote.  Shares of the Company's common stock do not possess any cumulative voting rights.

During the three months ended March 31, 2014, a total of 39,660 shares of the Company's Series A Preferred Stock were converted into 39,660 shares of our common stock on a one-for-one basis.  Options to purchase 26,250 shares of common stock were exercised for a net of 22,390 shares of common stock (when adjusting for a cashless exercise of 6,250 of such options and the payment, in shares of common stock, of an aggregate exercise price of $13,125, along with an exercise price of $24,000 paid in cash in connection with such exercises) and 22,390 shares of common stock were issued to the option holders in connection with such exercises.

NOTE 7.  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 March 31, 2014, there were 1,279,342 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

NOTE 8.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions.  Segment information for the three months ended March 31, 2014 and 2013 is as follows:

THREE MONTHS ENDED MARCH 31, 2014
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,571,400	$	19,827,459	$	3,950,799	$	47,349,658
Income from operations	$	20,390	$	770,575	$	165,622	$	956,587

THREE MONTHS ENDED MARCH 31, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,199,308	$	8,831,746	$	1,223,747	$	33,254,801
Income from operations	$	1,061,952	$	138,356	$	11,366	$	1,211,674

NOTE 9. CONTINGENT CONSIDERATION

As part of the consideration paid related to the acquisition of Vertex LP as discussed in Note 2, if certain earnings targets are met, the Company has to pay the seller approximately $2,233,000 annually in each of 2013, 2014 and 2015. In 2013, it had been determined that the 2013 earnings target would not be met and the contingent consideration was reduced by $1,850,000, which represents the discounted cash flow for year one. It had also been determined that there was a 25% probability that the 2014 earnings target would not be met and the contingent consideration was reduced by $388,750, which represents 25% of the discounted cash flows for year two.

As part of the consideration paid in connection with the acquisition of E-Source Holding, LLC, if certain targets are met, the Company has to pay the seller approximately $260,000 annually in 2014, 2015, 2016 and 2017. The Company has recorded contingent consideration of $748,000, which is the discounted cash flows of the earn-out payments. In addition, on January 31,

F-7

2015, 207,743 shares of the Company's stock will be issued as consideration for the additional equity interest if certain performance metrics are achieved for 2014. As of the date of the transaction, the estimated value of the stock to be issued of approximately $231,000 was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

NOTE 10. SUBSEQUENT EVENTS

Subsequent to March 31, 2014, (a) 500,000 shares of the Company's Series A Preferred Stock were converted into 500,000 shares of our common stock on a one-for-one basis; (b) options to purchase 258,750 shares of common stock were exercised for a net of 247,081 shares of common stock (when adjusting for a cashless exercise of 153,750 of such options and the payment, in shares of common stock, of an aggregate exercise price of $80,375, along with an exercise price of $51,250 paid in cash in connection with such exercises) and 247,081 shares of common stock were issued to the options holders in connection with such exercises; and (c) 500,000 shares of the Company's common stock were issued in connection with the Omega acquisition.

Subsequent to March 31, 2014, the available credit on the Line of Credit is $20,000,000. As of May 5, 2014, the outstanding balance drawn on the line of credit is $0 leaving an available balance for draw downs of $20,000,000.

Effective May 2, 2014, we and our newly formed subsidiary, Vertex Energy Operating, LLC (“Vertex Operating”, which was formed as a holding company to hold the Company’s operating subsidiaries, which were subsequently transferred to and are currently wholly-owned by Vertex Operating), as well as certain of our other direct and indirect subsidiaries (other than E-Source Holdings, LLC (“E-Source” (of which we own 70%)) as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Goldman Sachs Bank USA as lender and as administrative agent and collateral agent (the “Lender” or the “Agent”). Pursuant to the Credit Agreement, the Lender loaned us $40 million (the “Credit Agreement Loan”), which was evidenced by a Term Loan Note. Pursuant to the Credit Agreement, the Company has the option to select whether loans made under the Credit Agreement bear interest at (a) the greater of (i) the prime rate in effect, (ii) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate (defined below) and (B) 1%, and (iv) 4.5% per annum; or (b) the greater of (i) 1.50% and (ii) the applicable ICE Benchmark Administration Limited interest rate, divided by (x) one minus, (y) the maximum rate at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator (the “Adjusted LIBOR Rate”), in each case subject to the terms and conditions of the Credit Agreement, and in each case plus between 5.5% and 7.5% per annum (as provided in the Credit Agreement, based on several factors, including the

Company’s total leverage). Interest on the Credit Agreement is payable monthly in arrears, provided that upon any event of default the interest rate increases to 2% per annum in excess of the applicable interest rate then in effect. The amount owed under the Credit Agreement is due and payable on May 2, 2019. Amortizing principal payments are due on the Credit Agreement Loan in the amount of $300,000 per fiscal quarter for June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, and $800,000 per fiscal quarter thereafter through maturity. Additionally, in the event (a) we receive any sale

proceeds from the sale of assets or insurance proceeds (each as described in greater detail in the Credit Agreement), in excess of $250,000, we are required to pay such sale proceeds, less certain deductions, as a prepayment of the Credit Agreement Loan, unless we decide to reinvest such proceeds in long-term production assets as described in the Credit Agreement; (b) we sell equity securities (subject to certain exceptions) we are required to use 100% of the proceeds from such sales to repay the Credit Agreement Loan, subject to certain exemptions, including up to $5 million to be used for working capital, permitted acquisitions, working capital of one of our subsidiaries and funds (which are required to total at least $10 million) which we are able to raise prior to June 30, 2014 (subject to the terms of the Credit Agreement) through the sale of securities; (c) we issue debt, we are required to prepay the Credit Agreement Loan in an amount equal to 100% of such funds received; (d) we have cash flow which exceeds certain pre-negotiated limits, we are required to use between 50% and 75% of such additional cash flow to repay the Credit Agreement Loan; (e) we receive tax refunds in excess of $100,000 in any year, we are required to use such funds to prepay the Credit Agreement Loan; (f) our total debt exceeds certain maximum debt ratios set forth in the Credit

Agreement, we are required to immediately repay the Credit Agreement Loan in an amount equal to such excess debt; or (g) we receive any funds under the Purchase Agreement, we are required to prepay the Credit Agreement Loan in an amount equal to such received funds, subject in each case to the terms and conditions of the Credit Agreement. We also have the right to make voluntary repayments of the Credit Agreement Loan in the minimum amount of $500,000 (and in multiples of $100,000) from time to time. Except with respect to certain accounts, certain finished goods inventory and certain other reserves described in the Amended BOA Credit Agreement (as defined below), the amount owed pursuant to the Credit Agreement is secured by a first priority security interest in all of our assets and all of the assets and securities of our direct and indirect subsidiaries and is also guaranteed by our subsidiaries (other than E-Source) pursuant to the terms of the Credit Agreement, a Pledge and Security Agreement and Mortgage (providing a security interest over certain of our real property assets).

F-8

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

The Credit Agreement contains customary representations, warranties, covenants for facilities of similar nature and size as the Credit Agreement, and requirements for the Company to indemnify the Lender and the Agent for certain losses. The Credit Agreement also includes various covenants (positive and negative) binding the Company, including, requiring that the Company provide the Agent with certain reports, provide the Agent notices of material corporate events and forecasts, limiting the amount of indebtedness the Company may incur (for example, the Company’s total indebtedness cannot exceed between $30,000,000-$32,000,000 at any time, subject to certain exemptions set forth in greater detail in the Credit Agreement), and requiring us to maintain certain financial ratios, relating to consolidated EBITDA and debt leverage including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of between 0.90:1.00 and 1.25:1.00 (depending on the applicable quarter); maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 4:1 and 2:1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending June 30, 2018, of between $4.25 million and $17 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement (defined below), of at

least $3 million. The Credit Agreement includes customary events of default for facilities of a similar nature and size as the Credit Agreement, including if a default occurs under certain material agreements of the Company; a judgment is obtained against the Company in an amount in excess of $250,000 or which could have a material adverse effect on the Company; and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s Chief Executive Officer, Chairman of the Board and largest shareholder, ceases to own and control at least 20% of the economic and voting interests of the Company (on a fully-diluted basis); (b) any person other than Mr. Cowart (i) obtains 30% of more of the voting or economic interest in the Company on a fully-diluted basis or (ii) obtains the power (whether or not exercised) to elect a majority of the members of the Board of Directors; (c) we cease to own and control 100% of Vertex Operating; (d) the majority of the seats (other than vacant seats) on the Board of Directors of the Company cease to be occupied by persons who either (i) were members of the Board of Directors of the Company on May 2, 2014, or (ii) were nominated for election by the Board of Directors of the

Company, a majority of whom were directors on May 2, 2014 or whose election or nomination for election was previously approved by a majority of such directors; (e) Vertex II, GP, LLC (Vertex Operating’s wholly-owned subsidiary) ceases to be the sole general partner of any guarantor of the Credit Agreement that is a partnership; (f) a “change of control” or similar event under the Amended BOA Credit Agreement (described below) shall occur; or (g) any event, transaction or occurrence occurs, a result of which Benjamin P. Cowart shall for any reason cease to be actively engaged in the day-to-day management of the Company and its subsidiaries in the role he serves on May 2, 2014, unless (x) an interim successor reasonably acceptable to Agent and the Lender as required by the Credit Agreement is appointed within 10 days and (y) a permanent successor reasonably acceptable to the Agent and the Lender as required by the Credit Agreement is appointed within 60 days. Additionally, in connection with our entry into the Credit Agreement, all parties to whom any deferred purchase price or “earn-out” obligations are owed by us executed and delivered to the Agent an Earnout Subordination Agreement (other than one of the individuals who is owed earn-out payments in connection with the E-Source purchase), pursuant to which they agreed to not receive or demand any “earn-out” payments until the Lender and BOA are paid in full under the credit agreements. In connection with the closing of the Credit Agreement, we agreed to pay the Agent’s legal fees and transaction costs associated with the transactions contemplated by the Credit Agreement. We also paid an aggregate of approximately $1.7 million in commissions and fees to our advisors Craig-Hallum Capital Group LLC, Sapphire Financial Group, LLC and Wunderlich Securities, Inc. in consideration for financial advisory services rendered in connection with the Purchase Agreement and credit agreements, the transactions contemplated therein in and in certain cases a fairness opinion obtained on certain of the transactions.

The proceeds from the Credit Agreement were used to pay the amounts due at the Initial Closing (defined below), pay certain Omega (defined below) capital leases and other obligations of Omega, and to pay expenses associated with the Credit Agreement and the acquisition described below.

Amended and Restated Credit Agreement with Bank of America, N.A.

On May 2, 2014, we and Vertex Operating entered into an Amended and Restated Credit Agreement (the “Amended BOA Credit Agreement”) with Bank of America, N.A. (“BOA”). The Amended BOA Credit Agreement amended and restated the prior credit agreement we entered into with BOA in August 2012. Pursuant to the Amended BOA Credit Agreement, BOA agreed to loan us up to $20 million (the “BOA Loan”), subject to the terms of the Amended BOA Credit Agreement and certain lending ratios set forth therein, provided that the amount outstanding cannot exceed an amount equal to the total of (i) 80% of

F-9

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

the Company’s accounts in which BOA has a first-priority perfected security interest; (ii) 65% of the Company’s finished-goods inventory in which BOA holds a first-priority perfected security interest, in each case subject to the terms and conditions of the credit agreement, plus (iii) certain reserves established by BOA. We have the right to request up to three increases in the amount of the facility, which in the aggregate cannot exceed $10 million and which individually are required to be a minimum of $3 million each, provided that BOA has the right to approve any increase in its sole discretion. Loans made pursuant to the Amended BOA Credit Agreement are evidenced by a Revolving Note, which replaced the Company’s August 2012 Revolving Note, which was repaid on May 2, 2014 in connection with the parties’ entry into the Amended BOA Credit Agreement.

Amounts borrowed under the Revolving Note bear interest at the option of the Company at BOA’s prime commercial lending rate then in effect plus between 1.25% and 2% per annum (depending on the Company’s leverage ratio from time to time) or the LIBOR rate in effect plus between 2.35% and 3% per annum (depending on the Company’s leverage ratio from time to time), and are payable monthly in arrears (provided that upon an event of default the interest rate then in effect increases by 4% per annum). The Revolving Note is due and payable on May 2, 2017. We have the right to prepay the Revolving Note at any time without penalty. We are also required to make certain mandatory prepayments on the Revolving Note as described therein.

The Amended BOA Credit Agreement also requires BOA to provide us certain letters of credit as described therein. We agreed to pay BOA a commitment fee equal to between 0.25% and 0.35% (depending on our leverage ratio) multiplied by the actual daily amount by which the maximum amount BOA has agreed to loan us (currently $20 million) exceeds the amount loaned (and subject to letters of credit), which is due and payable quarterly in arrears on the last day of each March, June, September, and December, beginning June 30, 2014, until maturity. We also paid BOA $50,000 at closing in fees. In connection with letters of credit issued by BOA, we agreed to pay BOA a fee equal to the greater of 2% per annum (multiplied by the daily maximum amount available to be drawn) and $500 per line of credit.

The Amended BOA Credit Agreement contains customary representations, warranties, covenants and requirements for the Company to indemnify BOA and its affiliates. The Amended BOA Credit Agreement also includes various covenants (positive and negative) binding upon the Company, including, requiring that the Company comply with certain reporting requirements, provide notices of material corporate events and forecasts to BOA, and maintain certain financial ratios, relating to debt leverage, consolidated EBITDA, maximum debt exposure we can incur (provided that if we exceed such maximum debt exposure limit as set forth in the Amended BOA Credit Agreement, we are required to immediately repay any amount exceeding the limits set forth in the BOA Credit Agreement) and minimum liquidity, including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of not less than 1.25 to 1.00; maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 3.5 to 1 and 2 to 1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending March 30, 2017, of between $4.25 million and $15.5 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement, of at least $3 million. The Amended BOA Credit Agreement includes customary events of default for facilities of a similar nature and size as the Amended BOA Credit Agreement, including if an event of default occurs under any agreement the Company is subject to and in an amount in excess of $250,000 or if the Company breaches any term of any material agreement the Company is party to, subject to its right to cure such breach(s) under the Amended BOA Credit Agreement, and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s 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 20% of the equity interests of the Company; (b) the Company ceases at any time to own and control 100% of Vertex Operating or certain other of its subsidiaries; (c) Vertex Acquisition Sub, LLC (Vertex Operating’s wholly-owned subsidiary) ceases to control 100% of its current subsidiaries; (d) certain other changes in control of our subsidiaries occur; (e) a “change of control” or similar event or event of default occurs under the Credit Agreement; or (f) a default occurs under certain lease agreements related to premises leased by the Company. The amounts due pursuant to the Amended BOA Credit Agreement are secured by a Pledge and Security Agreement and various Deeds of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filings in favor of BOA. Additionally, Vertex Operating and the Company and each of the Company’s subsidiaries (other than E-Source) pledged all collateral which they own (including securities held) as security for the repayment of the amounts due pursuant to the Amended BOA Credit Agreement and guaranteed the amounts owed pursuant to an Amended and Restated Guaranty.

We used and will use the proceeds borrowed pursuant to the Amended BOA Credit Agreement to consummate the transactions contemplated by the Purchase Agreement, pay costs associated with the Amended BOA Credit Agreement and for working capital and other general corporate purposes.

F-10

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

Intercreditor Agreement

In connection with our entry into the Credit Agreement and Amended BOA Credit Agreement, the Agent and BOA entered into an Intercreditor Agreement on May 2, 2014 which governs which lenders have first and second priority security interests over certain of our assets in order to secure repayment of the credit facilities.

Omega Transaction

On May 2, 2014, we completed the Initial Closing (defined below) contemplated under that certain Asset Purchase Agreement entered into on March 17, 2014, and amended by the First Amendment dated April 14, 2014, Second Amendment dated April 30, 2014 and Third Amendment dated May 2, 2014 (as amended to date, the “Purchase Agreement”) by and among the Company, Vertex Refining LA, LLC and Vertex Refining NV, LLC (“Vertex Refining Nevada”), both wholly-owned subsidiaries of Vertex Operating, Omega Refining, LLC (“Omega Refining”), Bango Refining NV, LLC (“Bango Refining”) and Omega Holdings Company LLC (“Omega Holdings” and collectively with Omega Refining and Bango Refining, “Omega” or the “sellers”).

Pursuant to the Purchase Agreement, we agreed to acquire certain of Omega’s assets related to (1) the operation of oil re-refineries and, in connection therewith, purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers and (2) the provision of related products and support services.  Specifically, the assets included Omega’s Marrero, Louisiana and Bango, Nevada, re-refineries (which re-refine approximately 80 million gallons of used motor oil per year).  Additionally, the Marrero, Louisiana plant produces vacuum gas oil (VGO) and the Bango, Nevada plant produces base lubricating oils.  Omega also operates Golden State Lubricants Works, LLC (“Golden State”), a strategic blending and storage facility located in Bakersfield, California, which is included in the acquisition.  In connection with the acquisition, we also acquired certain of Omega’s prepaid assets and inventory.

The acquisition is to close in two separate closings, the first of which relating to the acquisition of Omega Refining (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana) and ownership of Golden State, as described above, closed on May 2, 2014 (the “Initial Closing”), and the second of which relating to the acquisition of Bango Refining and the Bango, Nevada plant, is expected to close on or around August 2014, subject to certain closing conditions being met prior to closing (the “Final Closing”).  Vertex’s obligation to consummate the Final Closing is subject to among other things, compliance with certain provisions of the credit agreements described herein and that the Bango plant operated by Bango Refining be fully restored and operational, as well as the plant meeting certain used motor oil processing run rates and that there are no adverse claims or legal proceedings related to an accident that occurred at the Bango plant in December 2013.

