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 September 30, 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: 25,417,906shares of common stock issued and outstanding as of November 8, 2014.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	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	13
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
	PART II
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
	September 30, 2014			December 31, 2013
ASSETS
Current assets
Cash and cash equivalents	$	1,229,746		$	2,678,628
Accounts receivable, net	21,675,824			11,714,813
Note receivable-related party	11,458,000			—
Inventory	19,001,712			8,540,459
Prepaid expenses	2,162,046			1,161,721
Total current assets	55,527,328			24,095,621
Noncurrent assets
Fixed assets, at cost	49,318,232			16,109,179
Less accumulated depreciation	(1,647,153		)	(1,018,003		)
Net fixed assets	47,671,079			15,091,176
Intangible assets, net	16,327,341			15,172,816
Goodwill	4,922,353			4,502,743
Deferred federal income tax	5,684,000			5,684,000
Other assets	2,797,842			—
Total noncurrent assets	77,402,615			40,450,735
TOTAL ASSETS	$	132,929,943		$	64,546,356
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	23,059,176		$	14,096,185
Capital leases	605,442			—
Current portion of long-term debt	40,781,399			1,956,847
Total current liabilities	64,446,017			16,053,032
Long-term liabilities
Long-term debt	2,040,598			6,558,851
Contingent consideration	3,371,836			3,220,250
Deferred federal income tax	378,000			378,000
Total liabilities	70,236,451			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 630,419 and 1,319,002 issued
and outstanding at September 30, 2014 and December 31,
2013, respectively	630			1,319
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 25,414,156 and 21,205,609
issued and outstanding at September 30, 2014 and
December 31, 2013, respectively	25,414			21,206
Additional paid-in capital	39,191,567			19,579,732
Retained earnings	23,475,881			17,542,004
Total Vertex Energy, Inc. stockholders' equity	62,693,492			37,144,261
Non-controlling interest	$	—		$	1,191,962
Total Equity	$	62,693,492		$	38,336,223
TOTAL LIABILITIES AND EQUITY	$	132,929,943		$	64,546,356

See accompanying notes to the consolidated financial statements

F-1

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
	Three Months Ended   September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues	$	76,903,516		$	46,830,647		$	196,332,796		$	115,196,850
Cost of revenues	72,846,322			41,945,879			178,252,434			104,287,660
Gross profit	4,057,194			4,884,768			18,080,362			10,909,190
Reduction of contingent liability	(1,876,752		)	—			(1,876,752		)	(1,850,000		)
Operating expenses:
Selling, general and administrative expenses   (exclusive of acquisition related expenses)	6,801,396			2,495,748			16,464,402			7,129,673
Acquisition related expenses	259,235			—			2,819,065			—
Total operating expenses	7,060,631			2,495,748			19,283,467			7,129,673
Income (loss) from operations	(1,126,685		)	2,389,020			673,647			5,629,517
Other income (expense):
Other income	109,980			—			110,357			—
Bargain purchase gain related to Omega acquisition	92,635			—			6,573,686			—
Other expense	—			(3,949		)	(10,866		)	(31,690		)
Interest expense	(947,325		)	(95,488		)	(1,680,371		)	(314,627		)
Total other income (expense)	(744,710		)	(99,437		)	4,992,806			(346,317		)
Income (loss) before income tax	(1,871,395		)	2,289,583			5,666,453			5,283,200
Income tax benefit (expense)	(57,975		)	40,211			(57,975		)	21,460
Net income (loss)	$	(1,929,370	)	$	2,329,794		$	5,608,478		$	5,304,660
Net loss attributable to non-controlling interest	$	—		$	—		$	325,399		$	—
Net income (loss) attributable to Vertex Energy, Inc.	$	(1,929,370	)	$	2,329,794		$	5,933,877		$	5,304,660
Earnings (loss) per common share
Basic	$	(0.08	)	$	0.13		$	0.26		$	0.30
Diluted	$	(0.08	)	$	0.12		$	0.24		$	0.27
Shares used in computing earnings per share
Basic	25,151,660			17,715,786			23,077,914			17,402,501
Diluted	25,151,660			19,997,257			24,825,326			19,766,263

See accompanying notes to the consolidated financial statements

F-2

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
	Nine Months Ended
	September 30, 2014			September 30, 2013
Cash flows from operating activities
Net income	$	5,608,478		$	5,304,660
Adjustments to reconcile net income to cash   provided by operating activities
Stock based compensation expense	173,979			123,571
Depreciation and amortization	2,981,393			1,615,657
Gain on acquisition	(6,573,686		)	—
Deferred federal income tax	—			(144,000		)
Reduction of contingent liability	(1,876,752		)	(1,850,000		)
Changes in operating assets and liabilities
Accounts receivable	(9,731,011		)	(794,821		)
Allowance for doubtful accounts	(230,000		)	—
Notes receivable-related party	(3,150,000		)	—
Inventory	(6,269,253		)	(2,338,000		)
Prepaid expenses	(1,348,935		)	(78,925		)
Accounts payable	8,962,991			3,516,056
Other assets	(81,450		)	—
Net cash provided by (used in) operating activities	(11,534,246		)	5,354,198
Cash flows from investing activities
Acquisition of Omega	(30,164,464		)	(67,972		)
Refund of asset acquisition	—			675,558
Purchase of fixed assets	(4,227,056		)	(1,671,295		)
Net cash used in investing activities	(34,391,520		)	(1,063,709		)
Cash flows from financing activities
Line of credit payments, net	—			(3,250,000		)
Proceeds related to secondary stock offering	15,803,000			—
Payments on contingent consideration	(136,662		)	—
Proceeds from note payable	41,372,315			—
Payments on note payable	(10,469,474		)	(1,372,453		)
Debt issue cost	(2,452,157		)	—
Proceeds from exercise of common stock options and warrants	359,862			55,250
Net cash provided by (used in) financing activities	44,476,884			(4,567,203		)
Net change in cash and cash equivalents	(1,448,882		)	(276,714		)
Cash and cash equivalents at beginning of the period	2,678,628			807,940
Cash and cash equivalents at end of period	$	1,229,746		$	531,226
SUPPLEMENTAL INFORMATION
Cash paid for interest	$	1,600,117		$	323,956
Cash paid for income taxes	$	80,158		$	122,001
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	$	689		$	189
Note payable for acquisition of E-Source interest	$	854,050		$	—
Additional paid in capital for acquisition of E-Source interest	$	1,790,745		$	—

 See accompanying notes to the consolidated financial statements

F-3

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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.

Leases

The company recognizes lease expense on a straight-line basis over the minimum lease terms which expire at various dates through 2032. These leases are for office and storage tank facilities and are classified as operating leases. For the leases that contain predetermined, fixed escalations of the minimum rentals, the Company recognizes the rent expense on a straight-line basis and records the difference between the rent expense and the rental amount payable in liabilities. Leasehold improvements made at the inception of the lease are amortized over the shorter of the asset life or the initial lease terms as described above. Leasehold improvements made during the lease term are also amortized over the shorter of the assets life or the remaining lease term.