The purchase price paid at the Initial Closing was $30,750,000 in cash, 500,000 shares of our restricted common stock (valued at approximately $4 million) and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Omega Refining in connection with the Initial Closing.  We also agreed to provide Omega a loan in the amount of up to approximately $13.8 million (described below).

The amount due at the Final Closing, in consideration for the acquisition of Bango Refining, will be the assumption of certain loans made pursuant to the Omega Secured Note (described below), the issuance of 1,500,000 shares of Vertex’s common stock of which 650,000 shares (with an agreed value of $3.2301 per share or approximately $2.1 million) will be held in escrow (the “Pledged Shares”) and used to satisfy indemnification claims and secure the repayment of the Omega Secured Note (defined below), and which amount is subject to adjustment in the event minimum inventory levels are not delivered at the Final Closing, and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Bango Refining.  A portion of the Pledged Shares will be released from escrow, subject to outstanding claims, on September 15, 2015, and the remainder will be released on the 18 month anniversary of the Final Closing.  Subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items, the sellers’ indemnification obligations are capped at $5 million.

In connection with the First Closing, Omega Refining and Bango Refining provided Vertex Refining Nevada a Secured Promissory Note (the “Omega Secured Note”) in the aggregate amount of $13,858,067, representing (a) a loan to Omega in the amount of approximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at the Initial Closing (which included consideration relating to the assets acquired at the Initial Closing and which will be acquired at the Final Closing) exceeded the value of assets acquired at the Initial Closing) (the “Purchase Price Loan”); (b) a $750,000 loan related to the delivery of a certain amount of used motor oil inventory at the Initial Closing (the “First Inventory Loan”);

F-11

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

(c) a $1,400,000 loan related to the delivery of a certain amount of used motor oil inventory at the Final Closing (the “Second Inventory Loan” and along with the First Inventory Loan, the “Inventory Loans”); (d) a loan in a single advance of $3.15 million to satisfy accounts payable and other working capital related obligations of Omega after the Initial Closing, provided such loans are not required to be made until after June 16, 2014 (the “Draw Down Loan”) and (e) an additional loan of up to $1 million for capital expenditures, if mutually approved by us and Omega (the “Capital Expenditure Loan”).

The Purchase Price Loan and the Draw Down Loan bear interest at the short-term federal rate as published by the Internal Revenue Service from time to time (currently 0.33% per annum) prior to October 30, 2014, and thereafter at 9.5% per annum, payable monthly in arrears and have a maturity date of March 31, 2015.  The First Inventory Loan and the Draw Down Loan accrue interest at the rate of 9.5% per annum beginning on May 31, 2014, and are due and payable on March 31, 2015.  Upon an event of default under any of the loans, the loans accrue interest at 18% per annum until paid in full.

The Purchase Price Loan and the Draw Down Loan are due and payable in full on the earlier of March 31, 2015 and the date of the Final Closing, provided that both the Purchase Price Loan and Draw Down Loan (including accrued and unpaid interest thereon) will be deemed paid in full upon the Final Closing.  The Omega Secured Note may be prepaid in whole or part from time to time without penalty.

The repayment of the Omega Secured Note is guaranteed by Omega Holdings pursuant to a Guaranty Agreement and secured by a security interest granted pursuant to the terms of the Omega Secured Note and a Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing.  Additionally, we have the right to set-off any amount due upon an event of default against certain of the Pledged Shares and the earn-out consideration described  below, of which a portion of such shares were pledged to secure the Omega Secured Note pursuant to a Pledge Agreement, subject to the terms of the Purchase Agreement.

The consideration payable in connection with the Final Closing is subject to customary adjustments prior to the Final Closing depending on certain criteria, including the amount of inventory delivered by the sellers at the Final Closing.

The sellers also have the right to earn additional earn-out consideration in the event certain EBITDA targets are met by (a) Vertex Refining NV, LLC during the years ended December 31, 2015 and 2016 (which targets begin at $3.5 million of EBITDA per year), of up to an aggregate of $6 million (payable in shares of the Company’s common stock equal to the volume-weighted average of the regular session closing prices per share of the Company’s common stock on the NASDAQ Capital Market for the ten (10) consecutive trading days prior to the applicable due date of such payments, provided, however, in no event shall the VWAP be less than $3.15 per share or more than $10.00 per share, as adjusted for any stock splits or recapitalizations); (b) Vertex Refining LA, LLC during any twelve month period during the eighteen month period commencing on the first day of the first full calendar month following the Initial Closing date (which targets begin at $8 million of EBITDA during such twelve month period) of up to 470,498 shares of common stock of the Company; and (c) Vertex Refining LA, LLC during the calendar year ended December 31, 2015 (which targets begin at $9 million of EBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capital expenditures (collectively, the “Earn-Outs).  Notwithstanding the above, the maximum number of shares of common stock to be issued pursuant to the Purchase Agreement cannot (i) exceed 19.9% of the outstanding shares of common stock outstanding on March 17, 2014, (ii) exceed 19.9% of the combined voting power of the Company on March 17, 2014, or (iii) otherwise exceed such number of shares of common stock that would violate applicable listing rules of the NASDAQ Stock Market in the event the Company’s stockholders do not approve the issuance of such shares (the “Share Cap”).  In the event the number of shares to be issued under the Purchase Agreement exceeds the Share Cap, then the Company is required to instead pay any such additional consideration in cash or obtain the approval of the Company’s stockholders under applicable rules and requirements of the NASDAQ Capital Market for the additional issuance of shares.

Finally, pursuant to the acquisition, (a) with certain exceptions related to sellers’ operation of Bango Refining between the Initial Closing and the Final Closing, the sellers agreed to enter into a non-competition agreement whereby they agreed not to compete against Vertex in connection with the acquired businesses, or to solicit active customers of the acquired businesses for a period of five years and (b) certain of the employees of the sellers agreed to enter into three year employment agreements with Vertex’s newly formed subsidiaries.

Additionally, we are required to file and obtain effectiveness of a registration statement within 90 days following the Initial Closing (if the Securities and Exchange Commission does not review the filing) and 150 days following the Initial Closing (if the Securities and Exchange Commission does review the filing), registering the shares of common stock issuable in connection

F-12

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(UNAUDITED)

with the acquisition.  In the event we fail to file the registration statement or obtain effectiveness of the registration within the time periods set forth in the Purchase Agreement, we are required to pay damages for each thirty (30) day period until cured, equal to that number of shares of common stock as equals 1% of the aggregate number of shares of common stock issued pursuant to the Purchase Agreement, however, we are not obligated to pay any liquidated damages if we are unable to fulfill our registration obligations as a result of rules, regulations, positions or releases or actions taken by the Securities and Exchange Commission.

The Final Closing remains subject to the satisfaction of certain customary closing conditions. The Purchase Agreement contains customary representations, warranties, covenants and indemnities by the parties thereto. Craig-Hallum Capital Group LLC is acting as exclusive financial advisor to the Company in connection with the acquisition and has provided a fairness opinion to the Board of Directors in connection with the transaction.

F-13

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 facilities, 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;

• 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 and successfully negotiate acquisition terms; our ability to effectively integrate acquired assets, companies, employees or businesses;

• liabilities associated with acquired companies, assets or businesses;

• interruptions at our facilities;

• our ability to complete pending acquisitions;

• required earn-out payments and other contingent payments we are required to make;

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

• our ability to acquire and construct new facilities;

• 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 25, 2014, and the other cautionary statements made in this Report as being applicable

10

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.

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, 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.

Finally, 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.  Subsequently, effective February 13, 2013, our common stock began trading on the NASDAQ Capital Market under the symbol “VTNR",

Material Acquisitions

Holdings:

Effective as of August 31, 2012, we acquired 100% of the outstanding equity interests of Vertex Acquisition Sub, LLC (“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” and the “Acquisition”), both of which entities were owned and operated by related parties.  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. (“Crossroad”), Vertex Recovery, L.P. (“Vertex Recovery”) and H&H Oil, L.P. (“H&H Oil”, and collectively, the “Transferred Partnerships”), and B&S LP contributed real estate associated with the operations of H&H Oil.

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 Sub.  Additionally, for each of the three one-year periods following September 11, 2012, 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 adjusted EBITDA targets of $10.75 million, $12.0 million and $13.5 million, respectively, in those periods. In 2013 it was determined that the 2013 earnings target would not be met and the contingent consideration was reduced by $1,850,000, which represents the discounted cash flow for year one. It was also determined that there is a 25% probability that the 2014 earnings target will not be met and the contingent consideration was reduced by $388,750, which represents 25% of the discounted cash flow for year two.

11

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, the subletting of office space, and agreements to operate the Thermal Chemical Extraction Process ("TCEP") (described below) facility and to transport and store feedstock and end products. The closing of the Acquisition eliminated these related-party transactions.  The description of our operations below reflects the closing of the Acquisition, unless otherwise stated or the discussion requires otherwise.

E-Source:

Effective October 1, 2013 Vertex acquired a 51% interest in E-Source Holdings, LLC (“E-Source”), a company that leases and operates a facility located in Houston, Texas, and provides dismantling, demolition, decommission and marine salvage services at industrial facilities throughout the Gulf Coast. E-Source also owns and operates a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials. The consideration paid for the acquisition of E-Source was approximately $900,000 and the right of one of the sellers (the “Earn-Out Seller”) to earn additional earn-out payments of up to 15% of E-Source’s net income before taxes, in the event certain calendar year net income thresholds are met, in calendar years 2014 through 2017, as well as a commission of 20% of the net income before taxes associated with certain future planned projects of E-Source required to be completed prior to December 31, 2014, as long as such applicable seller remains an employee of E-Source during such applicable periods. Effective on March 14, 2014, we entered into an amendment to our acquisition agreement with the Earn-Out Seller, and mutually agreed that the lesser of (a) 20% and (b) $100,000, per calendar year of earn-out payments due the Earn-Out Seller, if any, will be payable in shares of our restricted common stock, based on the average of the five closing sales prices of the Company’s common stock on the first five trading days of each applicable calendar year (each a “Valuation”) for which the earn-out consideration relates, provided that the parties mutually agreed to use a valuation of $3.2922 per share (the “2014 Valuation Price”) for any earn-out payments relating to the 2014 calendar year and further agreed that in no event will any future calendar year Valuation be less than the 2014 Valuation Price. On March 26, 2014, but effective January 1, 2014, the Company acquired an additional 19% interest in E-Source for $854,050 in cash consideration and the right to receive stock consideration (on January 31, 2015) in the amount of 207,743 shares of stock subject to certain performance metrics being met during 2014.

E-Source leases and operates a plant located in Houston, Texas, and provides dismantling, demolition, decommission and marine salvage services at industrial facilities throughout the Gulf Coast.   E-Source also owns and operates a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials.

Omega:

On May 2, 2014, we completed the Initial Closing (defined below) contemplated under that certain Asset Purchase Agreement entered into on March 17, 2014, and amended by the First Amendment dated April 14, 2014, Second Amendment dated April 30, 2014 and Third Amendment dated May 2, 2014 (as amended to date, the “Purchase Agreement”) by and among the Company, Vertex Refining LA, LLC and Vertex Refining NV, LLC (“Vertex Refining Nevada”), both wholly-owned subsidiaries of Vertex Operating, LLC (“Vertex Operating”), Omega Refining, LLC (“Omega Refining”), Bango Refining NV, LLC (“Bango Refining”) and Omega Holdings Company LLC (“Omega Holdings” and collectively with Omega Refining and Bango Refining, “Omega” or the “sellers”).

Pursuant to the Purchase Agreement, we agreed to acquire certain of Omega’s assets related to (1) the operation of oil re-refineries and, in connection therewith, purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers and (2) the provision of related products and support services. Specifically, the assets included Omega’s Marrero, Louisiana and Bango, Nevada, re-refineries (which re-refine approximately 80 million gallons of used motor oil per year). Additionally, the Marrero, Louisiana plant produces vacuum gas oil (VGO) and the Bango, Nevada plant produces base lubricating oils. Omega also operates Golden State Lubricants Works, LLC (“Golden State”), a strategic blending and storage facility located in Bakersfield, California, which is included in the acquisition. In connection with the acquisition, we also acquired certain of Omega’s prepaid assets and inventory.

The acquisition is to close in two separate closings, the first of which relating to the acquisition of Omega Refining (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana) and ownership of Golden State, as described above, closed on May 2, 2014 (the “Initial Closing”), and the second of which relating to the acquisition of Bango Refining and the Bango, Nevada plant, is expected to close on or around August 2014, subject to certain closing conditions being met prior to closing (the “Final Closing”). Vertex’s obligation to consummate the Final Closing is subject to among other things, compliance with certain provisions of the credit agreements described herein and that the Bango plant operated by Bango

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Refining be fully restored and operational, as well as the plant meeting certain used motor oil processing run rates and that there are no adverse claims or legal proceedings related to an accident that occurred at the Bango plant in December 2013.

The purchase price paid at the Initial Closing was $30,750,000 in cash (which funds we raised pursuant to our entry into the Credit Agreements, described below under “Liquidity and Capital Resources”), 500,000 shares of our restricted common stock (valued at approximately $4 million) and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Omega Refining in connection with the Initial Closing. We also agreed to provide Omega a loan in the amount of up to approximately $13.8 million (described below).

The amount due at the Final Closing, in consideration for the acquisition of Bango Refining, will be the assumption of certain loans made pursuant to the Omega Secured Note (described below), the issuance of 1,500,000 shares of Vertex’s common stock of which 650,000 shares (with an agreed value of $3.2301 per share or approximately $2.1 million) will be held in escrow (the “Pledged Shares”) and used to satisfy indemnification claims and secure the repayment of the Omega Secured Note (defined below), and which amount is subject to adjustment in the event minimum inventory levels are not delivered at the Final Closing, and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Bango Refining. A portion of the Pledged Shares will be released from escrow, subject to outstanding claims, on September 15, 2015, and the remainder will be released on the 18 month anniversary of the Final Closing. Subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items, the sellers’ indemnification obligations are capped at $5 million.

In connection with the First Closing, Omega Refining and Bango Refining provided Vertex Refining Nevada a Secured Promissory Note (the “Omega Secured Note”) in the aggregate amount of $13,858,067, representing (a) a loan to Omega in the amount of approximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at the Initial Closing (which included consideration relating to the assets acquired at the Initial Closing and which will be acquired at the Final Closing) exceeded the value of assets acquired at the Initial Closing) (the “Purchase Price Loan”); (b) a $750,000 loan related to the delivery of a certain amount of used motor oil inventory at the Initial Closing (the “First Inventory Loan”); (c) a $1,400,000 loan related to the delivery of a certain amount of used motor oil inventory at the Final Closing (the “Second Inventory Loan” and along with the First Inventory Loan, the “Inventory Loans”); (d) a loan in a single advance of $3.15 million to satisfy accounts payable and other working capital related obligations of Omega after the Initial Closing, provided such loans are not required to be made until after June 16, 2014 (the “Draw Down Loan”) and (e) an additional loan of up to $1 million for capital expenditures, if mutually approved by us and Omega (the “Capital Expenditure Loan”). The Purchase Price Loan and the Draw Down Loan bear interest at the short-term federal rate as published by the Internal Revenue Service from time to time (currently 0.33% per annum) prior to October 30, 2014, and thereafter at 9.5% per annum, payable monthly in arrears and have a maturity date of March 31, 2015. The First Inventory Loan and the Draw Down Loan accrue interest at the rate of 9.5% per annum beginning on May 31, 2014, and are due and payable on March 31, 2015. Upon an event of default under any of the loans, the loans accrue interest at 18% per annum until paid in full. The Purchase Price Loan and the Draw Down Loan are due and payable in full on the earlier of March 31, 2015 and the date of the Final Closing, provided that both the Purchase Price Loan and Draw Down Loan (including accrued and unpaid interest thereon) will be deemed paid in full upon the Final Closing. The Omega Secured Note may be prepaid in whole or part from time to time without penalty.

The repayment of the Omega Secured Note is guaranteed by Omega Holdings pursuant to a Guaranty Agreement and secured by a security interest granted pursuant to the terms of the Omega Secured Note and a Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing. Additionally, we have the right to set-off any amount due upon an event of default against certain of the Pledged Shares and the earn-out consideration described below, of which a portion of such shares were pledged to secure the Omega Secured Note pursuant to a Pledge Agreement, subject to the terms of the Purchase Agreement.

The consideration payable in connection with the Final Closing is subject to customary adjustments prior to the Final Closing depending on certain criteria, including the amount of inventory delivered by the sellers at the Final Closing.

The sellers also have the right to earn additional earn-out consideration in the event certain EBITDA targets are met by (a) Vertex Refining NV, LLC during the years ended December 31, 2015 and 2016 (which targets begin at $3.5 million of EBITDA per year), of up to an aggregate of $6 million (payable in shares of the Company’s common stock equal to the volume-weighted average of the regular session closing prices per share of the Company’s common stock on the NASDAQ Capital Market for the ten (10) consecutive trading days prior to the applicable due date of such payments, provided, however, in no event shall the VWAP be less than $3.15 per share or more than $10.00 per share, as adjusted for any stock splits or recapitalizations); (b) Vertex Refining LA, LLC during any twelve month period during the eighteen month period commencing on the first day of the first full calendar month following the Initial Closing date (which targets begin at $8

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million of EBITDA during such twelve month period) of up to 470,498 shares of common stock of the Company; and (c) Vertex Refining LA, LLC during the calendar year ended December 31, 2015 (which targets begin at $9 million of EBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capital expenditures (collectively, the “Earn-Outs). Notwithstanding the above, the maximum number of shares of common stock to be issued pursuant to the Purchase Agreement cannot (i) exceed 19.9% of the outstanding shares of common stock outstanding on March 17, 2014, (ii) exceed 19.9% of the combined voting power of the Company on March 17, 2014, or (iii) otherwise exceed such number of shares of common stock that would violate applicable listing rules of the NASDAQ Stock Market in the event the Company’s stockholders do not approve the issuance of such shares (the “Share Cap”). In the event the number of shares to be issued under the Purchase Agreement exceeds the Share Cap, then the Company is required to instead pay any such additional consideration in cash or obtain the approval of the Company’s stockholders under applicable rules and requirements of the NASDAQ Capital Market for the additional issuance of shares.

Finally, pursuant to the acquisition, (a) with certain exceptions related to sellers’ operation of Bango Refining between the Initial Closing and the Final Closing, the sellers agreed to enter into a non-competition agreement whereby they agreed not to compete against Vertex in connection with the acquired businesses, or to solicit active customers of the acquired businesses for a period of five years and (b) certain of the employees of the sellers agreed to enter into three year employment agreements with Vertex’s newly formed subsidiaries.

Additionally, we are required to file and obtain effectiveness of a registration statement within 90 days following the Initial Closing (if the Securities and Exchange Commission does not review the filing) and 150 days following the Initial Closing (if the Securities and Exchange Commission does review the filing), registering the shares of common stock issuable in connection with the acquisition. In the event we fail to file the registration statement or obtain effectiveness of the registration within the time periods set forth in the Purchase Agreement, we are required to pay damages for each thirty (30) day period until cured, equal to that number of shares of common stock as equals 1% of the aggregate number of shares of common stock issued pursuant to the Purchase Agreement, however, we are not obligated to pay any liquidated damages if we are unable to fulfill our registration obligations as a result of rules, regulations, positions or releases or actions taken by the Securities and Exchange Commission.

The Final Closing remains subject to the satisfaction of certain customary closing conditions. The Purchase Agreement contains customary representations, warranties, covenants and indemnities by the parties thereto. Craig-Hallum Capital Group LLC is acting as exclusive financial advisor to the Company in connection with the acquisition and has provided a fairness opinion to the Board of Directors in connection with the transaction.

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.  We operate in three divisions- the Black Oil, Refining and Marketing and Recovery 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 end customers. Our Recovery division is a generator solutions company for the proper recovery and management of hydrocarbon streams. We operate a refining facility that uses our proprietary TCEP technology and we also utilize third-party processing facilities.

We recently acquired a 70% interest in E-Source (as described above) a company that leases and operates a facility located in Houston, Texas, and provides dismantling, demolition, decommission and marine salvage services at industrial facilities throughout the Gulf Coast.   E-Source also owns and operates a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials.

Black Oil Division

Our Black Oil division is engaged in operations across the entire used motor oil recycling value chain including collection, aggregation, transportation, storage, refinement, and sales of aggregated feedstock and re-refined products to end users. 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 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

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motor oil.   We also aggregate used oil from a diverse network of approximately 50 suppliers who operate similar collection businesses to ours.

We manage the logistics of transport, storage and delivery of used oil to our customers.   We own a fleet of seven 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.  We also use our proprietary TCEP technology to re-refine used oil into marine fuel cutterstock and a higher-value feedstock for further processing.

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 feedstocks 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 have a toll-based processing agreement in place with KMTEX, Ltd. (“KMTEX”) to re-refine feedstock streams, under our direction, into various end products that we specify.  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.

Recovery Division

The Recovery division is a generator solutions company for the proper recovery and management of hydrocarbon streams. The Recovery division also provides industrial dismantling, demolition, decommissioning, investment recovery and marine salvage services in industrial facilities. The Company (through this division) owns and operates a fleet of eight trucks and heavy equipment used for processing, shipping and handling of reusable process equipment and other scrap commodities.

We currently provide our services in 13 states, primarily in the Gulf Coast and Central Midwest regions of the United States.  For the rolling twelve month period ending March 31, 2014, we aggregated approximately 78 million gallons of used motor oil and other petroleum by-product feedstocks and managed the re-refining of approximately 26.8 million gallons of used motor oil with our proprietary TCEP.

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 patented TCEP technology.  TCEP is a technology which utilizes 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.

TCEP differs from conventional re-refining technologies, such as vacuum distillation and hydrotreatment, by relying more heavily on chemical processes to remove impurities rather than temperature and pressure. Therefore, the capital requirements to build a TCEP plant are typically much less than a traditional re-refinery because large feed heaters, vacuum distillation columns, and a hydrotreating unit are not required.  The end product currently produced by TCEP is used as fuel oil cutterstock. Conventional re-refineries produce lubricating base oils or product grades slightly lower than base oil that can be used as industrial fuels or transportation fuel blendstocks.

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 50 million gallons at another location would be approximately $10 to $15 million,

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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 continued improvements in 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 as the acquisition of Omega's assets (as described in greater detail above).  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.

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, 2012, on September 11, 2012 in connection with the Acquisition, described above, we acquired 70% of E-Source (as described above), and have completed the Initial Closing in connection with the Omega acquisition, as described above.

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RESULTS OF OPERATIONS

Description of Material Financial Line Items:

Revenues

We generate revenues from three 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.  In addition, through used oil re-refining, we re-refine used oil through TCEP.  The finished product is then sold by barge as a fuel oil cutterstock and a feedstock component for major refineries.

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.  

RECOVERY - The Recovery division is a generator solutions company for the proper recovery and management of hydrocarbon streams. This division also provides dismantling, demolition, decommission and marine salvage services at industrial facilities. We own and operate a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials.

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

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 processing costs, transportation costs, purchasing and receiving costs, analytical assessments, brokerage fees and commissions, and 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 of 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.

RECOVERY - The Recovery division incurs cost of revenues relating to the purchase of hydrocarbon products, purchasing and receiving costs, inspection, demolition and transporting of metals and other salvage and materials. 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, #6 oil and metals.  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.

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.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2014 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2013

Set forth below are our results of operations for the three months ended March 31, 2014, as compared to the same period in 2013.  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 March 31,
	2014			2013			$ Change			% Change
Revenues	$	47,349,658		$	33,254,801		$	14,094,857		42	%
Cost of Revenues	42,205,170			29,785,043			(12,420,127		)	(42	)%
Gross Profit	5,144,488			3,469,758			1,674,730			48	%
Selling, general and administrative expenses	3,587,489			2,221,492			(1,365,997		)	(61	)%
Acquisition related expenses	600,412			36,592			(563,820		)	(1,541	)%
Income from operations	956,587			1,211,674			(255,087		)	(21	)%
Other Income	370			25,289			(24,919		)	(99	)%
Other expense	—			(40,726		)	40,726			100	%
Interest Expense	(75,811		)	(106,140		)	30,329			(29	)%
Total other (expense)	(75,441		)	(121,577		)	46,136			(38	)%
Income before income taxes	881,146			1,090,097			(208,951		)	(19	)%
Income tax (expense) benefit	—			(6,502		)	6,502			100	%
Net income	$	881,146		1,083,595			$	(202,449	)	(19	)%
Net income attributable to non-controlling interest	(18,981		)	—			$	(18,981	)	(100	)%
Net income attributable to Vertex Energy, Inc.	$	862,165		$	1,083,595		$	(221,430	)	(20	)%

Each of our segments’ gross profit during the three months ended March 31, 2014 and 2013 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 March 31,
Black Oil Segment	2014		2013		$ Change			% Change
Total revenue	$	23,571,400	$	23,199,308	$	372,092		2	%
Total cost of revenue	21,091,283		20,416,314		(674,969		)	(3	)%
Gross profit	$	2,480,117	$	2,782,994	$	(302,877	)	(11	)%
Refining Segment
Total revenue	$	19,827,459	$	8,831,746	$	10,995,713		125	%
Total cost of revenue	18,250,066		8,224,134		(10,025,932		)	(122	)%
Gross profit	$	1,577,393	$	607,612	$	969,781		160	%
Recovery Segment
Total revenue	$	3,950,799	$	1,223,747	$	2,727,052		223	%
Total cost of revenue	2,863,821		1,144,595		(1,719,226		)	(150	)%
Gross profit	$	1,086,978	$	79,152	$	1,007,826		1,273	%

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 42% for the three months ended March 31, 2014, compared to the same period in 2013, due primarily to an increase in overall volume of product sold during the three months ended March 31, 2014 compared to 2013. Total

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volume increased 41% largely as a result of the increased volume the Company has seen over the past nine months of Cutterstock and Gasoline products managed by our Refining and Marketing division, and gross profit increased 48% for the three months ended March 31, 2014 compared to 2013. Additionally, our per barrel margin increased 5% relative to the three months ended March 31, 2013. This increase was a result of the E-Source business being added which is part of our Recovery division, as well as some improved margins in our Refining and Marketing division.

Our Black Oil division's volume decreased approximately 1% during the three months ended March 31, 2014 compared to the same period in 2013. This decrease was due to the decreased amount of volume managed by our 3rd party supply business out of our Mobile, Alabama location as well as the upper Midwest during the first quarter of 2014, this decrease in supply was mostly due to the colder weather experienced during the three months ended March 31, 2014 which put an increased amount of demand on the supply in this region of the country.

Overall volume for the Refining and Marketing division increased 155% during the three month period ended March 31, 2014 as compared to the same period in 2013. This division experienced an increase in production of 158% for its gasoline blendstock for the three months ended March 31, 2014, compared to the same period in 2013. Our fuel oil cutter volumes increased 178% for the three months ended March 31, 2014, compared to the same period in 2013. Our pygas volumes increased 106% for the three months ended March 31, 2014 as compared to the same period in 2013. These increases are a result of some new feedstock streams that we started managing during the third quarter of 2013.

We experienced a 41% increase in the volume of our TCEP refined product during the three months ended March 31, 2014, compared to the same period in 2013. This increase is a result of the improvements that were made in 2013 to improve efficiencies and improve the volume throughput at the facility. In addition, commodity prices decreased approximately 8% for the three months ended March 31, 2014, compared to the same period in 2013. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the three months ended March 31, 2014 decreased $7.84 per barrel from a three month average of $97.13 per barrel to $89.29 per barrel.

Our Recovery division includes the business operations of Vertex Recovery as well as the recently acquired business of E-Source. This is a newly formed Segment as of the fourth quarter of 2013 (provided that our historical segment information provided below and elsewhere throughout this filing has been retroactively adjusted to include the Recovery division had it been in place during the periods presented). Revenues for this division increased substantially as a result of the E-Source business during the three months ended March 31, 2014. This division periodically participates in project works that are not ongoing thus we expect to see fluctuations in revenue and gross profit from this division from period to period.

Overall gross profit increased 48% and our margin per barrel increased approximately 5% for the three months ended March 31, 2014, compared to the same period in 2013. This improvement was a result of increased volumes.

Our TCEP technology generated revenues of $19,736,408 during the three months ended March 31, 2014, with cost of revenues of $17,098,562, producing a gross profit of $2,637,846.  The per barrel margin for our TCEP product decreased 30% as compared to same period during 2013.  This decrease was a result of a drop in the market value of the finished product of over 8% while feedstock costs remained unchanged.

The following table sets forth the high and low spot prices during the first three months of 2014 for our key benchmarks.

2014
Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.00	March 3	$	2.73	February 4
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	2.84	March 14	$	2.54	January 3
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	91.81	February 24	$	87.09	January 13
NYMEX Crude oil (Dollars per barrel)	$	104.92	March 3	$	91.66	January 9
Reported in Platt's US Marketscan (Gulf Coast)

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The following table sets forth the high and low spot prices during the first three months of 2013 for our key benchmarks.

2013
Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.25	February 12	$	2.78	March 25
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.21	February 15	$	2.65	January 11
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	101.02	February 14	$	94.21	January 15
NYMEX Crude oil (Dollars per barrel)	$	97.94	January 30	$	90.12	March 4
Reported in Platt's US Marketscan (Gulf Coast)

We saw a decrease during the first quarter of 2014 in each of the benchmark commodities we track compared to the same period in 2013.

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 can be influenced by many factors, 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.

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, we anticipate that 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 and improve our technologies 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 (as described above, our revenues track the spread between the prices we purchase feedstock for and the prices we can sell finished product at), 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.

We had total selling, general and administrative expenses of $4,187,901 for the three months ended March 31, 2014, compared to $2,258,084 for the prior year’s period, an increase of $1,929,817 or 85% from the prior period.  This increase is primarily due to the additional selling, general and administrative expenses generated by the new business lines, specifically from the E-source business, as well as increased sales expenses associated with our expansion into new markets. The Company incurred an additional $600,412 of legal, accounting, auditing, investment banking expenses and other one-time expenses related to current acquisitions during the three months ended March 31, 2014, compared to $36,592 during the three months ended March 31, 2013.

We had net income from operations of $956,587 for the three months ended March 31, 2014, compared to net income from operations of $1,211,674 for the three months ended March 31, 2013, a decrease of $255,087 or 21% from the prior year’s period.  The decrease was mainly due to increased expenses associated with new product lines and certain one-time expenses associated with acquisitions offset by an increase in volumes and revenues during the three month period ended March 31, 2014.  

We had net income of $881,146 for the three months ended March 31, 2014, compared to net income of $1,083,595 for the three months ended March 31, 2013, a decrease in net income of $202,449 or 19% from the prior period. Net income related to the 30% minority interest in E-Source was $18,981. We had net income attributable to the Company of $862,165 for the three months ended March 31, 2014, compared to $1,083,595 for the three months ended March 31, 2013, a decrease in net income of $221,430 or 20% from the prior year period.

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Set forth below, we have disclosed a quarter-by-quarter summary of our statements of operations and statements of operations by segment information for the quarters ended December 31, September 30, June 30, and March 31, 2012, and 2013 and March 31, 2014 respectively.

				Statements of Operations by Quarter
	Fiscal 2014			Fiscal 2013												Fiscal 2012
	First			Fourth			Third			Second			First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter
Revenues	$	47,349,658		$	46,770,402		$	46,830,647		$	35,111,402		$	33,254,801		$	32,256,541		$	36,195,570		$	31,293,193		$	34,827,939
Cost of Revenues	42,205,170			41,340,555			41,945,879			32,556,738			29,785,043			29,290,855			33,011,934			30,542,452			31,942,875
Gross Profit	5,144,488			5,429,847			4,884,768			2,554,664			3,469,758			2,965,686			3,183,636			750,741			2,885,064
Reduction of contingent liability	—			(388,750		)	—			(1,850,000		)	—			—			—			—			—
Selling, general and administrative expenses	3,587,489			4,359,857			2,495,748			2,395,745			2,221,492			2,413,181			1,610,146			919,227			1,194,747
Acquisition related expenses	600,412			17,150			—			—			36,592			101,964			1,154,612			—			—
Total selling, general and administrative expenses	4,187,901			3,988,257			2,495,748			545,745			2,258,084			2,515,145			2,764,758			919,227			1,194,747
Income (loss) from operations	956,587			1,441,590			2,389,020			2,008,919			1,211,674			450,541			418,878			(168,486		)	1,690,317
Other income (expense)
Other income	370			4,809			—			7,598			25,289									—
Other expense	—			(9,838		)	(3,949		)	—			(40,726		)	158			949			633			—
Interest expense	(75,811		)	(108,327		)	(95,488		)	(112,999		)	(106,140		)	(106,348		)	(28,972		)	—			(44		)
Total other income (expense)	(75,441		)	(113,356		)	(99,437		)	(105,401		)	(121,577		)	(106,190		)	(28,023		)	633			(44		)
Income (loss) before income taxes	881,146			1,328,234			2,289,583			1,903,518			1,090,097			344,351			390,855			(167,853		)	1,690,273
Income tax benefit (expense)	—			1,678,539			40,211			(12,248		)	(6,502		)	(207,000		)	1,714,813			8,828			(116,000		)
Net income (loss)	881,146			3,006,773			2,329,794			1,891,270			1,083,595			137,351			2,105,668			(159,025		)	1,574,273
Net income attributable to non-controlling interest	(18,981		)	(431,962		)	—			—			—			—			—			—			—
Net income attributable to Vertex Energy, Inc.	$	862,165		$	2,574,811		$	2,329,794		$	1,891,270		$	1,083,595		$	137,351		$	2,105,668		$	(159,025	)	$	1,574,273
Number of weighted average common shares outstanding
Basic	21,232,949			17,830,194			17,715,786			17,409,034			17,079,242			12,138,229			12,255,372			10,136,941			9,434,094
Diluted	23,738,018			20,182,829			19,997,257			19,887,288			20,139,182			14,866,134			16,484,023			10,136,941			15,473,017

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The below graph charts our total quarterly revenue over time from March 31, 2012 to March 31, 2014:

			Statements of Operations by Segments
	Fiscal 2014		Fiscal 2013								Fiscal 2012
	First		Fourth		Third		Second		First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter
Black Oil
Revenues	$	23,571,400	$	23,660,574	$	22,766,929	$	19,493,407	$	23,199,308	$	19,959,930	$	22,703,429	$	22,308,780	$	24,160,235
Cost of revenues	21,091,283		21,717,508		21,632,211		18,463,098		20,416,314		18,063,709		21,632,753		22,103,561		22,367,745
Gross profit	$	2,480,117	$	1,943,066	$	1,134,718	$	1,030,309	$	2,782,994	$	1,896,221	$	1,070,676	$	205,219	$	1,792,490
Refining & Marketing
Revenues	$	19,827,459	$	16,749,930	$	15,913,554	$	14,234,204	$	8,831,746	$	11,595,766	$	13,087,667	$	8,984,413	$	10,667,704
Cost of revenues	18,250,066		15,207,097		14,244,023		12,824,955		8,224,134		10,569,315		10,998,611		8,438,891		9,575,130
Gross profit	$	1,577,393	$	1,542,833	$	1,669,531	$	1,409,249	$	607,612	$	1,026,451	$	2,089,056	$	545,522	$	1,092,574
Recovery
Revenues	$	3,950,799	$	6,359,898	$	8,150,164	$	1,383,791	$	1,223,747	$	700,845	$	404,474	$	—	$	—
Cost of revenues	2,863,821		4,415,950		6,069,645		1,268,685		1,144,595		657,831		380,570		—		—
Gross profit	$	1,086,978	$	1,943,948	$	2,080,519	$	115,106	$	79,152	$	43,014	$	23,904	$	—	$	—

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Liquidity and Capital Resources

The success of our current business operations is not dependent on extensive capital expenditures (although we plan to construct additional TCEP facilities in the future, which will require substantial 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 $66,377,073 as of March 31, 2014 compared to $64,546,356 at December 31, 2013.   The increase was mainly due to the $862,165 of net income which was generated during the three months ended March 31, 2014, and a $2,337,816 increase in cash and cash equivalents as of March 31, 2014, which was impacted by a $986,095 reduction in inventory. Total current assets as of March 31, 2014 of $25,458,789 consisted of cash and cash equivalents of $5,016,444, accounts receivable, net, of $11,417,226, inventory of $7,554,364, and prepaid expenses of $1,470,755. Long term assets consisted of fixed assets, net, of $15,476,237, net intangible assets of $14,835,694, which primarily represents the value of the Company's TCEP patent, and $4,922,353 of goodwill (booked in connection with the Acquisition of Holdings and E-Source). In addition, mainly as a result of the approximately $30.75 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 tax asset of $5,684,000 as of March 31, 2014 compared to $5,684,000 at December 31, 2013. Our cash, accounts receivable, inventory and accounts payable fluctuate and are somewhat tied to one another based on the timing our inventory cycle and sales.