For capital leases assumed as a result of an acquisition, the leased assets owned by the acquiree and financed through a capital lease are measured separately, at fair value, from the underlying lease to which they are subject. The present value of the lease is then calculated using the lease terms and implicit interest rate. For operating leases assumed as a result of an acquisition, the lease terms are measured, at acquisition date, to determine if the terms are favorable or unfavorable when compared to a comparable market lease with similar terms.

Business Combinations

The company accounts for business combinations using the acquisition method of accounting. The results of operations for the acquired entities are included in the company’s consolidated financial results from their associated acquisition dates. The company allocates the purchase price of acquisitions to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. A portion of purchase price for our acquisitions is contingent upon the realization of certain operating results. The fair values assigned to identifiable intangible assets acquired and contingent consideration were determined by third party specialists engaged by the company on a case by case basis. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill. If the purchase price is under the fair value of the identified assets and liabilities, a bargain purchase is recognized and included in income from continuing operations.

F-4

NOTE 2.  CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At September 30, 2014 and 2013 and for each of the nine 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	28%	—%	1%	—%
Customer 2	13%	8%	46%	27%
Customer 3	11%	—%	10%	—%
Customer 4	9%	47%	—%	—%
Customer 5	7%	12%	8%	16%
Customer 6	2%	11%	—%	—%
Customer 7	—%	—%	10%	16%
Customer 8	—%	—%	2%	24%

At September 30, 2014 and 2013 and for each of the nine months then ended, the Company's segment revenues were comprised of the following customer concentrations:

	% of Revenue by Segment 2014			% Revenue by Segment 2013
	Black Oil	Refining	Recovery	Black Oil	Refining	Recovery
Customer 1	100%	—%	—%	100%	—%	—%
Customer 2	8%	92%	—%	17%	83%	—%
Customer 3	—%	100%	—%	—%	100%	—%
Customer 4	92%	—%	2%	—%	—%	—%
Customer 5	—%	100%	—%	—%	100%	—%
Customer 6	94%	—%	6%	—%	—%	—%
Customer 7	—%	—%	—%	77%	23%	—%
Customer 8	—%	—%	—%	100%	—%	—%

The Company purchases goods and services from one company that represented 10% of total purchases for the nine months ended September 30, 2014 and one company that represented 11% for the nine months ended September 30, 2013.

As a result of the Omega Refining acquisition on May 2, 2014, the Company assumed a feedstock purchase contract with an unrelated third party. The Company is required to purchase a minimum of 15,200,000 gallons of used motor oil per year until the contract expires on December 31, 2014. As of September 30, 2014, the company has purchased approximately 11,200,000 gallons from this vendor, leaving a 4,000,000 gallon purchase obligation. The purchase price for this contract is calculated as discount to Platts U.S. Gulf Coast No. 6 Fuel Oil, 3% Sulphur per gallon for the month prior to the date the product is released.

The Company has had various debt facilities available for use, of which there was $43,427,439 and $10,158,333 outstanding as of September 30, 2014 and September 30, 2013, respectively. See Note 5 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.

F-5

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 $2.6 million for the nine months ended September 30, 2014.  The Company recorded a change in valuation allowance for the nine months ended September 30, 2014 of approximately $879,210.

Additionally, pursuant to a Consulting Agreement previously entered into with Heartland Group Holdings, LLC ("Heartland") in July 2014, pursuant to which Vertex Operating, LLC (the Company's wholly-owned subsidiary, "Vertex Operating") agreed to provide consulting services to Heartland (the "Consulting Agreement") while the parties negotiated the definitive terms of a purchase agreement relating to the acquisition by the Company of substantially all the assets of Heartland, which agreement was entered into by both parties in October, 2014. Vertex Operating agreed to reimburse Heartland for its operating losses (on a cash basis net of interest, depreciation, corporate overhead expenses and insurance proceeds received)(“Operating Losses”) during the period from July 16, 2014 through the earlier of the closing of the purchase agreement or the termination of the purchase agreement, which reimbursement (estimated to total approximately $1.8 to $2 million at closing) will be paid to Heartland at the closing, or if the closing does not occur as a result of the breach of the purchase agreement or default thereunder by Vertex Operating (or its affiliates), or the failure of any closing condition of Vertex Operating (or its affiliates) thereunder, such amount is due within thirty days of the date it has been determined that such closing will not occur.  In the event the closing does not occur due to the breach or default by Heartland (or its affiliates) of the purchase agreement, Heartland is required to reimburse Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating ("Vertex OH") for costs and expenses incurred by it and Vertex Operating in connection with such Operating Losses. The closing of the purchase agreement is anticipated to occur prior to the end of November 2014.

Vertex OH and Vertex Operating also agreed to share equally with Heartland in the costs of certain projects undertaken by Heartland prior to the closing of the purchase agreement, provided that Heartland is not required to pay more than $788,500 of its costs associated with such project costs (a substantial portion of which amount has been fully funded by Heartland to date) which are estimated to total approximately $1.6 million.  In connection therewith, following the closing, Vertex OH will first pay, up to the amount expended by Heartland as of closing for such costs, any amounts due in connection with such projects, and the remaining amount of such projects will be split equally by Vertex OH and Heartland.  All projects undertaken following closing, if any, are in the sole discretion of Vertex OH.  Additionally, in the event of the termination of the purchase agreement due to a breach or default by Heartland (or its affiliates) under the purchase agreement, subject to any cure provision, Heartland is required to reimburse Vertex OH for any costs or expenses incurred by it or Vertex Operating in connection with such capital projects and pay Vertex OH’s portion of any capital project committed to prior to the date of termination, within thirty days of the date it has been determined that the closing will not occur. No amounts had been expended for these capital projects as of September 30, 2014.

NOTE 3. LIQUIDITY

During the three month period ended September 30, 2014, an event of default occurred under our financing agreements (as described in Notes 5 and 13). If we fail to obtain a waiver of the defaults under the credit agreements or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding or initiating foreclosure or insolvency proceedings.  As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders.    In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm

F-6

will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014.

NOTE 4. GOODWILL

At September 30, 2014 and December 31, 2013, goodwill totaled $4,922,353 and 4,502,743, respectively. The increase in goodwill during the nine months ended September 30, 2013 is attributable to the acquisition of E-Source (as described in Notes 11 and 12) and allocated to the recovery segment. The excess purchase price over the fair value of the net tangible assets and intangible assets was recorded as goodwill. The total carrying value of goodwill for all periods has been tested and it was determined that no impairment charges were necessary as of September 30, 2014.

The following table contains consideration paid in excess of the net assets of the company's acquired, allocated to the respective business segment is as of September 30, 2014:

	Black Oil	Refining & Marketing	Recovery	Total
Balance as of December 31, 2013	$3,554,515	$—	$948,228	$4,502,743
Acquisitions	—	—	419,610	419,610
Balance as of September 30, 2014	$3,554,515	$—	$1,367,838	$4,922,353

NOTE 5. 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.

In May 2014, the Company entered into an amended and restated credit agreement with Bank of America. The amended credit agreement amended and restated the prior credit agreement entered into with Bank of America in September 2012. Pursuant to the agreement, Bank of America agreed to loan the Company up to $20,000,000 in the form of a revolving line of credit, subject to certain terms and lending ratios, 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 then in effect between 1.25% and 2% per annum or the Bank of America LIBOR rate plus between 2.35% and 3% (both ranges dependent upon the Company's leverage ratio from time to time). 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 May 2, 2017.  The balance on the revolving line of credit was $0 at September 30, 2014.

The financing arrangement discussed above is secured by a first priority security interest in all of the assets and securities of our direct and indirect subsidiaries other than E-Source Holdings, LLC. The loan includes various covenants binding upon the Company, including, requiring that the Company comply with certain reporting requirements, provide notices of material corporate events and forecasts to Bank of America, and maintain certain financial ratios relating to debt leverage, consolidated EBITDA, maximum debt exposure, and minimum liquidity, including maintaining a ratio of quarterly consolidated EBITDA to certain fixed charges.

During the three month period ended September 30, 2014, an event of default occurred under the financing agreement (as described below and in Note 13) but we are currently working with our lenders to develop new amendments or modifications to our current agreements that would facilitate a mutually beneficial resolution. The default occurred as a result of our failure to satisfy certain requirements of the Credit Agreement including, but not limited to, the following:

The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was due on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 (The actual Ratio of Consolidated Total Debt for the twelve months ending August 31, 2014 was 4.6:1) and;

The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for the period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00).    

On May 2, 2014, the Company entered into a Credit and Guaranty Agreement with Goldman Sachs Bank USA. Pursuant to the agreement, Goldman Sachs Bank USA loaned the Company $40,000,000 in the form of a term loan. As set forth in 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

F-7

Federal Reserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate 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 Adjusted LIBOR Rate. Interest on the Credit Agreement is payable monthly in arrears. 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 until maturity on May 2, 2019. The balance on the term loan was $39,400,000 at September 30, 2014.

The Goldman Sachs Bank USA financing arrangement is secured by all of the assets of the Company, but subordinate to the aforementioned Bank of America credit agreement. Amounts outstanding under this agreement have been recorded as current on the September 30, 2014 balance sheet.

The Credit Agreement contains customary representations, warranties, and covenants for facilities of similar nature and size as the Credit Agreement. The Credit Agreement also includes various covenants binding the Company including limits on indebtedness the Company may incur and maintenance of certain financial ratios relating to consolidated EBITDA and debt leverage. During the three month period ended September 30, 2014, an event of default occurred, under the credit facility (as a result of, among other things, the cross default of the Bank of America facility described above, see Note 13), and we are currently working with our lenders to develop new amendments or modifications to our current agreements that would facilitate a mutually beneficial resolution. The Agent and Lenders have also communicated their intent to carefully monitor the situation to determine additional remedies.

On May 2, 2014, in connection with the closing of the Omega Refining acquisition, the Company assumed two capital leases totaling $3,154,860. Payments of $2,549,418 were made and the balance was $605,442 at September 30, 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 $2,341,572 at September 30, 2014.

The Company financed insurance premiums through various financial institutions bearing interest rates from 4% to 4.52%. All such premium finance agreements have maturities of less than one year and have a balance of $862,409 at September 30, 2014.

Effective January 1, 2014, the Company purchased an additional 19% ownership interest in E-Source Holdings, LLC ("E-Source") of which it had previously acquired 51%. 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 through December 31, 2014. The balance of the note payable is $218,016 at September 30, 2014.

The Company's outstanding debt facilities as of September 30, 2014 are summarized as follows:

Creditor	Loan Type	Origination Date	Maturity Date	Loan Amount		Balance on September 30, 2014
Bank of America	Revolving LOC	May, 2014	May, 2017	$	20,000,000	$	—
Goldman Sachs USA	Term Loan	May, 2014	May, 2019	40,000,000		39,400,000
Pacific Western Bank	Capital Lease	December, 2010	December, 2014	970,974		71,626
Pacific Western Bank	Capital Lease	September, 2012	August, 2017	520,219		533,816
Various institutions	Various	Various	Various	2,690,677		2,341,572
E-source note	Note	January, 2014	December, 2014	854,050		218,016
Various institutions	Insurance premiums financed	Various	> 1 year	1,789,481		862,409
				$	66,825,401	$	43,427,439

F-8

Future contractual maturities of notes payable are summarized as follows:

Creditor	Q4 2014		2015		2016		2017		2018		2019		Thereafter
Goldman Sachs USA	$	300,000	$	2,700,000	$	3,200,000	$	3,200,000	$	3,200,000	$	3,200,000	$	23,600,000
Pacific Western Bank	71,625		—		—		—		—		—		—
Pacific Western Bank	41,060		172,654		186,948		133,154		—		—		—
Various institutions	30,394		305,293		323,178		342,204		263,918		236,066		840,519
E-source note	218,017		—		—		—		—		—		—
Various institutions	531,722		330,687		—		—		—		—		—
Totals	$	1,192,818	$	3,508,634	$	3,710,126	$	3,675,358	$	3,463,918	$	3,436,066	$	24,440,519

NOTE 6. STOCK-BASED COMPENSATION

Stock-based compensation expense was $173,979 and $123,571 for the nine months ended September 30, 2014 and 2013, respectively, for options previously awarded by the Company.

Stock option activity for the nine months ended September 30, 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 granted	250,000		7.91			9.80	501,893
Options forfeited/expired	(91,667	)	10.78			—	(29,335		)
Options exercised	(634,000	)	(0.87		)	—	(262,241		)
Outstanding at September 30, 2014	2,585,167		$	7.14		5.54	$	1,537,480
Vested at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010
Exercisable at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 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 exercised	(6,250	)	(1.75		)	—	(2,800		)
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at September 30, 2014	—		$	—		—	$	—
Vested at September 30, 2014	—		$	—		—	$	—
Exercisable at September 30, 2014	—		$	—		—	$	—

In April 2014, the Company granted two employees Incentive Stock Options to purchase an aggregate of 150,000 shares of the Company's common stock, which have a term of ten years, an exercise price of $7.55 per share and vest at the rate of 1/4th of such options per year on each of the first four anniversaries of the grant date.

F-9

In August, 2014, the Company granted one employee Incentive Stock Options to purchase an aggregate of 100,000 shares of the Company's common stock, which have a term of ten years, and exercise price of $8.44 per share and vest at the rate of 25,000 of such options on grant date and 18,750 on each of the first four anniversaries of the grant date.