We had total current liabilities of $18,133,642 as of March 31, 2014 compared to $16,053,032 at December 31, 2013.  This increase was largely due to the increase in our accounts payable during the three months ended March 31, 2014, which accounts payable totaled $15,288,497 as of March 31, 2014, and a Term Note obtained in connection with the Acquisition from Bank of America (described in greater detail below) of which the current portion outstanding at March 31, 2014 was $1,700,000. In addition, we had $291,095 of current liabilities related to the E-Source acquisition and $854,050 owed to E-Source for the additional 19% ownership interest acquired during the three months ended March 31,2014.

We had total liabilities of $27,942,030 as of March 31, 2014, including current liabilities of $18,133,642 and long-term liabilities of $9,808,388, which included $4,108,333 of long-term debt representing non-current amounts due on the Term Note, and $2,101,805 related to E-Source debt, $3,220,250 of contingent consideration, after the reduction described above, relating to the earn-out payments associated with the Acquisition of Holdings and E-Source acquisition, and $378,000 of deferred federal income tax.

We had working capital of $7,325,147 as of March 31, 2014, compared to working capital of $8,042,589 as of December 31, 2013.  The decrease in working capital from December 31, 2013 to March 31, 2014 is due to an increase in cash and cash equivalents offset by an increase in accounts payable and a decrease in accounts receivable and inventory.

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.

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

Pursuant to the Credit Agreement, we had 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 could not exceed the lesser of (a) $10,000,000 and (b) an amount equal to the total of (i) 80% of our accounts in which BOA has a first-priority perfected security interest; (ii) 80% of our finished-goods inventory in which BOA holds a first-priority perfected security interest, in each case subject to the terms and conditions of the Credit Agreement.

Amounts borrowed under the Revolving Note bear interest at our option at the lesser of BOA’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.

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Amounts borrowed under the Term Note bear interest at our option at the lesser of BOA'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 $141,667 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.

The Credit Agreement was replaced by the Amended BOA Credit Agreement (defined and described below in May 2014).

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 “MaterialAcquisitions”- "Holdings" and to pay fees and costs associated with the closing of the Acquisition.

As of March 31, 2014, the Line of Credit had a balance of $0 and the Term Note had a balance of $5,808,333.

As a result of the E-Source acquisition, the Company has notes payable to various financial institutions, bearing interest at rates ranging from 5% to 6.35%. The balance of these notes is $2,392,900 as of March 31, 2014.

In February 2013, the Lender agreed to lease the Company up to $1,025,000 of equipment to enhance the TCEP operation. Monthly payments are fixed for the sixty month duration of the lease at $13,328 per month.  The lease also provides an early buy-out right for the Company and a right for the Company to extend the lease at the end of its term.  

Credit and Guaranty Agreement

Effective May 2, 2014, we and our newly formed subsidiary, Vertex Energy Operating, LLC (which was formed as a holding company to hold the Company’s operating subsidiaries, which were subsequently transferred to and are currently wholly-owned by Vertex Operating), as well as certain of our other direct and indirect subsidiaries (other than E-Source) as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Goldman Sachs Bank USA as lender and as administrative agent and collateral agent (the “Lender” or the “Agent”). Pursuant to the Credit Agreement, the Lender loaned us $40 million (the “Credit Agreement Loan”), which was evidenced by a Term Loan Note. Pursuant to the Credit Agreement, the Company has the option to select whether loans made under the Credit Agreement bear interest at (a) the greater of (i) the prime rate in effect, (ii) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate (defined below) and (B) 1%, and (iv) 4.5% per annum; or (b) the greater of (i) 1.50% and (ii) the applicable ICE Benchmark Administration Limited interest rate, divided by (x) one minus, (y) the maximum rate at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator (the “Adjusted LIBOR Rate”), in each case subject to the terms and conditions of the Credit Agreement, and in each case plus between 5.5% and 7.5% per annum (as provided in the Credit Agreement, based on several factors, including the Company’s total leverage). Interest on the Credit Agreement is payable monthly in arrears, provided that upon any event of default the interest rate increases to 2% per annum in excess of the applicable interest rate then in effect. The amount owed under the Credit Agreement is due and payable on May 2, 2019.

Amortizing principal payments are due on the Credit Agreement Loan in the amount of $300,000 per fiscal quarter for June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, and $800,000 per fiscal quarter thereafter through maturity. Additionally, in the event (a) we receive any sale proceeds from the sale of assets or insurance proceeds (each as described in greater detail in the Credit Agreement), in excess of $250,000, we are required to pay such sale proceeds, less certain deductions, as a prepayment of the Credit Agreement Loan, unless we decide to reinvest such proceeds in long-term production assets as described in the Credit Agreement; (b) we sell equity securities (subject to certain exceptions) we are required to use 100% of the proceeds from such sales to repay the Credit Agreement Loan, subject to certain exemptions, including up to $5 million to be used for working capital, permitted acquisitions, working capital of Vertex Refining Nevada and funds (which are required to total at least $10 million) which we are able to raise prior to June 30, 2014 (subject to the terms of the Credit Agreement) through the sale of securities; (c) we issue debt, we are required to prepay the Credit Agreement Loan in an amount equal to 100% of such funds received; (d) we have cash flow which exceeds certain pre-negotiated limits, we are required to use between 50% and 75% of such additional cash flow to repay the Credit Agreement Loan; (e) we receive tax refunds in excess of $100,000 in any year, we are required to use such funds to prepay the Credit Agreement Loan; (f) our total debt exceeds certain maximum debt ratios set forth in the Credit Agreement, we are required to immediately repay the Credit Agreement Loan in an amount equal to such excess debt; or (g) we receive any funds under the Purchase Agreement, we are required to prepay the Credit Agreement Loan in an amount equal to such received funds, subject in each case to the terms

24

and conditions of the Credit Agreement. We also have the right to make voluntary repayments of the Credit Agreement Loan in the minimum amount of $500,000 (and in multiples of $100,000) from time to time.

Except with respect to certain accounts, certain finished goods inventory and certain other reserves described in the Amended BOA Credit Agreement (as defined below), the amount owed pursuant to the Credit Agreement is secured by a first priority security interest in all of our assets and all of the assets and securities of our direct and indirect subsidiaries and is also guaranteed by our subsidiaries (other than E-Source) pursuant to the terms of the Credit Agreement, a Pledge and Security Agreement and Mortgage (providing a security interest over certain of our real property assets).

The Credit Agreement contains customary representations, warranties, covenants for facilities of similar nature and size as the Credit Agreement, and requirements for the Company to indemnify the Lender and the Agent for certain losses. The Credit Agreement also includes various covenants (positive and negative) binding the Company, including, requiring that the Company provide the Agent with certain reports, provide the Agent notices of material corporate events and forecasts, limiting the amount of indebtedness the Company may incur (for example, the Company’s total indebtedness cannot exceed between $30,000,000-$32,000,000 at any time, subject to certain exemptions set forth in greater detail in the Credit Agreement), and requiring us to maintain certain financial ratios, relating to consolidated EBITDA and debt leverage including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of between 0.90:1.00 and 1.25:1.00 (depending on the applicable quarter); maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 4:1 and 2:1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending June 30, 2018, of between $4.25 million and $17 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement (defined below), of at least $3 million.

The Credit Agreement includes customary events of default for facilities of a similar nature and size as the Credit Agreement, including if a default occurs under certain material agreements of the Company; a judgment is obtained against the Company in an amount in excess of $250,000 or which could have a material adverse effect on the Company; and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s Chief Executive Officer, Chairman of the Board and largest shareholder, ceases to own and control at least 20% of the economic and voting interests of the Company (on a fully-diluted basis); (b) any person other than Mr. Cowart (i) obtains 30% of more of the voting or economic interest in the Company on a fully-diluted basis or (ii) obtains the power (whether or not exercised) to elect a majority of the members of the Board of Directors; (c) we cease to own and control 100% of Vertex Operating; (d) the majority of the seats (other than vacant seats) on the Board of Directors of the Company cease to be occupied by persons who either (i) were members of the Board of Directors of the Company on May 2, 2014, or (ii) were nominated for election by the Board of Directors of the Company, a majority of whom were directors on May 2, 2014 or whose election or nomination for election was previously approved by a majority of such directors; (e) Vertex II, GP, LLC (Vertex Operating’s wholly-owned subsidiary) ceases to be the sole general partner of any guarantor of the Credit Agreement that is a partnership; (f) a “change of control” or similar event under the Amended BOA Credit Agreement (described below) shall occur; or (g) any event, transaction or occurrence occurs, a result of which Benjamin P. Cowart shall for any reason cease to be actively engaged in the day-to-day management of the Company and its subsidiaries in the role he serves on May 2, 2014, unless (x) an interim successor reasonably acceptable to Agent and the Lender as required by the Credit Agreement is appointed within 10 days and (y) a permanent successor reasonably acceptable to the Agent and the Lender as required by the Credit Agreement is appointed within 60 days.

Additionally, in connection with our entry into the Credit Agreement, all parties to whom any deferred purchase price or “earn-out” obligations are owed by us executed and delivered to the Agent an Earnout Subordination Agreement (other than one of the individuals who is owed earn-out payments in connection with the E-Source purchase), pursuant to which they agreed to not receive or demand any “earn-out” payments until the Lender and BOA are paid in full under the credit agreements.

In connection with the closing of the Credit Agreement, we agreed to pay the Agent’s legal fees and transaction costs associated with the transactions contemplated by the Credit Agreement. We also paid an aggregate of approximately $1.7 million in commissions and fees to our advisors Craig-Hallum Capital Group LLC, Sapphire Financial Group, LLC and Wunderlich Securities, Inc. in consideration for financial advisory services rendered in connection with the Purchase Agreement and credit agreements, the transactions contemplated therein in and in certain cases a fairness opinion obtained on certain of the transactions.

The proceeds from the Credit Agreement were used to pay the amounts due at the Initial Closing of the Omega purchase (described above), pay certain Omega capital leases and other obligations of Omega, and to pay expenses associated with the Initial Closing of the Omega acquisition.

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Amended and Restated Credit Agreement with Bank of America, N.A.

On May 2, 2014, we and Vertex Operating entered into an Amended and Restated Credit Agreement (the “Amended BOA Credit Agreement” and together with the “Credit Agreement”, the “Credit Agreements”) with BOA. The Amended BOA Credit Agreement amended and restated the prior credit agreement we entered into with BOA in August 2012. Pursuant to the Amended BOA Credit Agreement, BOA agreed to loan us up to $20 million (the “BOA Loan”), subject to the terms of the Amended BOA Credit Agreement and certain lending ratios set forth therein, provided that the amount outstanding cannot exceed an amount equal to the total of (i) 80% of the Company’s accounts in which BOA has a first-priority perfected security interest; (ii) 65% of the Company’s finished-goods inventory in which BOA holds a first-priority perfected security interest, in each case subject to the terms and conditions of the credit agreement, plus (iii) certain reserves established by BOA.

We have the right to request up to three increases in the amount of the facility, which in the aggregate cannot exceed $10 million and which individually are required to be a minimum of $3 million each, provided that BOA has the right to approve any increase in its sole discretion. Loans made pursuant to the Amended BOA Credit Agreement are evidenced by a Revolving Note, which replaced the Company’s August 2012 Revolving Note, which was repaid on May 2, 2014 in connection with the parties’ entry into the Amended BOA Credit Agreement.

Amounts borrowed under the Revolving Note bear interest at the option of the Company at BOA’s prime commercial lending rate then in effect plus between 1.25% and 2% per annum (depending on the Company’s leverage ratio from time to time) or the LIBOR rate in effect plus between 2.35% and 3% per annum (depending on the Company’s leverage ratio from time to time), and are payable monthly in arrears (provided that upon an event of default the interest rate then in effect increases by 4% per annum). The Revolving Note is due and payable on May 2, 2017.

We have the right to prepay the Revolving Note at any time without penalty. We are also required to make certain mandatory prepayments on the Revolving Note as described therein.

The Amended BOA Credit Agreement also requires BOA to provide us certain letters of credit as described therein.

We agreed to pay BOA a commitment fee equal to between 0.25% and 0.35% (depending on our leverage ratio) multiplied by the actual daily amount by which the maximum amount BOA has agreed to loan us (currently $20 million) exceeds the amount loaned (and subject to letters of credit), which is due and payable quarterly in arrears on the last day of each March, June, September, and December, beginning June 30, 2014, until maturity. We also paid BOA $50,000 at closing in fees. In connection with letters of credit issued by BOA, we agreed to pay BOA a fee equal to the greater of 2% per annum (multiplied by the daily maximum amount available to be drawn) and $500 per line of credit.

    The Amended BOA Credit Agreement contains customary representations, warranties, covenants and requirements for the Company to indemnify BOA and its affiliates. The Amended BOA Credit Agreement also includes various covenants (positive and negative) binding upon the Company, including, requiring that the Company comply with certain reporting requirements, provide notices of material corporate events and forecasts to BOA, and maintain certain financial ratios, relating to debt leverage, consolidated EBITDA, maximum debt exposure we can incur (provided that if we exceed such maximum debt exposure limit as set forth in the Amended BOA Credit Agreement, we are required to immediately repay any amount exceeding the limits set forth in the BOA Credit Agreement) and minimum liquidity, including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of not less than 1.25 to 1.00; maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 3.5 to 1 and 2 to 1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending March 30, 2017, of between $4.25 million and $15.5 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement, of at least $3 million.

The Amended BOA Credit Agreement includes customary events of default for facilities of a similar nature and size as the Amended BOA Credit Agreement, including if an event of default occurs under any agreement the Company is subject to and in an amount in excess of $250,000 or if the Company breaches any term of any material agreement the Company is party to, subject to its right to cure such breach(s) under the Amended BOA Credit Agreement, and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s 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 20% of the equity interests of the Company; (b) the Company ceases at any time to own and control 100% of Vertex Operating or certain other of its subsidiaries; (c) Vertex Acquisition Sub, LLC (Vertex Operating’s wholly-

26

owned subsidiary) ceases to control 100% of its current subsidiaries; (d) certain other changes in control of our subsidiaries occur; (e) a “change of control” or similar event or event of default occurs under the Credit Agreement; or (f) a default occurs under certain lease agreements related to premises leased by the Company.

The amounts due pursuant to the Amended BOA Credit Agreement are secured by a Pledge and Security Agreement and various Deeds of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filings in favor of BOA. Additionally, Vertex Operating and the Company and each of the Company’s subsidiaries (other than E-Source) pledged all collateral which they own (including securities held) as security for the repayment of the amounts due pursuant to the Amended BOA Credit Agreement and guaranteed the amounts owed pursuant to an Amended and Restated Guaranty.

We used and will use the proceeds borrowed pursuant to the Amended BOA Credit Agreement to consummate the transactions contemplated by the Initial Closing of the Purchase Agreement, pay costs associated with the Amended BOA Credit Agreement and for working capital and other general corporate purposes.

Need for additional funding

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 $10 to $15.0 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.

Management believes that our Credit Agreements, in addition to projected earnings, will provide sufficient liquidity to fund our operations for the foreseeable future, although we may seek additional financing to fund acquisitions or other development in the future.

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 goals for 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 us 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 NASDAQ Capital Market, 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 not relate to the actual value of our company, and may not reflect the actual value of our common stock. Shareholders and potential investors in our common stock should exercise caution before making an investment in our common stock, 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 our public reports, industry information, and those business valuation methods commonly used to value private companies.

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Cash flows for the three months ended March 31, 2014 compared to the three months ended March 31, 2013

	Three Months Ended March 31,
	2014			2013
Beginning cash and cash equivalents	$	2,678,628		$	807,940
Net cash provided by (used in):
Operating activities	3,412,397			3,139,419
Investing activities	(780,616		)	93,207
Financing activities	(293,965		)	(2,723,735		)
Net increase (decrease)  in cash and cash equivalents	2,337,816			508,891
Ending cash and cash equivalents	$	5,016,444		$	1,316,831

Operating activities provided cash of $3,412,397 for the three months ended March 31, 2014 as compared to $3,139,419 of cash being provided during the corresponding period in 2013.  Our primary sources of liquidity are cash flows from our operations and the availability to borrow funds under our Credit Facilities, notes and lease line of credit with Bank of America, as described above.  The primary reasons for the increase in cash provided by operating activities are related to the decrease in accounts receivable of $297,587 (compared to an increase of $222,270 in the prior period), $881,146 of net income (compared to $1,083,595 in the prior period), $732,677 of depreciation and amortization (compared to $532,718 in the prior period), $986,095 of decrease in inventory (compared to an increase of $37,871 in the prior period) and $1,192,312 of increase in accounts payable (compared to an increase of $1,771,924 in the prior period) offset by a $728,644 increase in prepaid expenses (compared to an increase of $26,731 in the prior period).