NOTE 7. 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 nine months ended September 30, 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 nine months ended September 30, 2014 does not include options to purchase 1,006,000 shares due to their anti-dilutive effect.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Basic earnings per share	$	0.26	$	0.30
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Effect of dilutive securities
Stock options and warrants	1,116,993		1,039,925
Preferred stock	630,419		1,323,837
Diluted weighted-average shares outstanding	24,825,326		19,766,263
Diluted earnings per share	$	0.24	$	0.27

NOTE 8. COMMON STOCK

The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2014, there were 25,414,156 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 nine months ended September 30, 2014, a total of 688,583 shares of the Company's Series A Preferred Stock were converted into 688,583 shares of our common stock on a one-for-one basis. Warrants to purchase 6,250 shares of the Company's common stock were exercised for 6,250 shares of common stock with $10,937 of exercise price paid in cash. Options to purchase 634,000 shares of common stock were exercised for a net of 605,972 shares of common stock (when adjusting for a cashless

F-10

exercise of 212,500 of such options and the payment, in shares of common stock, of an aggregate exercise price of $205,125, along with an exercise price of $348,925 paid in cash in connection with such exercises) and 605,972 shares of common stock were issued to the option holders in connection with such exercises. Additionally, in June 2014, 2,200,000 shares were sold in connection with an underwritten offering of the Company's common stock for net proceeds of $15,803,000 after deducting offering costs of $1,247,000 from the $17,050,000 raised. The shares have a par value per share of $0.001. In May 2014, 500,000 shares of our restricted common stock (valued at $3,266,000) were issued in connection with the initial closing of the Omega Refining acquisition (see note 10). In September, 2014, 207,743 shares of Company's common stock, valued at $1,790,745, were issued as payment for the remaining 30% ownership in E-Source (additional information included in Note 12).

NOTE 9.  PREFERRED STOCK

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Preferred Stock is 5,000,000 (“Series A Preferred”).  The total number of designated shares of the Company’s Series B Preferred Stock is 2,000,000. As of September 30, 2014, there were 630,419 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

NOTE 10.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions.  Segment information for the three and nine months ended September 30, 2014 and 2013 is as follows:

NINE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil		Refining & Marketing		Recovery			Total
Revenues	$	124,884,174	$	58,000,951	$	13,447,671		$	196,332,796
Income (loss) from operations	$	388,035	$	1,768,043	$	(1,482,431	)	$	673,647

NINE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	65,412,393	$	38,979,504	$	10,804,953	$	115,196,850
Income from operations	$	1,276,173	$	2,260,834	$	2,092,510	$	5,629,517

THREE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil			Refining & Marketing		Recovery			Total
Revenues	$	52,434,252		$	19,655,674	$	4,813,590		$	76,903,516
Income (loss) from operations	$	(749,043	)	$	229,260	$	(606,902	)	$	(1,126,685	)

THREE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil			Refining & Marketing		Recovery		Total
Revenues	$	22,719,678		$	15,913,554	$	8,197,415	$	46,830,647
Income (loss) from operations	$	(791,121	)	$	1,158,637	$	2,021,504	$	2,389,020

F-11

NOTE 11. CONTINGENT CONSIDERATION

As part of the consideration paid related to the August 2012 acquisition of Vertex Holdings, L.P., 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 the 2014 earnings target would not be met and the contingent consideration was reduced by $1,555,000, which represents 100% of the discounted cash flows for year two.

As part of the consideration paid in connection with the acquisition of Omega Refining (see Note 12), the Company has agreed to pay the seller additional earn-out consideration in the event that certain EBITDA targets are met (a) during any twelve month period during the eighteen month period commencing on the first day of the first full calendar month following the May 2, 2014 initial closing date (which targets begin at $8,000,000 of EBITDA during such twelve month period) of up to 470,498 shares of common stock of the Company; and (b) during the calendar year ended December 31, 2015 (which targets begin at $9,000,000 of EBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capital expenditures. The contingent consideration has been evaluated by management and reduced by $99,164.

As part of the consideration paid in connection with the acquisition of 51% 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. Of this amount, $136,662 was paid during the three months ended September 30, 2014 and the remaining $611,338 was written off. The write off was triggered because certain terms of the contingent consideration agreement were not met by the acquiree.

As part of the consideration paid in connection with the acquisition of an additional 19% of E-source Holding, LLC, if certain targets were met, on January 31, 2015, 207,743 shares of the Company’s common stock were to be issued to the seller. The estimated fair value of the stock at the time of this agreement was approximately $231,000 and was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 850-10-45. This amount was written off during the three months ended September 30, 2014 after certain terms of the contingent consideration agreement were not met by the aquiree.

On September 4, 2014, the Company acquired the remaining 30% interest in E-Source Holdings, LLC, of which it had previously acquired 70%. In consideration for the 30% interest, the Company issued 207,743 shares of common stock, valued at approximately $1,790,745, which was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

NOTE 12. ACQUISITION

E-SourceHoldings Transaction

On September 4, 2014, the Company acquired the remaining 30% interest in E-Source Holdings, LLC, of which it had previously acquired 70%. In consideration for the 30%, the Company issued 207,743 shares of common stock, valued at approximately $1,790,745. The transaction was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

Omega Refining Transaction

On May 2, 2014, the Company completed its acquisition of substantially all of the assets of Omega Refining, LLC (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana ("Omega Refining") and ownership of Golden State Lubricant Works, LLC for the purpose of re-refining used lubricating oils into processed oils and other products for the distribution, supply and sale to end-customers with related products and support services. The purchase price paid at the closing was approximately $28,764,000 in cash, 500,000 shares of our restricted common stock (valued at $3,266,000) 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 Holdings a loan in the amount of up to approximately $13.8 million.

The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration paid by the Company was allocated to Omega Refining's net tangible assets and intangible assets based on their estimated fair values as of May 2, 2014. The transaction resulted in a bargain purchase of $6,481,051 recognized in net income as an acquisition-date gain. During the three month period ending September 30, 2014, an additional $92,635 bargain purchase gain was recognized after capital lease balances were true up, resulting in a total bargain purchase gain of $6,573,686. The Omega Refining purchase qualifies as a bargain purchase since the acquisition date

F-12

amounts of the identifiable net asset acquired, excluding goodwill ($39.01 million), exceed the value of the consideration transferred ($32.44 million). The difference of $6.57 million is a gain as of the acquisition date. The bargain purchase resulted from the financial distress that Omega was in due to the large amount of debt held by Omega and the unexpected decrease in crack spreads that made the debt level overbearing. The Company retained an independent third party to assist management in determining the fair value of tangible and intangible assets transferred and liabilities assumed. The allocation of the purchase price is based on the best estimates of management.