Investing activities used cash of $780,616 for the three months ended March 31, 2014 as compared to having provided $93,207 of cash during the corresponding period in 2013.  Investing activities for the three months ended March 31, 2014 are comprised of $780,616 in cash payments used to purchase miscellaneous operating assets.

Financing activities used cash of $293,965 for the three months ended March 31, 2014 as compared to having used $2,723,735 of cash during the corresponding period in 2013.  Financing activities for the three months ended March 31, 2014 are comprised of $666,386 in cash payments towards the repayment of the Term Note and Revolving Note and $351,921 proceeds from additional notes payable, $3,500 payments related to the primary stock offering undertaken by the Company in the fourth quarter of 2013, and $24,000 of cash provided during the three months ended March 31, 2014 in connection with proceeds from the exercise of common stock options.

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, 2013, the Company had utilized approximately $11.25 million of these NOLs leaving approximately $30.75 million of potential NOLs of which we expect to utilize approximately $0.4 million for the three months ended March 31, 2014.  The Company recorded a change in the valuation allowance as of March 31, 2014 for approximately $136,000.

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.

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We evaluate the carrying value and recoverability of our 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 our 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 and third party processing facility via barge. Revenue is also recognized as recovered scrap materials are sold and projects are completed.

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

We account 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. We estimate 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. We believe 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 Income/ Loss per Share

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

Income Taxes

We account for income taxes in accordance with the FASB ASC Topic 740.  We record 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.  We consider, 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

29

January 1, 2013. The adoption of this guidance effective January 1, 2013 did 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.

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.

We are not currently involved in legal proceedings 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 for the year ended December 31, 2013, filed with the Commission on March 25, 2014, and in the Form 10-K, prior to making an investment in the Company.

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

During the three months ended March 31, 2014, a total of 39,660 shares of the Company's Series A Preferred Stock were converted into 39,660 shares of our common stock on a one-for-one basis.  Options to purchase 26,250 shares of common stock were exercised for a net of 22,390 shares of common stock (when adjusting for a cashless exercise of 6,250 of such options and the payment, in shares of common stock, of an aggregate exercise price of $13,125, along with an exercise price of $24,000 paid in cash in connection with such exercises) and 22,390 shares of common stock were issued to the option holders in connection with such exercises.

Subsequent to March 31, 2014, (a) 500,000 shares of the Company's Series A Preferred Stock were converted into 500,000 shares of our common stock on a one-for-one basis; (b) options to purchase 258,750 shares of common stock were exercised for a net of 247,081 shares of common stock (when adjusting for a cashless exercise of 153,750 of such options and the payment, in shares of common stock, of an aggregate exercise price of $80,375, along with an exercise price of $51,250 paid in cash in connection with such exercises) and 247,081 shares of common stock were issued to the option holders in connection with such exercises; and (c) 500,000 shares of the Company's restricted common stock were issued in connection with the Omega acquisition.

All of the shares of common stock issuable upon conversion of the Series A Preferred Stock shares were exempt from registration pursuant to an exemption from registration afforded by Section 3(a)(10) of the Securities Exchange Act of 1934, as amended. All of the shares of common stock issuable upon exercise of options were registered on Form S-8 and therefore did not constitute restricted securities (except to the extent such securities were acquired by "affiliates" of the Company).

The issuance of restricted shares in connection with the Omega transaction was exempt from registration pursuant to Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended, since the issuance did not involve a public offering, the recipient took the securities for investment and not resale, we took appropriate measures to restrict transfer, and the recipient was an "accredited investor".

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

None.

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Item 6.  Exhibits

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference. 

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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: May 13 , 2014	By: /s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)
Date: May 13 , 2014	By: /s/ Chris Carlson
	Chris Carlson
	Chief Financial Officer
	(Principal Financial Officer)

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EXHIBIT INDEX

			Incorporated by Reference
Exhibit Number	Description of Exhibit	Filed or Furnished Herewith	Form	Exhibit	Filing Date/Period End Date	File No.
1.1	Underwriting Agreement, dated November 20, 2013, by and among Vertex Energy, Inc. and Craig-Hallum Capital Group LLC		8-K	1.1	11/21/2013	001-11476
2.1	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		8-K	2.1	8/15/2012	000-53619
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		8-K	2.2	9/12/2012	000-53619
2.3	Asset Purchase Agreement by and among Vertex Energy, Inc., Vertex Refining LA, LLC.,Vertex Refining NV., LLC, Omega Refining, LLC, Bango Refining NV, LLC and Omega Holdings Company LLC (March 17, 2014)		8-K	2.1	3/19/2014	001-11476
2.4	First Amendment to Asset Purchase Agreement by and among Vertex Energy, Inc., Vertex Refining LA, LLC, Vertex Refining NV, LLC, Omega Refining, LLC, Bango Refining NV, LLC and Omega Holdings Company LLC (April 14, 2014)		8-K	2.2	4/15/2014	001-11476
2.5	Second Amendment to Asset Purchase Agreement by and among Vertex Energy, Inc., Vertex Refining LA, LLC, Vertex Refining NV, LLC, Bango Refining NV, LLC and Omega Holdings Company LLC (April 30, 2014)		8-K	2.3	5/6/2014	001-11476
2.6(#)	Third Amendment to Asset Purchase Agreement by and among Vertex Energy, Inc., Vertex Refining LA, LLC, Vertex Refining NV, LLC, Bango Refining NV, LLC and Omega Holdings Company LLC (May 2, 2014)		8-K	2.4	5/6/2014	001-11476
10.1(+)	Tolling Agreement between KMTEX, Ltd. and Vertex Energy Inc., dated April 17, 2013		8-K	10.1	11/12/2013	001-11476
10.2	Credit Agreement between Vertex Energy Inc. and Bank of America, N.A. dated August 31, 2012		8-K	10.1	9/12/2012	000-53619
10.3	$10,000,000 Revolving Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012		8-K	10.2	9/12/2012	000-53619
10.4	$8,500,000 Term Note by Vertex Energy, Inc. in favor of Bank of America, N.A. dated August 31, 2012		8-K	10.3	9/12/2012	000-53619
10.5	Security Agreement with Bank of America, N.A. dated August 31, 2012		8-K	10.4	9/12/2012	000-53619

34

10.6	Corporate Guaranty in favor of Bank of America, N.A. dated August 31, 2012		8-K	10.5	9/12/2012	000-53619
10.7	First Amendment to Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012		10-Q	10.18	9/30/2012	000-53619
10.8(#)	Secured Promissory Note ($13,858,066.67)-May 2, 2014-Omega Refining, LLC and Bango Refining NV, LLC as borrowers and Vertex Refining NV, LLC as lender		8-K	10.1	5/6/2014	001-11476
10.9	Guaranty Agreement-Omega Holdings-May 2, 2014		8-K	10.2	5/6/2014	001-11476
10.10(#)	Credit and Guaranty Agreement dated as of May 2, 2014, by and among Vertex Energy Operating, LLC, Vertex Energy, Inc., and certain other subsidiaries of Vertex Energy, Inc., as Guarantors, and Goldman Sachs USA, as Lender and as Administrative Agent, Collateral Agent, and Lead Arranger		8-K	10.3	5/6/2014	001-11476
10.11	Term Loan Note ($40,000,000)-Credit and Guaranty Agreement dated as of May 2, 2014		8-K	10.4	5/6/2014	001-11476
10.12(#)	Pledge and Security Agreement-Credit and Guaranty Agreement dated as of May 2, 2014		8-K	10.5	5/6/2014	001-11476
10.13(#)	Amended and Restated Credit Agreement, among Vertex Energy, Inc., and Vertex Energy Operating, LLC, as Borrowers and Bank of America, N.A., as Lender as of May 2, 2014		8-K	10.6	5/6/2014	001-11476
10.14	Revolving Note ($20,000,000)-Amended and Restated Credit Agreement, as of May 2, 2014		8-K	10.7	5/6/2014	001-11476
10.15(#)	Pledge and Security Agreement-Amended and Restated Credit Agreement, as of May 2, 2014		8-K	10.8	5/6/2014	001-11476
10.16	Amended and Restated Guaranty-Amended and Restated Credit Agreement, as of May 2, 2014		8-K	10.9	5/6/2014	001-11476
10.17	Intercreditor Agreement, May 2, 2014, by and among Bank of America, N.A. and Goldman Sachs Bank USA		8-K	10.10	5/6/2014	001-11476
21.1	Subsidiaries		10-K	21.1	12/31/2013	001-11476
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*	X
31.2	Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act*	X
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act**	X
32.2	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act**	X
99.1	Glossary of Selected Terms		10-K	99.1	12/31/2012	001-11476
101.INS++	XBRL Instance Document	X
101.SCH++	XBRL Taxonomy Extension Schema Document	X

35

101.CAL++	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF++	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB++	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE++	XBRL Taxonomy Extension Presentation Linkbase Document	X

* Filed herewith.

** Furnished herewith.

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

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

# Certain portions of this document (which portions have been replaced by "***'s") have been omitted in connection with a request for Confidential Treatment which has been submitted to the Commission. 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.

36

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 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 a 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 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: May 13, 2014	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 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 a 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 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: May 13, 2014	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 March 31, 2014, 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.

Date: May 13, 2014	By:	/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 March 31, 2014, 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.

Date: May 13, 2014	By:	/s/ Chris Carlson
		Chris Carlson Chief Financial Officer (Principal Accounting Officer)

EX-99.2

EXHIBIT 99.2

VERTEX ENERGY, INC.

CHARTER OF THE:

RISK COMMITTEE

Effective July 24, 2013

Vertex Energy, Inc. (the “Company”)

Risk Committee Charter

Role:

The Risk Committee's (the “Committee’s”) role is to assist the Board of Directors (the “Board”) in connection with the oversight of the Company’s management of key risks, including strategic and operational risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks in connection with, among other things, sales, market dynamics, and hedging strategies.

Membership:

The membership of the Committee will consist of at least two directors of the Company, who shall satisfy the definition of “independent” under the listing standard of the NASDAQ Capital Market, or such other exchange(s) upon which the Company’s securities are then listed from time to time (the “Exchange”).

The Board may remove any member from the Committee at any time with or without cause.   Each Committee member may be required to satisfy certain independence requirements of applicable securities laws (including as set forth above), rules or guidelines and any other applicable regulatory rules. Determinations as to whether a particular director satisfies the requirements for membership on the Committee shall be made by the full Board.

Operations:

The Board shall designate one member of the Committee to act as its chairperson.  The Committee will meet a minimum of once a year. Additional meetings may occur as the Committee or its chair deems advisable. The Committee may also meet periodically in executive session without Company management present. The Committee will cause to be kept adequate minutes of its proceedings, and will report on its actions and activities at the next quarterly meeting of the Board. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee is authorized to adopt its own rules of procedure not inconsistent with (a) any provision of the Company’s Articles of Incorporation, (b) any provision of the Bylaws of the Company, or (c) the laws of the State of Nevada.

Authority:

Except as otherwise delegated by the Board or the Committee, the Committee will act on behalf of the Board. The primary responsibility for assisting the Board in its oversight with respect to operating risk, legal risk and compliance rests with the Audit Committee. The Chairman of the Committee shall coordinate with the Chairman of the Company’s Audit Committee to assist the Audit Committee in its review of the Company’s risks that have been delegated to the Audit Committee in its charter. The Chairman of the Committee shall also coordinate with the Chairman of the Compensation Committee to assist the Compensation Committee in its consideration of the relationship between risk management policies and practices, corporate strategy and senior executive compensation.

The Committee shall have the resources and appropriate authority, without seeking the approval of the Board, to discharge its responsibilities, including the authority to retain, at the Company’s expense (without requiring any Board approval for the fees and other retention terms for such persons), outside legal or other consultants to advise the Committee and to authorize or conduct investigations into any matters within the scope of its responsibilities and to approve related fees and retention terms.  The Committee may request any director, officer or employee of the Company, the Company’s outside counsel or independent auditors or such other persons as it deems appropriate to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.  The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.  The Committee shall have full access to all books, records, facilities and personnel of the Company in connection with the discharge of its responsibilities.

Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.

The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee to perform certain of its duties from time to time.

Performance Evaluation:

The Committee shall review its own performance and reassess the adequacy of this Charter at least annually in such manner as it deems appropriate, and submit such evaluation, including any recommendations for change, to the full Board for review, discussion and approval.

Responsibilities:

Risk assessment and risk management are the responsibility of the Company’s management and the Audit Committee. Subject to the sole determination of the Board and where applicable, the Audit Committee, the principal responsibilities and functions of the Risk Committee are as follows:

1. To review and discuss with management the Company’s risk governance structure, risk assessment and risk management practices, the guidelines, policies and processes for risk assessment and risk management and the effectiveness of applicable risk management frameworks.

2. To review and discuss with management the Company’s risk appetite, tolerance and strategy relating to key risks, including credit risk, legal risk, regulatory risk, operational risk, liquidity and funding risk, market risk, product and sales risk, risk relating to hedging transactions and reputational risk, as well as the guidelines, policies and processes for monitoring and mitigating such risks.

3. Review at least yearly, the major risk exposures of the Company and its business units, including market, credit, operational, liquidity, funding, and reputational risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures.

4. To assess whether compliance and risk mitigation programs and initiatives are fulfilling their purpose or require any modification, and suggest remedial action where necessary.

5. To review disclosure regarding risk contained in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, if any.

6. To review reports on selected risk topics as the Committee deems appropriate from time to time.

7. To discharge any other duties or responsibilities delegated to the Committee by the Board.

The Committee shall make such recommendations with respect to any of the above and other matters as the Committee deems necessary or appropriate. The Committee shall periodically report to the Audit Committee with respect to Risks related to or affecting the Company’s financial statements and where applicable the Compensation Committee with respect to risks affecting senior executive compensation.

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SUBSEQUENT EVENTS (Details 1) (USD $)	1 Months Ended	3 Months Ended				3 Months Ended		0 Months Ended		3 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended
	May 13, 2014 Subsequent Event	Mar. 31, 2015 Forecast 2014 Goldman Sachs Bank Credit Agreement	Dec. 31, 2014 Forecast 2014 Goldman Sachs Bank Credit Agreement	Sep. 30, 2014 Forecast 2014 Goldman Sachs Bank Credit Agreement	May 02, 2014 E-Source Holdings, LLC Subsequent Event	Mar. 31, 2014 Term Loan	May 02, 2014 Term Loan Subsequent Event	May 02, 2014 Term Loan 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Forecast 2014 Goldman Sachs Bank Credit Agreement	Jun. 30, 2015 Term Loan Forecast 2014 Goldman Sachs Bank Credit Agreement	Jun. 30, 2014 Term Loan Forecast 2014 Goldman Sachs Bank Credit Agreement	May 02, 2014 Term Loan Minimum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	Jun. 30, 2014 Term Loan Minimum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Maximum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	Jun. 30, 2014 Term Loan Maximum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Chief Executive Officer 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Company individuals, excluding the CEO 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Federal Funds rate Maximum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan Bank of America LIBOR rate Maximum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event	May 02, 2014 Term Loan ICE Benchmark Administration Limited Maximum 2014 Goldman Sachs Bank Credit Agreement Subsequent Event
Subsequent Event [Line Items]
Ownership in subsidiary, percentage					70.00%
Loan amount								$ 40,000,000
Variable rate, basis spread																		0.50%	1.00%	1.50%
Debt instrument, stated rate								4.50%				5.50%		7.50%
Maximum increase in interest rate in the event of default								2.00%
Quarterly loan principal payment ($800,000 - June 30, 2015 and thereafter)		300,000	300,000	300,000		141,667				800,000	300,000
Maximum amount of proceeds from sale of assets or insurance proceeds									250,000
Percentage of proceeds from sales of equity securities required to be used to repay Credit Agreement Loan								100.00%
Maximum amount of sale of equity securities proceeds to be used for working capital or acquisition								5,000,000
Minimum working capital and funds of subsidiary							10,000,000
Percentage of debt issuance funds received used to prepay Credit Agreement Loan								100.00%
Percentage of pre-negotiated cash flow limit used to prepay Credit Agreement Loan												50.00%		75.00%
Maximum tax refund per year (excess must be used to prepay Credit Agreement Loan)								100,000
Minimum repayment amount								500,000
Repayment increments								100,000
Covenant terms, Company's, maximum total indebtedness limit												30,000,000		32,000,000
Covenant terms, EBITDA to fixed charges ratio												0.90		1.25
Covenant terms, Debt to EBITDA ratio												2		4
Covenant terms, EBITDA limits													4,250,000.00		17,000,000
Covenant terms, minimum available drawdowns								3,000,000
Customary events of default, minimum judgment against Company, amount								250,000
Customary events of default, minimum percentage of economic and voting interests controlled by CEO																20.00%	30.00%
Customary events of default, ownership in subsidiary that must be maintained								100.00%
Maximum time period to appoint an interim successor								10 days
Maximum time period to appoint an permanent successor								60 days
Payment of commission and fees related to Credit Agreement	$ 1,700,000

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STOCK BASED COMPENSATION (Details 1) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Stock Warrants
Outstanding, beginning - shares	7,083
Warrants cancelled/forfeited/expired - shares	(833)
Outstanding, ending - shares	6,250	7,083
Vested - shares	0
Exercisable - shares	0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Outstanding, beginning - weighted average exercise price (in USD per share)	$ 2.72
Warrants cancelled/forfeited/expired - weighted average exercise price (in USD per share)	$ (10.00)
Outstanding, ending - weighted average exercise price (in USD per share)	$ 1.75	$ 2.72
Vested - weighted average exercise price (in USD per share)	$ 0.00
Exercisable - weighted average exercise price (in USD per share)	$ 0.00
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Outstanding, beginning - weighted average remaining contractual life (in years)	1 year 6 months	1 year 6 months 25 days
Outstanding, ending - weighted average remaining contractual life (in years)	1 year 6 months	1 year 6 months 25 days
Vested - weighted average remaining contractual life (in years)	0 years
Exercisable - weighted average remaining contractual life (in years)	0 years
Outstanding, beginning - grant date fair value	$ 2,900
Warrants cancelled/forfeited/expired - grant date fair value	(100)
Outstanding, ending - grant date fair value	2,800	2,900
Vested - grant date fair value	0
Exercisable - grant date fair value	$ 0

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STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

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

STOCK BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock-based compensation expense was $51,224 and $48,054 for the three months ended March 31, 2014 and 2013, respectively, for options previously awarded by the Company.

Stock option activity for the three months ended March 31, 2014 is summarized as follows:

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	3,060,834		$	5.89		6.07	$	1,327,163
Options forfeited	(18,750	)	(2.10		)	—	(12,840		)
Options exercised	(26,250	)	(1.41		)	—	(15,589		)
Outstanding at March 31, 2014	3,015,834		$	5.95		5.80	$	1,298,734
Vested at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768
Exercisable at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2014 is as follows: 

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	7,083		$	2.72		1.57	$	2,900
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at March 31, 2014	6,250		$	1.75		1.50	$	2,800
Vested at March 31, 2014	—		$	—		—	$	—
Exercisable at March 31, 2014	—		$	—		—	$	—

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PREFERRED STOCK (Details Narrative) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Class of Stock [Line Items]
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, par value (in USD per share)	$ 0.001	$ 0.001
Series A Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, par value (in USD per share)	$ 0.001	$ 0.001
Preferred stock, shares issued	1,279,342	1,319,002
Preferred stock, shares outstanding	1,279,342	1,319,002
Series B Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized	2,000,000
Preferred stock, shares issued	0
Preferred stock, shares outstanding	0

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COMMON STOCK (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Conversion of Stock [Line Items]
Common stock, shares authorized	750,000,000		750,000,000
Common stock, par value (in USD per share)	$ 0.001		$ 0.001
Common stock, shares issued	21,267,658		21,205,609
Common stock, shares outstanding	21,267,658		21,205,609
Number of votes entitled to each common stock share	1
Options to purchase shares, exercised gross	26,250
Options to purchase shares, exercised net	22,390
Options to purchase shares, cashless exercise adjustment	6,250
Options to purchase shares, aggregate exercise price	$ 13,125
Cash in connection with stock option exercises	$ 24,000	$ 0
Series A Preferred Stock
Conversion of Stock [Line Items]
Preferred stock converted to common stock, shares	39,660
Number of common shares issued for each convertible share	1
Common stock
Conversion of Stock [Line Items]
New shares as a result of stock conversion, in shares	39,660

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SEGMENT REPORTING (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Segment Reporting Information [Line Items]
Revenues	$ 47,349,658	$ 33,254,801
Income from operations	956,587	1,211,674
Operating segments | Black Oil
Segment Reporting Information [Line Items]
Revenues	23,571,400	23,199,308
Income from operations	20,390	1,061,952
Operating segments | Refining & Marketing
Segment Reporting Information [Line Items]
Revenues	19,827,459	8,831,746
Income from operations	770,575	138,356
Operating segments | Recovery
Segment Reporting Information [Line Items]
Revenues	3,950,799	1,223,747
Income from operations	$ 165,622	$ 11,366

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CONTINGENT CONSIDERATION (Details Narrative) (USD $)			3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Vertex Acquisition LP	Mar. 31, 2014 E-Source Holdings, LLC	Jan. 03, 2014 E-Source Holdings, LLC
Business Acquisition [Line Items]
Contingent consideration	$ 3,220,250	$ 3,220,250	$ 2,233,000	$ 748,000
Increase (decrease) of contingent consideration			(1,850,000)
Probability that 2014 earnings target will not be met			25.00%
Increase (decrease) of 2014 contingent consideration			(388,750)
Discount on cash flows in year two, percent			25.00%
Payment to seller, 2014				260,000
Payment to seller, 2015				260,000
Payment to seller, 2016				260,000
Payment to seller, 2017				260,000
Number of shares to be issued as consideration, contingent on certain performance metrics				207,743
Estimated value of stock to be issued recorded in additional paid in capital	$ 19,882,694	$ 19,579,732			$ 231,000

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NOTES PAYABLE

3 Months Ended

Mar. 31, 2014

Notes Payable [Abstract]

NOTES PAYABLE

NOTES PAYABLE

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 to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, 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 was $0 at March 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 $141,667 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 was $5,808,333 at March 31, 2014.

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, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00. A tangible net worth requirement was included in the credit agreement in error. This requirement was waived and the credit agreement was amended in January 2013. The Company was in compliance with all aspects of the agreement at March 31, 2014.

The Company has notes payable to various financial institutions, bearing interest at rates ranging from 5% to 6.35%, maturing from November 2015 to April 2023. The balance of the notes payable is $2,392,900 at March 31, 2014.

Effective January 1, 2014, the Company purchased an additional 19% ownership interest in E-Source Holdings. In consideration for the additional interest the Company will pay $854,050 of which $200,000 was paid on April 11, 2014 and the remainder is to be paid monthly in $72,672 installments. The Company will also issue 207,743 shares of stock on January 31, 2015 if certain EBITDA criteria are met for 2014. As of the date of the transaction, the estimated value of the stock to be issued of approximately $231,000 was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

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SUBSEQUENT EVENTS (Details Narrative) (USD $)	3 Months Ended	1 Months Ended	3 Months Ended	1 Months Ended	3 Months Ended	1 Months Ended
	Mar. 31, 2014	May 13, 2014 Subsequent Event	Mar. 31, 2014 Series A Preferred Stock	May 13, 2014 Series A Preferred Stock Subsequent Event	Mar. 31, 2014 Common stock	May 13, 2014 Common stock Subsequent Event	May 13, 2014 Omega Refining Common stock Subsequent Event	May 13, 2014 2014 Amended Bank of America Credit Agreement Subsequent Event	May 05, 2014 2014 Amended Bank of America Credit Agreement Subsequent Event
Subsequent Event [Line Items]
Preferred stock converted to common stock, shares			39,660	500,000
New shares as a result of stock conversion, in shares					39,660	500,000
Number of common shares issued for each convertible share			1	1
Options to purchase shares, exercised gross	26,250					258,750
Options to purchase shares, exercised net	22,390					247,081
Options to purchase shares, aggregate exercise price	$ 13,125	$ 80,375
Options to purchase shares, cashless exercise adjustment	6,250	153,750
Cash from stock option exercise		51,250
Number of shares issued as part of business acquisition							500,000
Line of credit, available								20,000,000
Line of credit, balance									0
Line of credit, remaining capacity									$ 20,000,000

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CONSOLIDATED BALANCE SHEETS (unaudited) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 5,016,444	$ 2,678,628
Accounts receivable, net	11,417,226	11,714,813
Inventory	7,554,364	8,540,459
Prepaid expenses	1,470,755	1,161,721
Total current assets	25,458,789	24,095,621
Noncurrent assets
Fixed assets, net	15,476,237	15,091,176
Intangible assets, net	14,835,694	15,172,816
Goodwill	4,922,353	4,502,743
Deferred federal income taxes	5,684,000	5,684,000
Total noncurrent assets	40,918,284	40,450,735
TOTAL ASSETS	66,377,073	64,546,356
Current liabilities
Accounts payable and accrued expenses	15,288,497	14,096,185
Current portion of long-term debt	2,845,145	1,956,847
Total current liabilities	18,133,642	16,053,032
Long-term liabilities
Long-term debt	6,210,138	6,558,851
Contingent consideration	3,220,250	3,220,250
Deferred federal income tax	378,000	378,000
Total liabilities	27,942,030	26,210,133
Commitments and contingencies
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 1,279,342 and 1,319,002 issued and outstanding at March 31, 2014 and December 31, 2013, respectively	1,279	1,319
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 21,267,658 and 21,205,609 issued and outstanding at March 31, 2014 and December 31, 2013, respectively	21,268	21,206
Additional paid-in capital	19,882,694	19,579,732
Retained earnings	18,404,169	17,542,004
Total Vertex Energy, Inc. stockholders' equity	38,309,410	37,144,261
Non-controlling interest	125,633	1,191,962
Total equity	38,435,043	38,336,223
TOTAL LIABILITIES AND EQUITY	$ 66,377,073	$ 64,546,356

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BASIS OF PRESENTATION AND NATURE OF OPERATIONS

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND NATURE OF OPERATIONS

BASIS OF PRESENTATION AND NATURE OF OPERATIONS

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 25, 2014 (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 2013 as reported in Form 10-K, have been omitted.

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SUBSEQUENT EVENTS (Details 3) (USD $)	0 Months Ended	3 Months Ended			0 Months Ended	1 Months Ended	3 Months Ended					12 Months Ended							0 Months Ended
	May 02, 2014 Omega Refining Subsequent Event	Aug. 31, 2014 Forecast	Aug. 31, 2014 Forecast Omega Refining and Bango Refining closing gal	Aug. 31, 2014 Forecast Omega Refining	May 02, 2014 Restricted common stock Omega Refining Subsequent Event	May 13, 2014 Common stock Omega Refining Subsequent Event	Aug. 31, 2014 Common stock Forecast Bango Refining	Aug. 31, 2014 Vertex Refining Nevada, LLC Forecast Omega Refining and Bango Refining	Aug. 31, 2014 Vertex Refining Nevada, LLC Minimum Forecast Omega Refining and Bango Refining	Aug. 31, 2014 Vertex Refining Nevada, LLC Maximum Forecast Omega Refining and Bango Refining	Aug. 31, 2014 Vertex Refining LA, LLC Forecast Omega Refining and Bango Refining	Dec. 31, 2015 Vertex Refining LA, LLC Forecast Omega Refining and Bango Refining	May 02, 2014 Omega Secured Note Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 Purchase Price Loan Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 First Inventory Loan Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 Second Inventory Loan Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 Draw Down Loan Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 Capital Expenditure Loan Vertex Refining Nevada, LLC Maximum Omega Refining and Bango Refining Subsequent Event	May 02, 2014 Purchase Price Loan and Draw Down Loan Short-term federal rate Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	May 02, 2014 First Inventory Loan and Draw Down Loan Vertex Refining Nevada, LLC Omega Refining and Bango Refining Subsequent Event	Nov. 01, 2014 First Inventory Loan and Draw Down Loan Vertex Refining Nevada, LLC Forecast Omega Refining and Bango Refining
Subsequent Event [Line Items]
Number of gallons of used motor oil re-refined per year			80,000,000
Number of separate acquisition closings			2
Amount paid for business acquisition	$ 30,750,000
Number of shares issued as part of business acquisition					500,000	500,000	1,500,000
Value of shares issued as part of business acquisition					4,000,000
Amount of loan provided to acquiree	13,800,000
Number of shares issued held in escrow							650,000
Value of common shares held in escrow (in USD per share)							$ 3.2301
Value of common shares held in escrow							2,100,000
Anniversary which remaining shares held in escrow will be released		18 months
Indemnification obligations of the seller (maximum)		5,000,000
Promissory note receivable													13,858,067	7,560,000	750,000	1,400,000	3,150,000	1,000,000
Note receivable, effective interest rate																			0.33%
Note receivable, stated interest rate																				9.50%	9.50%
Interest rate in the event of default													18.00%
Earnings before interest, taxes, depreciation, and amortization (EBITDA), annual target amount (minimum)								3,500,000.0			8,000,000	9,000,000
Earnings before interest, taxes, depreciation, and amortization (EBITDA), aggregate target amount (maximum)								$ 6,000,000
Earnings before interest, taxes, depreciation, and amortization (EBITDA), shares (maximum)											470,498	770,498
Number of consecutive trading days used to compute weighted-average closing price per share								10 days
Volume-weighted average price (VWAP) (in USD per share)									$ 3.15	$ 10.00
EBITDA measurement period											12 months
EBITDA performance period			18 months
Number of common shares issued to number of common shares outstanding (maximum percentage)			19.90%
Maximum combined voting power, percentage			19.90%
Time period intervals which the Company is responsible for damages				30 days
Percentage of aggregate number of shares issued				1.00%

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NOTES PAYABLE (Details Narrative) (USD $)	3 Months Ended			3 Months Ended			3 Months Ended		0 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Mar. 31, 2014 Notes Payable	Mar. 31, 2014 Term Loan	Mar. 31, 2014 Term Loan 2012 Credit Agreement	Mar. 31, 2014 Term Loan Bank of America LIBOR rate 2012 Credit Agreement	Mar. 31, 2014 Revolving Line of Credit 2012 Credit Agreement	Jan. 03, 2014 E-Source Holdings, LLC	Apr. 11, 2014 E-Source Holdings, LLC Subsequent Event
Line of Credit Facility [Line Items]
Term loan amount						$ 8,500,000
Line of credit, maximum borrowing capacity								10,000,000
Variable rate, basis spread							2.75%	2.75%
Line of credit, balance								0
Debt due date					Aug. 31, 2015			Aug. 31, 2014
Loan monthly principal payments					141,667
Loan balance as of March 31, 2014						5,808,333
Variable rate, description					BOA LIBOR rate + 2.75%			BOA LIBOR rate + 2.75%
Loan restrictive covenants					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, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00.
Fixed charge coverage ratio	1.25
Senior funded debt to EBITDA	2.00
Debt Instrument, Interest Rate, Effective Percentage Rate Range, Minimum				5.00%
Debt Instrument, Interest Rate, Effective Percentage Rate Range, Maximum				6.35%
Additional ownership acquired in equity method investment									19.00%
Amount payable in consideration for additional interest	2,392,900								854,050
Payments on note payable for additional interest in equity method investment	666,386	473,735								200,000
Monthly installment of note payable									72,672
Stock consideration									207,743
Estimated value of stock to be issued recorded in additional paid in capital	$ 19,882,694		$ 19,579,732						$ 231,000

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STOCK BASED COMPENSATION (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Stock Options
Outstanding, beginning - shares	3,060,834
Options forfeited - shares	(18,750)
Options exercised - shares	(26,250)
Outstanding, ending - shares	3,015,834	3,060,834
Vested - shares	2,235,834
Exercisable - shares	2,235,834
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding, beginning - weighted average exercise price (in USD per share)	$ 5.89
Options forfeited - weighted average exercise price (in USD per share)	$ (2.10)
Options exercised - weighted average exercise price (in USD per share)	$ (1.41)
Outstanding, ending - weighted average exercise price (in USD per share)	$ 5.95	$ 5.89
Vested - weighted average exercise price (in USD per share)	$ 7.00
Exercisable - weighted average exercise price (in USD per share)	$ 7.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Outstanding, beginning - weighted average remaining contractual life (in years)	5 years 9 months 18 days	6 years 0 months 25 days
Outstanding, ending - weighted average remaining contractual life (in years)	5 years 9 months 18 days	6 years 0 months 25 days
Vested - weighted average remaining contractual life (in years)	4 years 11 months 4 days
Exercisable - weighted average remaining contractual life (in years)	4 years 11 months 4 days
Outstanding, beginning - grant date fair value	$ 1,327,163
Options forfeited - grant date fair value	(12,840)
Options exercised - grant date fair value	(15,589)
Outstanding, ending - grant date fair value	1,298,734	1,327,163
Vested - grant date fair value	646,768
Exercisable - grant date fair value	$ 646,768

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2014

Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract]

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At March 31, 2014 and 2013 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2014		2013
	% of Revenues	% of Receivables	% of Revenues	% of Receivables
Customer 1	42%	32%	—%	—%
Customer 2	21%	17%	59%	64%
Customer 3	15%	9%	3%	—%
Customer 4	—%	—%	8%	13%

The Company purchases goods and services from one company that represented 10% of total purchases for the three months ended March 31, 2014 and two companies that represented 13% and 10% each for the three months ended March 31, 2013.

The Company has had various debt facilities available for use, of which there was $9,055,283 and $8,515,698 outstanding as of March 31, 2014 and December 31, 2013, respectively. See Note 3 for further details.

In February 2013, Bank of America agreed to lease the Company up to $1,025,000 of equipment to enhance the Thermal Chemical Extraction Process (TCEP) operation, which went into effect in April 2013.  Under the current terms of the lease agreement, there are 60 monthly payments of approximately $13,328.

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 products 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, 2013, the Company had utilized approximately $11.25 million of these NOLs leaving approximately $30.75 million of potential NOLs of which we expect to utilize approximately $0.4 million for the three months ended March 31, 2014.  The Company recorded a change in valuation allowance for the three months ended March 31, 2014 for approximately $136,000.