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

	(in thousands)
Cash and cash equivalents	$	406
Accounts receivable	950
Inventory	4,192
Prepaid expenses	71
Property, plant and equipment	30,000
Deposits	400
Bango secured note issued to Vertex	8,308
Technology	2,287
Non-compete agreements	66
Total identifiable net assets	$	46,680
Less liabilities assumed, including contingent consideration	(7,670		)
Gain on purchase	(6,574		)
Total purchase price	$	32,436

The Company incurred $2,559,830 in costs associated with the Omega Refining acquisition. These included legal, accounting, environmental and investment banking.

The following table summarizes the cost of amortizable intangible assets related to the Omega Refining acquisition: 

	Estimated Cost (in thousands)		Useful life (years)
Non-Competes	$	66	1
Technology	2,287		15
Total	$	2,353

F-13

The results of Omega Refining are included in the consolidated financial statements subsequent to May 2, 2014. The following schedule contains pro forma results from operations as if the acquisition had occurred on January 1, 2014. The pro forma results do not report actual results that would have occurred had the merger taken place on January 1, 2014, nor do they necessarily suggest future operating results

	Nine Months Ended September 30,
	2014		2013
Revenues	$	234,957,949	$	221,836,815
Income from operations	1,478,186		8,047,532
Net income	6,216,035		7,329,101
Net loss attributable to non-controlling interest	325,399		—
Net income attributable to Vertex Energy, Inc.	$	6,541,434	$	7,329,101
Earnings  per common share
Basic	$0.28		$0.42
Diluted	$0.26		$0.37

NOTE 13. SUBSEQUENT EVENTS

Subsequent to September 30, 2014, an option holder exercised options to purchase 3,750 shares of the Company's common stock at an exercise price of $2.75 per share for $10,313 of cash and was issued 3,750 shares of our common stock.

Subsequent to September 30, 2014, the available credit on the Line of Credit was $20,000,000. As of November 10, 2014, the outstanding balance drawn on the line of credit is $0, leaving an available balance for draw downs of $20,000,000.

Effective October 3, 2014, the Company entered into a consulting agreement with its director, Timothy C. Harvey, pursuant to which Mr. Harvey agreed to provide consulting services to the Company in connection with overseeing the Company’s trading and selling of finished products and assisting the Company with finding the best markets for products from the Company’s facilities for a term of one year.  In consideration for agreeing to provide services under the agreement, the Company agreed to pay Mr. Harvey $10,000 per month, and to grant him an option to purchase up to 75,000 shares of the Company's common stock at an exercise price of $6.615 per share, the mean between the highest and lowest quoted selling prices of the Company's common stock on October 2, 2014 (the day immediately preceding the approval by the Board of Directors of the agreement), which vest at the rate of 1/4th of such options per year, subject to Mr. Harvey’s continued consulting, employment or service as a director of the Company, which options were granted under the Company's 2013 Stock Incentive Plan.

On October 21, 2014, the Company entered into anAsset Purchase Agreement (the “Purchase Agreement”) by and among the Company, Vertex Operating, Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating (“Vertex OH”), and Heartland Group Holdings, LLC (“Heartland”).  Heartland is in the business of operating an oil re-refinery and, in connection therewith, collecting, aggregating and purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers (collectively, the “Heartland Business”).

Pursuant to the Purchase Agreement, we agreed to acquire substantially all of the assets of Heartland related to and used in the operating of the Heartland Business, including raw materials, finished products and work-in-process, equipment and other fixed assets, customer lists and marketing information, the name ‘Heartland’ and other related trade names, Heartland’s real property relating to its used oil refining facility located in Columbus, Ohio, used oil storage and transfer facilities located in Columbus, Zanesville and Norwalk, Ohio, and leases related to storage and transfer facilities located in Zanesville, Ohio, Mount Sterling, Kentucky, and Ravenswood, West Virginia (collectively, the “Heartland Assets”) and to assume certain liabilities of Heartland associated with certain assumed and acquired agreements.  The main assets excluded from the purchased assets pursuant to the Purchase Agreement are Heartland’s cash and cash equivalents, receivables, certain prepaid expenses, refunds and related claims, rights to certain tax refunds, certain assets used in the operations of Heartland which are used more than incidentally by Heartland’s majority equity owner (Warren Distribution, Inc. (“Warren”)) in connection with the operation of its other businesses and certain real property assets.

The transactions contemplated by the Purchase Agreement are planned to close on or before November 30, 2014 (such closing date, the “Closing”).

F-14

The purchase price payable in consideration for the Heartland Assets is $8,276,792 and the assumption of the assumed liabilities (subject to adjustment in connection with certain required inventory levels at closing as set forth in the Purchase Agreement), which amount is payable by way of the issuance to Heartland (or its assigns) of 1,189,637 shares of the Company’s restricted common stock, of which 150,000 shares of restricted common stock will be held in escrow and used to satisfy indemnification claims (the “Escrow Shares”).  The purchase price is subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items. Heartland’s indemnification obligations under the Purchase Agreement are capped at $4 million.

The Escrow Shares are to be held in escrow to satisfy indemnification claims for 24 months following the Closing; provided that Heartland has the option at any time to acquire such Escrow Shares and instead place cash in such escrow account, upon the payment into the escrow account of $333,333 in cash for each 50,000 Escrow Shares acquired by Heartland.  Any claims made against the Escrow Shares pursuant to the indemnification provisions of the Purchase Agreement result in the cancellation of Escrow Shares equal in value to the amount of the applicable claim divided by the ten-day volume weighted average price per share of the Company’s common stock ending on and including the trading day immediately preceding the date of such applicable claim.

Heartland will also have the right pursuant to the terms of the Purchase Agreement to earn additional earn-out consideration of up to a maximum of $8,276,792, based on total EBITDA related to the Heartland Business during the twelve month period beginning on the first day of the first full calendar month commencing on or after the first anniversary of the Closing (the “Earnout Period”), as follows (as applicable, the “Contingent Payment”):

EBITDA generated during Earnout Period	Contingent Payment Due
Less than $1,650,000	$0
At least $1,650,000	$4,138,396
More than $1,650,000 and less than $3,300,000	Pro-rated between $4,138,396 and $8,276,792
$3,300,000 or more	$8,276,792

Any Contingent Payment due is payable 50% in cash and 50% in shares of the Company’s common stock based on 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 commencing on the trading day immediately following the last day of the Earnout Period and ending on such tenth trading day thereafter.  Additionally, the amount of any Contingent Payment is reduced by two-thirds of the cumulative total of required capital expenditures incurred at Heartland’s refining facility in Columbus, Ohio, which are paid or funded by Vertex OH after the Closing, not to exceed $866,667, which capital expenditures are estimated to total $1.3 million in aggregate.

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 October 21, 2014, (ii) exceed 19.9% of the combined voting power of the Company on October 21, 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 Vertex OH 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.