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CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Preferred stock, par value (in USD per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Common stock, par value (in USD per share)	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	21,267,658	21,205,609
Common stock, shares outstanding	21,267,658	21,205,609
Series A Preferred Stock
Preferred stock, par value (in USD per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	1,279,342	1,319,002
Preferred stock, shares outstanding	1,279,342	1,319,002

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STOCK BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2014

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

Schedule of Stock option activity

Stock option activity for the three months ended March 31, 2014 is summarized as follows:

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	3,060,834		$	5.89		6.07	$	1,327,163
Options forfeited	(18,750	)	(2.10		)	—	(12,840		)
Options exercised	(26,250	)	(1.41		)	—	(15,589		)
Outstanding at March 31, 2014	3,015,834		$	5.95		5.80	$	1,298,734
Vested at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768
Exercisable at March 31, 2014	2,235,834		$	7.00		4.93	$	646,768

Schedule of Stock warrant activity

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2014 is as follows: 

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)	Grant Date Fair Value
Outstanding at December 31, 2013	7,083		$	2.72		1.57	$	2,900
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at March 31, 2014	6,250		$	1.75		1.50	$	2,800
Vested at March 31, 2014	—		$	—		—	$	—
Exercisable at March 31, 2014	—		$	—		—	$	—

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 07, 2014
Document And Entity Information
Entity Registrant Name	Vertex Energy Inc.
Entity Central Index Key	0000890447
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		22,514,739
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of reconciliation of 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 three months ended March 31, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Basic earnings per share	$	0.04	$	0.06
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Effect of dilutive securities
Stock options and warrants	1,225,727		1,631,017
Preferred stock	1,279,342		1,428,923
Diluted weighted-average shares outstanding	23,738,018		20,139,182
Diluted earnings per share	$	0.04	$	0.05

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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement of Cash Flows [Abstract]
Revenues	$ 47,349,658	$ 33,254,801
Cost of revenues	42,205,170	29,785,043
Gross profit	5,144,488	3,469,758
Selling, general and administrative expenses (exclusive of acquisition related expenses)	3,587,489	2,221,492
Acquisition related expenses	600,412	36,592
Total selling, general and administrative expenses	4,187,901	2,258,084
Income from operations	956,587	1,211,674
Other income (expense)
Other income	370	25,289
Other expense	0	(40,726)
Interest expense	(75,811)	(106,140)
Total other (expense)	(75,441)	(121,577)
Income before income tax	881,146	1,090,097
Income tax benefit (expense)	0	(6,502)
Net income	881,146	1,083,595
Net income attributable to non-controlling interest	(18,981)	0
Net income attributable to Vertex Energy, Inc.	$ 862,165	$ 1,083,595
Earnings per common share
Basic (in USD per share)	$ 0.04	$ 0.06
Diluted (in USD per share)	$ 0.04	$ 0.05
Shares used in computing earnings per share
Basic (shares)	21,232,949	17,079,242
Diluted (shares)	23,738,018	20,139,182

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PREFERRED STOCK

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

PREFERRED STOCK

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 March 31, 2014, there were 1,279,342 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

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COMMON STOCK

3 Months Ended

Mar. 31, 2014

Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]

COMMON STOCK

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 March 31, 2014, there were 21,267,658 common shares issued and outstanding.

Each share of the Company's common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by the Company's board of directors.  No holders of any shares of the Company's common stock has a preemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject to redemption or convertible into other securities.  Upon liquidation, dissolution or winding-up of the Company and after payment of creditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-share basis among the holders of the Company's common stock.  Each share of the Company's common stock is entitled to one vote.  Shares of the Company's common stock do not possess any cumulative voting rights.

During the three months ended March 31, 2014, a total of 39,660 shares of the Company's Series A Preferred Stock were converted into 39,660 shares of our common stock on a one-for-one basis.  Options to purchase 26,250 shares of common stock were exercised for a net of 22,390 shares of common stock (when adjusting for a cashless exercise of 6,250 of such options and the payment, in shares of common stock, of an aggregate exercise price of $13,125, along with an exercise price of $24,000 paid in cash in connection with such exercises) and 22,390 shares of common stock were issued to the option holders in connection with such exercises.

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STOCK BASED COMPENSATION (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock based compensation expense	$ 51,224	$ 48,054

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule of the Company's reportable segment information

The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions.  Segment information for the three months ended March 31, 2014 and 2013 is as follows:

THREE MONTHS ENDED MARCH 31, 2014
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,571,400	$	19,827,459	$	3,950,799	$	47,349,658
Income from operations	$	20,390	$	770,575	$	165,622	$	956,587

THREE MONTHS ENDED MARCH 31, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,199,308	$	8,831,746	$	1,223,747	$	33,254,801
Income from operations	$	1,061,952	$	138,356	$	11,366	$	1,211,674

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Subsequent to March 31, 2014, (a) 500,000 shares of the Company's Series A Preferred Stock were converted into 500,000 shares of our common stock on a one-for-one basis; (b) options to purchase 258,750 shares of common stock were exercised for a net of 247,081 shares of common stock (when adjusting for a cashless exercise of 153,750 of such options and the payment, in shares of common stock, of an aggregate exercise price of $80,375, along with an exercise price of $51,250 paid in cash in connection with such exercises) and 247,081 shares of common stock were issued to the options holders in connection with such exercises; and (c) 500,000 shares of the Company's common stock were issued in connection with the Omega acquisition.

Subsequent to March 31, 2014, the available credit on the Line of Credit is $20,000,000. As of May 5, 2014, the outstanding balance drawn on the line of credit is $0 leaving an available balance for draw downs of $20,000,000.

Effective May 2, 2014, we and our newly formed subsidiary, Vertex Energy Operating, LLC (“Vertex Operating”, which was formed as a holding company to hold the Company’s operating subsidiaries, which were subsequently transferred to and are currently wholly-owned by Vertex Operating), as well as certain of our other direct and indirect subsidiaries (other than E-Source Holdings, LLC (“E-Source” (of which we own 70%)) as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Goldman Sachs Bank USA as lender and as administrative agent and collateral agent (the “Lender” or the “Agent”). Pursuant to the Credit Agreement, the Lender loaned us $40 million (the “Credit Agreement Loan”), which was evidenced by a Term Loan Note. Pursuant to the Credit Agreement, the Company has the option to select whether loans made under the Credit Agreement bear interest at (a) the greater of (i) the prime rate in effect, (ii) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate (defined below) and (B) 1%, and (iv) 4.5% per annum; or (b) the greater of (i) 1.50% and (ii) the applicable ICE Benchmark Administration Limited interest rate, divided by (x) one minus, (y) the maximum rate at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator (the “Adjusted LIBOR Rate”), in each case subject to the terms and conditions of the Credit Agreement, and in each case plus between 5.5% and 7.5% per annum (as provided in the Credit Agreement, based on several factors, including the

Company’s total leverage). Interest on the Credit Agreement is payable monthly in arrears, provided that upon any event of default the interest rate increases to 2% per annum in excess of the applicable interest rate then in effect. The amount owed under the Credit Agreement is due and payable on May 2, 2019. Amortizing principal payments are due on the Credit Agreement Loan in the amount of $300,000 per fiscal quarter for June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, and $800,000 per fiscal quarter thereafter through maturity. Additionally, in the event (a) we receive any sale

proceeds from the sale of assets or insurance proceeds (each as described in greater detail in the Credit Agreement), in excess of $250,000, we are required to pay such sale proceeds, less certain deductions, as a prepayment of the Credit Agreement Loan, unless we decide to reinvest such proceeds in long-term production assets as described in the Credit Agreement; (b) we sell equity securities (subject to certain exceptions) we are required to use 100% of the proceeds from such sales to repay the Credit Agreement Loan, subject to certain exemptions, including up to $5 million to be used for working capital, permitted acquisitions, working capital of one of our subsidiaries and funds (which are required to total at least $10 million) which we are able to raise prior to June 30, 2014 (subject to the terms of the Credit Agreement) through the sale of securities; (c) we issue debt, we are required to prepay the Credit Agreement Loan in an amount equal to 100% of such funds received; (d) we have cash flow which exceeds certain pre-negotiated limits, we are required to use between 50% and 75% of such additional cash flow to repay the Credit Agreement Loan; (e) we receive tax refunds in excess of $100,000 in any year, we are required to use such funds to prepay the Credit Agreement Loan; (f) our total debt exceeds certain maximum debt ratios set forth in the Credit

Agreement, we are required to immediately repay the Credit Agreement Loan in an amount equal to such excess debt; or (g) we receive any funds under the Purchase Agreement, we are required to prepay the Credit Agreement Loan in an amount equal to such received funds, subject in each case to the terms and conditions of the Credit Agreement. We also have the right to make voluntary repayments of the Credit Agreement Loan in the minimum amount of $500,000 (and in multiples of $100,000) from time to time. Except with respect to certain accounts, certain finished goods inventory and certain other reserves described in the Amended BOA Credit Agreement (as defined below), the amount owed pursuant to the Credit Agreement is secured by a first priority security interest in all of our assets and all of the assets and securities of our direct and indirect subsidiaries and is also guaranteed by our subsidiaries (other than E-Source) pursuant to the terms of the Credit Agreement, a Pledge and Security Agreement and Mortgage (providing a security interest over certain of our real property assets).

The Credit Agreement contains customary representations, warranties, covenants for facilities of similar nature and size as the Credit Agreement, and requirements for the Company to indemnify the Lender and the Agent for certain losses. The Credit Agreement also includes various covenants (positive and negative) binding the Company, including, requiring that the Company provide the Agent with certain reports, provide the Agent notices of material corporate events and forecasts, limiting the amount of indebtedness the Company may incur (for example, the Company’s total indebtedness cannot exceed between $30,000,000-$32,000,000 at any time, subject to certain exemptions set forth in greater detail in the Credit Agreement), and requiring us to maintain certain financial ratios, relating to consolidated EBITDA and debt leverage including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of between 0.90:1.00 and 1.25:1.00 (depending on the applicable quarter); maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 4:1 and 2:1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending June 30, 2018, of between $4.25 million and $17 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement (defined below), of at

least $3 million. The Credit Agreement includes customary events of default for facilities of a similar nature and size as the Credit Agreement, including if a default occurs under certain material agreements of the Company; a judgment is obtained against the Company in an amount in excess of $250,000 or which could have a material adverse effect on the Company; and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s Chief Executive Officer, Chairman of the Board and largest shareholder, ceases to own and control at least 20% of the economic and voting interests of the Company (on a fully-diluted basis); (b) any person other than Mr. Cowart (i) obtains 30% of more of the voting or economic interest in the Company on a fully-diluted basis or (ii) obtains the power (whether or not exercised) to elect a majority of the members of the Board of Directors; (c) we cease to own and control 100% of Vertex Operating; (d) the majority of the seats (other than vacant seats) on the Board of Directors of the Company cease to be occupied by persons who either (i) were members of the Board of Directors of the Company on May 2, 2014, or (ii) were nominated for election by the Board of Directors of the

Company, a majority of whom were directors on May 2, 2014 or whose election or nomination for election was previously approved by a majority of such directors; (e) Vertex II, GP, LLC (Vertex Operating’s wholly-owned subsidiary) ceases to be the sole general partner of any guarantor of the Credit Agreement that is a partnership; (f) a “change of control” or similar event under the Amended BOA Credit Agreement (described below) shall occur; or (g) any event, transaction or occurrence occurs, a result of which Benjamin P. Cowart shall for any reason cease to be actively engaged in the day-to-day management of the Company and its subsidiaries in the role he serves on May 2, 2014, unless (x) an interim successor reasonably acceptable to Agent and the Lender as required by the Credit Agreement is appointed within 10 days and (y) a permanent successor reasonably acceptable to the Agent and the Lender as required by the Credit Agreement is appointed within 60 days. Additionally, in connection with our entry into the Credit Agreement, all parties to whom any deferred purchase price or “earn-out” obligations are owed by us executed and delivered to the Agent an Earnout Subordination Agreement (other than one of the individuals who is owed earn-out payments in connection with the E-Source purchase), pursuant to which they agreed to not receive or demand any “earn-out” payments until the Lender and BOA are paid in full under the credit agreements. In connection with the closing of the Credit Agreement, we agreed to pay the Agent’s legal fees and transaction costs associated with the transactions contemplated by the Credit Agreement. We also paid an aggregate of approximately $1.7 million in commissions and fees to our advisors Craig-Hallum Capital Group LLC, Sapphire Financial Group, LLC and Wunderlich Securities, Inc. in consideration for financial advisory services rendered in connection with the Purchase Agreement and credit agreements, the transactions contemplated therein in and in certain cases a fairness opinion obtained on certain of the transactions.

The proceeds from the Credit Agreement were used to pay the amounts due at the Initial Closing (defined below), pay certain Omega (defined below) capital leases and other obligations of Omega, and to pay expenses associated with the Credit Agreement and the acquisition described below.

Amended and Restated Credit Agreement with Bank of America, N.A.

On May 2, 2014, we and Vertex Operating entered into an Amended and Restated Credit Agreement (the “Amended BOA Credit Agreement”) with Bank of America, N.A. (“BOA”). The Amended BOA Credit Agreement amended and restated the prior credit agreement we entered into with BOA in August 2012. Pursuant to the Amended BOA Credit Agreement, BOA agreed to loan us up to $20 million (the “BOA Loan”), subject to the terms of the Amended BOA Credit Agreement and certain lending ratios set forth therein, provided that the amount outstanding cannot exceed an amount equal to the total of (i) 80% of the Company’s accounts in which BOA has a first-priority perfected security interest; (ii) 65% of the Company’s finished-goods inventory in which BOA holds a first-priority perfected security interest, in each case subject to the terms and conditions of the credit agreement, plus (iii) certain reserves established by BOA. We have the right to request up to three increases in the amount of the facility, which in the aggregate cannot exceed $10 million and which individually are required to be a minimum of $3 million each, provided that BOA has the right to approve any increase in its sole discretion. Loans made pursuant to the Amended BOA Credit Agreement are evidenced by a Revolving Note, which replaced the Company’s August 2012 Revolving Note, which was repaid on May 2, 2014 in connection with the parties’ entry into the Amended BOA Credit Agreement.

Amounts borrowed under the Revolving Note bear interest at the option of the Company at BOA’s prime commercial lending rate then in effect plus between 1.25% and 2% per annum (depending on the Company’s leverage ratio from time to time) or the LIBOR rate in effect plus between 2.35% and 3% per annum (depending on the Company’s leverage ratio from time to time), and are payable monthly in arrears (provided that upon an event of default the interest rate then in effect increases by 4% per annum). The Revolving Note is due and payable on May 2, 2017. We have the right to prepay the Revolving Note at any time without penalty. We are also required to make certain mandatory prepayments on the Revolving Note as described therein.

The Amended BOA Credit Agreement also requires BOA to provide us certain letters of credit as described therein. We agreed to pay BOA a commitment fee equal to between 0.25% and 0.35% (depending on our leverage ratio) multiplied by the actual daily amount by which the maximum amount BOA has agreed to loan us (currently $20 million) exceeds the amount loaned (and subject to letters of credit), which is due and payable quarterly in arrears on the last day of each March, June, September, and December, beginning June 30, 2014, until maturity. We also paid BOA $50,000 at closing in fees. In connection with letters of credit issued by BOA, we agreed to pay BOA a fee equal to the greater of 2% per annum (multiplied by the daily maximum amount available to be drawn) and $500 per line of credit.

The Amended BOA Credit Agreement contains customary representations, warranties, covenants and requirements for the Company to indemnify BOA and its affiliates. The Amended BOA Credit Agreement also includes various covenants (positive and negative) binding upon the Company, including, requiring that the Company comply with certain reporting requirements, provide notices of material corporate events and forecasts to BOA, and maintain certain financial ratios, relating to debt leverage, consolidated EBITDA, maximum debt exposure we can incur (provided that if we exceed such maximum debt exposure limit as set forth in the Amended BOA Credit Agreement, we are required to immediately repay any amount exceeding the limits set forth in the BOA Credit Agreement) and minimum liquidity, including maintaining a ratio of quarterly consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement) to certain fixed charges (cumulative for subsequent periods up to the first 12 months and thereafter on a 12 month basis), for each quarter beginning June 30, 2014, of not less than 1.25 to 1.00; maintaining a ratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for the prior 12 month period, for each quarter beginning June 30, 2014, of between 3.5 to 1 and 2 to 1 (depending on the applicable quarter); maintaining consolidated EBITDA (as calculated and adjusted in the Amended BOA Credit Agreement), for each fiscal quarter beginning June 30, 2014, and ending March 30, 2017, of between $4.25 million and $15.5 million (depending on the applicable quarter); and maintaining at all times (a) liquid cash on hand and (b) available drawdowns under the Amended BOA Credit Agreement, of at least $3 million. The Amended BOA Credit Agreement includes customary events of default for facilities of a similar nature and size as the Amended BOA Credit Agreement, including if an event of default occurs under any agreement the Company is subject to and in an amount in excess of $250,000 or if the Company breaches any term of any material agreement the Company is party to, subject to its right to cure such breach(s) under the Amended BOA Credit Agreement, and also provides that an event of default occurs if (a) Benjamin P. Cowart, the Company’s 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 20% of the equity interests of the Company; (b) the Company ceases at any time to own and control 100% of Vertex Operating or certain other of its subsidiaries; (c) Vertex Acquisition Sub, LLC (Vertex Operating’s wholly-owned subsidiary) ceases to control 100% of its current subsidiaries; (d) certain other changes in control of our subsidiaries occur; (e) a “change of control” or similar event or event of default occurs under the Credit Agreement; or (f) a default occurs under certain lease agreements related to premises leased by the Company. The amounts due pursuant to the Amended BOA Credit Agreement are secured by a Pledge and Security Agreement and various Deeds of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filings in favor of BOA. Additionally, Vertex Operating and the Company and each of the Company’s subsidiaries (other than E-Source) pledged all collateral which they own (including securities held) as security for the repayment of the amounts due pursuant to the Amended BOA Credit Agreement and guaranteed the amounts owed pursuant to an Amended and Restated Guaranty.

We used and will use the proceeds borrowed pursuant to the Amended BOA Credit Agreement to consummate the transactions contemplated by the Purchase Agreement, pay costs associated with the Amended BOA Credit Agreement and for working capital and other general corporate purposes.

Intercreditor Agreement

In connection with our entry into the Credit Agreement and Amended BOA Credit Agreement, the Agent and BOA entered into an Intercreditor Agreement on May 2, 2014 which governs which lenders have first and second priority security interests over certain of our assets in order to secure repayment of the credit facilities.

Omega Transaction

On May 2, 2014, we completed the Initial Closing (defined below) contemplated under that certain Asset Purchase Agreement entered into on March 17, 2014, and amended by the First Amendment dated April 14, 2014, Second Amendment dated April 30, 2014 and Third Amendment dated May 2, 2014 (as amended to date, the “Purchase Agreement”) by and among the Company, Vertex Refining LA, LLC and Vertex Refining NV, LLC (“Vertex Refining Nevada”), both wholly-owned subsidiaries of Vertex Operating, Omega Refining, LLC (“Omega Refining”), Bango Refining NV, LLC (“Bango Refining”) and Omega Holdings Company LLC (“Omega Holdings” and collectively with Omega Refining and Bango Refining, “Omega” or the “sellers”).

Pursuant to the Purchase Agreement, we agreed to acquire certain of Omega’s assets related to (1) the operation of oil re-refineries and, in connection therewith, purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers and (2) the provision of related products and support services.  Specifically, the assets included Omega’s Marrero, Louisiana and Bango, Nevada, re-refineries (which re-refine approximately 80 million gallons of used motor oil per year).  Additionally, the Marrero, Louisiana plant produces vacuum gas oil (VGO) and the Bango, Nevada plant produces base lubricating oils.  Omega also operates Golden State Lubricants Works, LLC (“Golden State”), a strategic blending and storage facility located in Bakersfield, California, which is included in the acquisition.  In connection with the acquisition, we also acquired certain of Omega’s prepaid assets and inventory.

The acquisition is to close in two separate closings, the first of which relating to the acquisition of Omega Refining (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana) and ownership of Golden State, as described above, closed on May 2, 2014 (the “Initial Closing”), and the second of which relating to the acquisition of Bango Refining and the Bango, Nevada plant, is expected to close on or around August 2014, subject to certain closing conditions being met prior to closing (the “Final Closing”).  Vertex’s obligation to consummate the Final Closing is subject to among other things, compliance with certain provisions of the credit agreements described herein and that the Bango plant operated by Bango Refining be fully restored and operational, as well as the plant meeting certain used motor oil processing run rates and that there are no adverse claims or legal proceedings related to an accident that occurred at the Bango plant in December 2013.

The purchase price paid at the Initial Closing was $30,750,000 in cash, 500,000 shares of our restricted common stock (valued at approximately $4 million) and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Omega Refining in connection with the Initial Closing.  We also agreed to provide Omega a loan in the amount of up to approximately $13.8 million (described below).

The amount due at the Final Closing, in consideration for the acquisition of Bango Refining, will be the assumption of certain loans made pursuant to the Omega Secured Note (described below), the issuance of 1,500,000 shares of Vertex’s common stock of which 650,000 shares (with an agreed value of $3.2301 per share or approximately $2.1 million) will be held in escrow (the “Pledged Shares”) and used to satisfy indemnification claims and secure the repayment of the Omega Secured Note (defined below), and which amount is subject to adjustment in the event minimum inventory levels are not delivered at the Final Closing, and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Bango Refining.  A portion of the Pledged Shares will be released from escrow, subject to outstanding claims, on September 15, 2015, and the remainder will be released on the 18 month anniversary of the Final Closing.  Subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items, the sellers’ indemnification obligations are capped at $5 million.

In connection with the First Closing, Omega Refining and Bango Refining provided Vertex Refining Nevada a Secured Promissory Note (the “Omega Secured Note”) in the aggregate amount of $13,858,067, representing (a) a loan to Omega in the amount of approximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at the Initial Closing (which included consideration relating to the assets acquired at the Initial Closing and which will be acquired at the Final Closing) exceeded the value of assets acquired at the Initial Closing) (the “Purchase Price Loan”); (b) a $750,000 loan related to the delivery of a certain amount of used motor oil inventory at the Initial Closing (the “First Inventory Loan”); (c) a $1,400,000 loan related to the delivery of a certain amount of used motor oil inventory at the Final Closing (the “Second Inventory Loan” and along with the First Inventory Loan, the “Inventory Loans”); (d) a loan in a single advance of $3.15 million to satisfy accounts payable and other working capital related obligations of Omega after the Initial Closing, provided such loans are not required to be made until after June 16, 2014 (the “Draw Down Loan”) and (e) an additional loan of up to $1 million for capital expenditures, if mutually approved by us and Omega (the “Capital Expenditure Loan”).

The Purchase Price Loan and the Draw Down Loan bear interest at the short-term federal rate as published by the Internal Revenue Service from time to time (currently 0.33% per annum) prior to October 30, 2014, and thereafter at 9.5% per annum, payable monthly in arrears and have a maturity date of March 31, 2015.  The First Inventory Loan and the Draw Down Loan accrue interest at the rate of 9.5% per annum beginning on May 31, 2014, and are due and payable on March 31, 2015.  Upon an event of default under any of the loans, the loans accrue interest at 18% per annum until paid in full.

The Purchase Price Loan and the Draw Down Loan are due and payable in full on the earlier of March 31, 2015 and the date of the Final Closing, provided that both the Purchase Price Loan and Draw Down Loan (including accrued and unpaid interest thereon) will be deemed paid in full upon the Final Closing.  The Omega Secured Note may be prepaid in whole or part from time to time without penalty.

The repayment of the Omega Secured Note is guaranteed by Omega Holdings pursuant to a Guaranty Agreement and secured by a security interest granted pursuant to the terms of the Omega Secured Note and a Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing.  Additionally, we have the right to set-off any amount due upon an event of default against certain of the Pledged Shares and the earn-out consideration described  below, of which a portion of such shares were pledged to secure the Omega Secured Note pursuant to a Pledge Agreement, subject to the terms of the Purchase Agreement.

The consideration payable in connection with the Final Closing is subject to customary adjustments prior to the Final Closing depending on certain criteria, including the amount of inventory delivered by the sellers at the Final Closing.

The sellers also have the right to earn additional earn-out consideration in the event certain EBITDA targets are met by (a) Vertex Refining NV, LLC during the years ended December 31, 2015 and 2016 (which targets begin at $3.5 million of EBITDA per year), of up to an aggregate of $6 million (payable in shares of the Company’s common stock equal to the volume-weighted average of the regular session closing prices per share of the Company’s common stock on the NASDAQ Capital Market for the ten (10) consecutive trading days prior to the applicable due date of such payments, provided, however, in no event shall the VWAP be less than $3.15 per share or more than $10.00 per share, as adjusted for any stock splits or recapitalizations); (b) Vertex Refining LA, LLC during any twelve month period during the eighteen month period commencing on the first day of the first full calendar month following the Initial Closing date (which targets begin at $8 million of EBITDA during such twelve month period) of up to 470,498 shares of common stock of the Company; and (c) Vertex Refining LA, LLC during the calendar year ended December 31, 2015 (which targets begin at $9 million of EBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capital expenditures (collectively, the “Earn-Outs).  Notwithstanding the above, the maximum number of shares of common stock to be issued pursuant to the Purchase Agreement cannot (i) exceed 19.9% of the outstanding shares of common stock outstanding on March 17, 2014, (ii) exceed 19.9% of the combined voting power of the Company on March 17, 2014, or (iii) otherwise exceed such number of shares of common stock that would violate applicable listing rules of the NASDAQ Stock Market in the event the Company’s stockholders do not approve the issuance of such shares (the “Share Cap”).  In the event the number of shares to be issued under the Purchase Agreement exceeds the Share Cap, then the Company is required to instead pay any such additional consideration in cash or obtain the approval of the Company’s stockholders under applicable rules and requirements of the NASDAQ Capital Market for the additional issuance of shares.

Finally, pursuant to the acquisition, (a) with certain exceptions related to sellers’ operation of Bango Refining between the Initial Closing and the Final Closing, the sellers agreed to enter into a non-competition agreement whereby they agreed not to compete against Vertex in connection with the acquired businesses, or to solicit active customers of the acquired businesses for a period of five years and (b) certain of the employees of the sellers agreed to enter into three year employment agreements with Vertex’s newly formed subsidiaries.

Additionally, we are required to file and obtain effectiveness of a registration statement within 90 days following the Initial Closing (if the Securities and Exchange Commission does not review the filing) and 150 days following the Initial Closing (if the Securities and Exchange Commission does review the filing), registering the shares of common stock issuable in connection with the acquisition.  In the event we fail to file the registration statement or obtain effectiveness of the registration within the time periods set forth in the Purchase Agreement, we are required to pay damages for each thirty (30) day period until cured, equal to that number of shares of common stock as equals 1% of the aggregate number of shares of common stock issued pursuant to the Purchase Agreement, however, we are not obligated to pay any liquidated damages if we are unable to fulfill our registration obligations as a result of rules, regulations, positions or releases or actions taken by the Securities and Exchange Commission.

The Final Closing remains subject to the satisfaction of certain customary closing conditions. The Purchase Agreement contains customary representations, warranties, covenants and indemnities by the parties thereto. Craig-Hallum Capital Group LLC is acting as exclusive financial advisor to the Company in connection with the acquisition and has provided a fairness opinion to the Board of Directors in connection with the transaction.

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions.  Segment information for the three months ended March 31, 2014 and 2013 is as follows:

THREE MONTHS ENDED MARCH 31, 2014
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,571,400	$	19,827,459	$	3,950,799	$	47,349,658
Income from operations	$	20,390	$	770,575	$	165,622	$	956,587

THREE MONTHS ENDED MARCH 31, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	23,199,308	$	8,831,746	$	1,223,747	$	33,254,801
Income from operations	$	1,061,952	$	138,356	$	11,366	$	1,211,674

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CONTINGENT CONSIDERATION

3 Months Ended

Mar. 31, 2014

Business Combination, Contingent Consideration Arrangements [Abstract]

CONTINGENT CONSIDERATION

CONTINGENT CONSIDERATION

As part of the consideration paid related to the acquisition of Vertex LP as discussed in Note 2, if certain earnings targets are met, the Company has to pay the seller approximately $2,233,000 annually in each of 2013, 2014 and 2015. In 2013, it had been determined that the 2013 earnings target would not be met and the contingent consideration was reduced by $1,850,000, which represents the discounted cash flow for year one. It had also been determined that there was a 25% probability that the 2014 earnings target would not be met and the contingent consideration was reduced by $388,750, which represents 25% of the discounted cash flows for year two.

As part of the consideration paid in connection with the acquisition of E-Source Holding, LLC, if certain targets are met, the Company has to pay the seller approximately $260,000 annually in 2014, 2015, 2016 and 2017. The Company has recorded contingent consideration of $748,000, which is the discounted cash flows of the earn-out payments. In addition, on January 31, 2015, 207,743 shares of the Company's stock will be issued as consideration for the additional equity interest if certain performance metrics are achieved for 2014. As of the date of the transaction, the estimated value of the stock to be issued of approximately $231,000 was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2014

Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract]

Schedule of Concentrations

At March 31, 2014 and 2013 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2014		2013
	% of Revenues	% of Receivables	% of Revenues	% of Receivables
Customer 1	42%	32%	—%	—%
Customer 2	21%	17%	59%	64%
Customer 3	15%	9%	3%	—%
Customer 4	—%	—%	8%	13%

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SUBSEQUENT EVENTS (Details 2) (2014 Amended Bank of America Credit Agreement, Subsequent Event, USD $)		0 Months Ended
	May 13, 2014	May 02, 2014 Revolving Line of Credit increase	May 02, 2014 Revolving Line of Credit Minimum	May 02, 2014 Revolving Line of Credit Maximum	May 02, 2014 Revolving Line of Credit Prime rate Minimum	May 02, 2014 Revolving Line of Credit Prime rate Maximum	May 02, 2014 Revolving Line of Credit Bank of America LIBOR rate Minimum	May 02, 2014 Revolving Line of Credit Bank of America LIBOR rate Maximum	May 02, 2014 Revolving Line of Credit Chief Executive Officer	May 02, 2014 Revolving Line of Credit Vertex Acquisition Sub, LLC
Subsequent Event [Line Items]
Maximum borrowing capacity under new credit agreement	$ 20,000,000	$ 20,000,000
Covenant terms, maximum amount outstanding in which Bank of America has first-priority perfected security interest		80.00%
Percentage of Company's finished-goods inventory which Bank of America holds a first priority security interest		65.00%
Maximum number of borrowing capacity increases		3
Maximum aggregate additional borrowing		10,000,000
Minimum additional borrowing amount (per instance)		3,000,000
Variable rate, basis spread					1.25%	2.00%	2.35%	3.00%
Interest rate increase in the event of default		4.00%
Commitment fee, percentage			0.25%	0.35%
Closing fees paid		50,000
Additional fee, percentage		2.00%
Fee per line of credit		500
Line of credit facility, covenant terms, EBITDA to fixed charges ratio, recalculation period		12 months
Line of credit facility, minimum EBITDA to certain fixed charges ratio		1.25
Line of credit facility, covenant terms, debt to EBITDA ratio, measurement period		12 months
Line of credit facility, covenant terms, debt to EBITDA ratio			2	3.5
Line of credit facility, covenant terms, EBITDA			15,500,000.0	4,250,000.00
Line of credit facility, covenant terms, minimum available drawdowns		3,000,000
Line of credit facility, default events, judgment against Company (excess of)		$ 250,000
Line of credit facility, default events, minimum equity interest percentage									20.00%
Line of credit facility, default events, percentage ownership in subsidiary that must be maintained		100.00%								100.00%

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details) (Customer concentration risk)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues
Revenue, Major Customer [Line Items]
Concentration percentage	15.00%
Revenues | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	42.00%	0.00%
Revenues | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	21.00%	59.00%
Revenues | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage		3.00%
Revenues | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	8.00%
Receivables | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	32.00%	0.00%
Receivables | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	17.00%	64.00%
Receivables | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	9.00%	0.00%
Receivables | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	13.00%

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EARNINGS PER SHARE (Details Narrative)	3 Months Ended
	Mar. 31, 2014
Earnings Per Share [Abstract]
Options to purchase	817,667

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net income	$ 881,146	$ 1,083,595
Adjustments to reconcile net income to cash provided by operating activities
Stock based compensation expense	51,224	48,054
Depreciation and amortization	732,677	532,718
Deferred federal income tax	0	(10,000)
Changes in operating assets and liabilities
Accounts receivable	297,587	(222,270)
Inventory	986,095	(37,871)
Prepaid expenses	(728,644)	(26,731)
Accounts payable	1,192,312	1,771,924
Net cash provided by operating activities	3,412,397	3,139,419
Cash flows from investing activities
Acquisition, net	0	(34,122)
Refund of asset acquisition	0	675,558
Purchase of fixed assets	(780,616)	(548,229)
Net cash provided by (used in) investing activities	(780,616)	93,207
Cash flows from financing activities
Line of credit payments, net	0	(2,250,000)
Payments related to primary stock offering	(3,500)	0
Proceeds from note payable	351,921	0
Payments on note payable	(666,386)	(473,735)
Proceeds from exercise of common stock warrants	24,000	0
Net cash used in financing activities	(293,965)	(2,723,735)
Net increase in cash and cash equivalents	2,337,816	508,891
Cash and cash equivalents at beginning of the period	2,678,628	807,940
Cash and cash equivalents at end of period	5,016,444	1,316,831
SUPPLEMENTAL INFORMATION
Cash paid for interest	75,811	76,706
Cash paid for income taxes	0	0
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	40	84
E-Source Holdings, LLC
NON-CASH TRANSACTIONS
Note payable for acquisition of E-Source interest	854,050	0
Additional paid in capital for acquisition of E-Source interest	$ 231,260	$ 0

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS 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 three months ended March 31, 2014 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 three months ended March 31, 2014 does not include options to purchase 817,667 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 three months ended March 31, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Basic earnings per share	$	0.04	$	0.06
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	862,165	$	1,083,595
Denominator:
Weighted-average shares outstanding	21,232,949		17,079,242
Effect of dilutive securities
Stock options and warrants	1,225,727		1,631,017
Preferred stock	1,279,342		1,428,923
Diluted weighted-average shares outstanding	23,738,018		20,139,182
Diluted earnings per share	$	0.04	$	0.05

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Numerator:
Net income available to common shareholders	$ 862,165	$ 1,083,595
Denominator:
Weighted-average common shares outstanding	21,232,949	17,079,242
Basic earnings per share (in USD per share)	$ 0.04	$ 0.06
Effect of dilutive securities
Stock options and warrants (shares)	1,225,727	1,631,017
Preferred stock (shares)	1,279,342	1,428,923
Diluted weighted-average shares outstanding	23,738,018	20,139,182
Diluted earnings per share (in USD per share)	$ 0.04	$ 0.05

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	3 Months Ended			3 Months Ended
	Mar. 31, 2014 Payment	Dec. 31, 2013	Feb. 28, 2013	Mar. 31, 2014 Purchases Supplier concentration risk company	Mar. 31, 2013 Purchases Supplier concentration risk company	Mar. 31, 2014 Purchases Supplier concentration risk Supplier 1	Mar. 31, 2013 Purchases Supplier concentration risk Supplier 1	Mar. 31, 2013 Purchases Supplier concentration risk Supplier 2
Revenue, Major Customer [Line Items]
Number of suppliers				1	2
Concentration percentage						10.00%	13.00%	10.00%
Debt facilities outstanding	$ 9,055,283	$ 8,515,698
Equipment leased to the company			1,025,000
Number of payments	60
Monthly lease payments for equipment leased to the company	13,328
Net operating losses acquired as a result of a merger		42,000,000
NOL utilized		11,250,000
NOL remaining balance		30,750,000
NOL expected to be utilized	400,000
Change in valuation allowance	$ 136,000