 Additionally, we are required to file a registration statement within thirty days of the Closing registering at least 1,189,637 shares of the Company’s common stock and use commercially reasonable efforts to obtain effectiveness of the registration statement within 90 days of the filing date if the SEC does not review the registration statement or within 120 days if the SEC does review the registration statement filing.   Pursuant to the Purchase Agreement, Heartland agreed to not sell more than 50,000 shares of the Company’s common stock each week, if otherwise permitted pursuant to applicable law and regulation.

F-15

As of September 30, 2014, the Company was not in compliance with certain covenants contained in its credit facilities, including the financial covenants noted below with Bank of America (“BOA”) and Goldman Sachs Bank USA (“Goldman Sachs”):

• The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was due on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 (the actual Ratio of Consolidated Total Debt for the twelve month period ending on August 31, 2014 was 4.6:1); and

• The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for three month period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00).

In connection with the defaults above (and additional defaults described below), in October and November 2014, the Company received notices of events of default from Bank of America and Goldman Sachs, respectively, describing the occurrence of the following events of default under the credit agreements in addition to the prior financial covenant defaults described above:

• The Company entering into various letters of intent in violation of the permitted activities covenants of the Goldman Sachs Credit Agreement; and

• The Company failing to timely comply with various post-closing obligations set forth in the credit agreements including, among others, to deliver certificates of title of Company vehicles to the lenders, assignments of rights under various agreements from the Company to Vertex Operating, confirmation of the closing or transfer of various Company bank accounts, various surveys of mortgaged properties, and delivering a collateral access agreement to BOA.

Additionally, as each credit facility contains cross-default provisions, the default under each lender credit agreement constitutes a default under the agreement with the other lender. As events of default have occurred under the BOA credit agreement, BOA is not required to lend us any further funds under such agreement.

Notwithstanding the above described events of default, both the BOA and Goldman Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

F-16

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 and future 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;

• certain events of default which have occurred and are continuing under our debt facilities;

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• our ability to effectively manage our growth;

• repayment of and covenants in our debt facilities;

• 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 and prior Form 10-Qs.

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 Company's Quarterly Report on Form 10-Q, filed with the Commission on August 14, 2014, and the other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

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.

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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 had also been determined that the 2014 earnings target would not be met and the contingent consideration was reduced by $1,555,000, whichrepresents 100% of the discounted cash flows for year two.

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 (which the parties agreed would not be met as of their entry into the August 2014 acquisition agreement described below). Of this amount, $136,662 was paid during the three months ended September 30, 2014 and the remaining $611,338 in cash and $231,000 in stock contingencies were written off. The write off was triggered because certain terms of the contingent consideration agreement were not met by the acquiree.

In August 2014, Vertex Energy Operating, LLC, a wholly-owned subsidiary of the Company, acquired the remaining 30% interest in E-Source, in consideration for the issuance of 207,743 shares of Company common stock and confirmation by the parties that the performance metrics relating to the 207,743 shares of common stock issuable in connection with the 19% acquisition would not be met. Following this transaction, E-Source became a 100% wholly-owned subsidiary of Vertex Operating.

E-Source 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.

Omega:

On May 2, 2014, we completed the Initial Closing (defined below) contemplated under the 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,

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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 November 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 approximately $28,764,000 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 $3,266,000) 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 (which shares we are not required to register with the Commission and do not currently anticipate registering with the Commission) 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.

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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. The contingent consideration has been evaluated by management and reduced by $99,164.

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 were required to file and obtain effectiveness of a registration statement within 90 days following the Initial Closing (if the Securities and Exchange Commission did not review the filing) and 150 days following the Initial Closing (if the Securities and Exchange Commission did review the filing), registering the shares of common stock issuable in connection with the acquisition, which registration statement was declared effective on July 29, 2014.

We obtained rights to certain material agreements and contracts of Omega Refining in connection with the Initial Closing, including obligations under Omega Refining’s capital leases and rights under a Terminaling Services Agreement dated May 1, 2008, originally between Omega Refining and Marrero Terminal LLC (the “Terminaling Agreement”) and a Second Used Motor Oil Buy/Sell Contract originally between Omega Refining and Thermo Fluids Inc. dated August 1, 2012 (the “Used Oil Contract”). Pursuant to the Terminaling Agreement, Marrero Terminal LLC agreed to provide certain terminaling services at the Marrero, Louisiana facility, subject to the terms of the agreement, including the use of tanks for storage in consideration for certain per barrel storage and throughput fees. The Terminaling Agreement has a term through April 30, 2018, subject to the right to extend such agreement pursuant to the terms thereof. Pursuant to the Used Oil Contract, we are required to purchase from Thermo Fluids Inc. an aggregate of a minimum of 26 million gallons of used motor oil through the end of the term of the agreement, December 31, 2014, with certain required minimum monthly and yearly volumes. We are required to pay Thermo Fluids Inc. consideration based on a discount to the average low posting of Platts U.S. Gulf Coast No. 6 Fuel Oil, plus in some cases additional consideration per barrel, for all used motor oil purchased pursuant to the agreement, subject to certain adjustments provided for in the agreement.

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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Heartland:

On October 21, 2014, the Company entered into anAsset Heartland Purchase Agreement (the “ Heartland Purchase Agreement”) by and among the Company, Vertex Operating, Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating (“Vertex OH”), and Heartland Group Holdings, LLC (“Heartland”).  Heartland is in the business of operating an oil re-refinery and, in connection therewith, collecting, aggregating and purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers (collectively, the “Heartland Business”).

Pursuant to the Heartland Purchase Agreement, we agreed to acquire substantially all of the assets of Heartland related to and used in the operating of the Heartland Business, including raw materials, finished products and work-in-process, equipment and other fixed assets, customer lists and marketing information, the name ‘Heartland’ and other related trade names, Heartland’s real property relating to its used oil refining facility located in Columbus, Ohio, used oil storage and transfer facilities located in Columbus, Zanesville and Norwalk, Ohio, and leases related to storage and transfer facilities located in Zanesville, Ohio, Mount Sterling, Kentucky, and Ravenswood, West Virginia (collectively, the “Heartland Assets”) and to assume certain liabilities of Heartland associated with certain assumed and acquired agreements.  The main assets excluded from the purchased assets pursuant to the Heartland Purchase Agreement are Heartland’s cash and cash equivalents, receivables, certain prepaid expenses, refunds and related claims, rights to certain tax refunds, certain assets used in the operations of Heartland which are used more than incidentally by Heartland’s majority equity owner (Warren Distribution, Inc. (“Warren”)) in connection with the operation of its other businesses and certain real property assets.

The transactions contemplated by the Heartland Purchase Agreement are planned to close on or before November 30, 2014 (such closing date, the “Closing”).

The purchase price payable in consideration for the Heartland Assets is the assumption of the assumed liabilities and $8,276,792 (subject to adjustment in connection with certain required inventory levels at closing as set forth in the Heartland Purchase Agreement), which amount is payable by way of the issuance to Heartland (or its assigns) of 1,189,637 shares of the Company’s restricted common stock, of which 150,000 shares of restricted common stock will be held in escrow and used to satisfy indemnification claims (the “Escrow Shares”).  The Purchase Price is subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items. Heartland’s indemnification obligations under the Heartland Purchase Agreement are capped at $4 million.

Additionally, pursuant to a Consulting Agreement previously entered into with Heartland in July 2014, pursuant to which Vertex Operating agreed to provide consulting services to Heartland while the parties negotiated the definitive terms of the Heartland Purchase Agreement (the “Consulting Agreement”), Vertex Operating agreed to reimburse Heartland for its operating losses (on a cash basis net of interest, depreciation, corporate overhead expenses and insurance proceeds received)(“Operating Losses”) during the period from July 16, 2014 through the earlier of the Closing or the termination of the Heartland Purchase Agreement, which reimbursement (estimated to total approximately $1.8 to $2 million at Closing) will be paid to Heartland at the Closing, or if the Closing does not occur as a result of the breach of the Heartland Purchase Agreement or default thereunder by Vertex Operating (or its affiliates), or the failure of any closing condition of Vertex Operating (or its affiliates) thereunder, such amount is due within thirty days of the date it has been determined that such Closing will not occur.  In the event the Closing does not occur due to the breach or default by Heartland (or its affiliates) of the Heartland Purchase Agreement, Heartland is required to reimburse Vertex OH for costs and expenses incurred by it and Vertex Operating in connection with such Operating Losses.

Vertex OH and Vertex Operating also agreed to share equally with Heartland in the costs of certain capital projects undertaken by Heartland prior to Closing, provided that Heartland is not required to pay more than $788,500 of its costs associated with such project costs (a substantial portion of which amount has been fully funded by Heartland to date) which are estimated to total approximately $1.6 million.  In connection therewith, following the Closing, Vertex OH will first pay, up to the amount expended by Heartland as of Closing for such costs, any amounts due in connection with such projects, and the remaining amount of such projects will be split equally by Vertex OH and Heartland.  All projects undertaken following Closing, if any, are in the sole discretion of Vertex OH.  Additionally, in the event of the termination of the Heartland Purchase Agreement due to a breach or default by Heartland (or its affiliates) under the Heartland Purchase Agreement, subject to any cure provision, Heartland is required to reimburse Vertex OH for any costs or expenses incurred by it or Vertex Operating in connection with such capital projects and pay Vertex OH’s portion of any capital project committed to prior to the date of termination, within thirty days of the date it has been determined that the Closing will not occur.

The Escrow Shares are to be held in escrow to satisfy indemnification claims for 24 months following the Closing; provided that Heartland has the option at any time to acquire such Escrow Shares and instead place cash in such escrow account, upon the payment into the escrow account of $333,333 in cash for each 50,000 Escrow Shares acquired by Heartland.  Any claims made

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against the Escrow Shares pursuant to the indemnification provisions of the Heartland Purchase Agreement result in the cancellation of Escrow Shares equal in value to the amount of the applicable claim divided by the ten-day volume weighted average price per share of the Company’s common stock ending on and including the trading day immediately preceding the date of such applicable claim.

Heartland will also have the right pursuant to the terms of the Heartland Purchase Agreement to earn additional earn-out consideration of up to a maximum of $8,276,792, based on total EBITDA related to the Heartland Business during the twelve month period beginning on the first day of the first full calendar month commencing on or after the first anniversary of the Closing (the “Earnout Period”), as follows (as applicable, the “Contingent Payment”):

EBITDA generated during Earnout Period	Contingent Payment Due
Less than $1,650,000	$0
At least $1,650,000	$4,138,396
More than $1,650,000 and less than $3,300,000	Pro-rated between $4,138,396 and $8,276,792
$3,300,000 or more	$8,276,792

Any Contingent Payment due is payable 50% in cash and 50% in shares of the Company’s common stock based on 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 commencing on the trading day immediately following the last day of the Earnout Period and ending on such tenth trading day thereafter.  Additionally, the amount of any Contingent Payment is reduced by two-thirds of the cumulative total of required capital expenditures incurred at Heartland’s refining facility in Columbus, Ohio, which are paid or funded by Vertex OH after the Closing, not to exceed $866,667, which capital expenditures are estimated to total $1.3 million in aggregate.

Notwithstanding the above, the maximum number of shares of common stock to be issued pursuant to the Heartland Purchase Agreement cannot (i) exceed 19.9% of the outstanding shares of common stock outstanding on October 21, 2014, (ii) exceed 19.9% of the combined voting power of the Company on October 21, 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 Heartland Purchase Agreement exceeds the Share Cap, then Vertex OH 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.

Additionally, we are required to file a registration statement within thirty days of the Closing registering at least 1,189,637 shares of the Company’s common stock and use commercially reasonable efforts to obtain effectiveness of the registration statement within 90 days of the filing date if the SEC does not review the registration statement or within 120 days if the SEC does review the registration statement filing.   Pursuant to the Heartland Purchase Agreement, Heartland agreed to not sell more than 50,000 shares of the Company’s common stock each week, if otherwise permitted pursuant to applicable law and regulation.

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 100% 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. We also recently acquired Omega's Marrero, Louisiana re-refinery and Myrtle Grove complex in Belle

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Chasse, Louisiana and ownership of Golden State, as described above. The Marrero, Louisiana facility re-refines used motor oil and also produces vacuum gas oil. Golden State operates a strategic blending and storage facility located in Bakersfield, California.

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 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. In addition at our Marrero facility we produce a Vacuum Gas Oil (VGO) product that is sold to refineries as well as to the marine fuels market.

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 September 30, 2014, we aggregated approximately 103 million gallons of used motor oil and other petroleum by-product feedstocks and managed the re-refining of approximately 54 million gallons of used motor oil with our proprietary TCEP process and VGO process.

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

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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, 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. In addition to TCEP, at our Marrero, Louisiana facility we are producing a vacuum gas oil (VGO) through our re-refinery.

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) and our recently announced proposed acquisition of certain assets from Heartland Group Holdings, LLC.  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.

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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.

Recent Events

In September 2014, we entered into a joint supply and marketing agreement "JSMA" with a strategic petroleum products trading company whereby we will jointly market our finished product produced from our Marrero, Louisiana facility (low sulfur fuel oil and marine bunker fuel) and split the gross profit resulting in the sales of such product equally (50/50).  As such, the finished product related to this venture has been sold and paid for from the JSMA and the cost associated therewith has been reimbursed to us; however no additional revenues associated with the sale of such products will be recognized until the product is further delivered to the end markets and the JSMA recognizes gross profit on such sales.  The agreement has a term through the end of November 2014.

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. Through the operations at our Marrero, Louisiana facility we produce a Vacuum Gas Oil (VGO) product from used oil re-refining which is then sold via barge to end users to utilize in a refining process or a fuel oil blend.

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.

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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.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2013

Set forth below are our results of operations for the three months ended September 30, 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 September 30,
	2014			2013			$ Change			% Change
Revenues	$	76,903,516		$	46,830,647		$	30,072,869		64	%
Cost of Revenues	72,846,322			41,945,879			(30,900,443		)	(74	)%
Gross Profit	4,057,194			4,884,768			(827,574		)	(17	)%
Reduction of contingent liability	(1,876,752		)	—			1,876,752			100	%
Selling, general and administrative expenses	6,801,396			2,495,748			(4,305,648		)	(173	)%
Acquisition related expenses	259,235			—			(259,235		)	(100	)%
Income (loss) from operations	(1,126,685		)	2,389,020			(3,515,705		)	(147	)%
Other Income	109,980			—			109,980			100	%
Bargain purchase gain related to Omega acquisition	92,635			—			92,635			100	%
Other expense	—			(3,949		)	3,949			100	%
Interest Expense	(947,325		)	(95,488		)	(851,837		)	(892	)%
Total other income (expense)	(744,710		)	(99,437		)	(645,273		)	(649	)%
Income (loss) before income taxes	(1,871,395		)	2,289,583			(4,160,978		)	(182	)%
Income tax (expense) benefit	(57,975		)	40,211			(98,186		)	(244	)%
Net income (loss)	$	(1,929,370	)	$	2,329,794		$	(4,259,164	)	(183	)%

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Each of our segments’ gross profit during the three months ended September 30, 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   September 30,
Black Oil Segment	2014			2013			$ Change			% Change
Total revenue	$	52,434,252		$	22,719,678		$	29,714,574		131	%
Total cost of revenue	49,933,205			21,586,736			(28,346,469		)	(131	)%
Gross profit	2,501,047			1,132,942			1,368,105			121	%
Reduction in contingent consideration	1,876,752			—			1,876,752			100	%
Selling general and administrative expense	5,126,842			1,924,063			(3,202,779		)	(166	)%
Income from operations	$	(749,043	)	$	(791,121	)	$	42,078		5	%
Refining Segment
Total revenue	$	19,655,674		$	15,913,554		$	3,742,120		24	%
Total cost of revenue	18,679,687			14,244,023			(4,435,664		)	(31	)%
Gross profit	975,987			1,669,531			(693,544		)	(42	)%
Selling general and administrative expense	746,727			510,894			(235,833		)	(46	)%
Income from operations	$	229,260		$	1,158,637		$	(929,377	)	(80	)%
Recovery Segment
Total revenue	$	4,813,590		$	8,197,415		$	(3,383,825	)	(41	)%
Total cost of revenue	4,233,430			6,115,120			1,881,690			31	%
Gross profit	580,160			2,082,295			(1,502,135		)	(72	)%
Selling general and administrative expense	1,187,062			60,791			(1,126,271		)	(1,853	)%
Income (loss) from operations	$	(606,902	)	$	2,021,504		$	(2,628,406	)	(130	)%

The following schedule separates revenues and gross profit contributed by our recently acquired business entities, Omega Refining and E-Source, during the three month period ending September 30, 2014. The isolated figures are presented in dollars and as a percentage of total consolidated results.

	Three Months Ended September 30, 2014
	Consolidated Results		Omega Refining		% Contributed by Omega Refining
Total Revenue	$	76,903,516	$	32,973,450	43%
Gross Profit	4,057,194		2,047,560		50%
	Consolidated Results		E-Source		% Contributed by E-Source
Total Revenue	$	76,903,516	$	1,732,967	2%
Gross Profit	4,057,194		327,805		8%

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 64% for the three months ended September 30, 2014 compared to the same period in 2013, due primarily to an increase in overall volume of product sold during the three months ended September 30, 2014 compared to the same period in 2013. Total volume increased 56% largely as a result of the recent addition of the Marrero facility in May 2014, which produces a VGO finished product. Gross profit decreased by 17% for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. Additionally, our per barrel margin decreased 47% relative to the three months ended September

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30, 2013. This decrease was a result of operational decisions made at our TCEP facility, where we decreased our production during the period to make significant improvements as well as maintenance at the location. In addition volumes were lower at our Marrero facility related to stack testing that was being done for permitting purposes to determine if the facility could qualify for increased production in the future. In addition finished product values for our VGO product declined dramatically due to certain facilities being down in the Gulf Coast causing disruption in supply/demand balances during August and September. Market demand being lower for VGO products during this period caused a sharp drop in our finished product values during this period. Due to lower demand for VGO during this period The 74% increase in cost of revenues for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 is mainly a result of our increased revenues.

Our Black Oil division's volume increased approximately 106% during the three months ended September 30, 2014 compared to the same period in 2013. This increase was due to the increased amount of volume managed through our TCEP operation as a result of the improvements that were made, as well as the increased volume we realized from the Marrero facility (beginning May 2, 2014) (described in greater detail below) which produces a VGO finished product. Volumes collected through our H&H business increased 41% during the three months ended September 30, 2014 compared to the same period in 2013.

We experienced a 7% increase in the volume of our TCEP refined product during the three months ended September 30, 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. This increase would have been much higher if we had not brought the plant down for improvements and maintenance during the 3rd quarter. In addition, commodity prices decreased approximately 6% for the three months ended September 30, 2014, compared to the same period in 2013. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the three months ended September 30, 2014 decreased $5.58 per barrel from a three month average of $92.98 for the three months ended September 30, 2013 per barrel to $87.40 per barrel for the three months ended September 30, 2014.

Our TCEP technology generated revenues of $14,364,173 during the three months ended September 30, 2014 with cost of revenues of $13,934,459, producing a gross profit of $429,714.  The per barrel margin for our TCEP product decreased 63% as compared to the same period during 2013.  This decrease was largely a result of the maintenance and improvements taking place at the facility, which caused an increase in our cost of goods during this period, as well as the decrease in the market value of the finished product of 6% while feedstock costs remained relatively unchanged. In addition the lower than expected volume through the facility during this period had an impact on the overall Gross Profit.

Overall volume for the Refining and Marketing division increased 17% during the three month period ended September 30, 2014 as compared to the same period in 2013. This division experienced an increase in production of 10% for its gasoline blendstock for the three months ended September 30, 2014, compared to the same period in 2013. Our fuel oil cutter volumes decreased 13% for the three months ended September 30, 2014, compared to the same period in 2013. Our pygas volumes increased 180% for the three months ended September 30, 2014 as compared to the same period in 2013. These increases are a result of some new feedstock streams as well as variations in volume builds that can vary throughout the year at the facility where our product is produced.

Our Recovery division includes the business operations of Vertex Recovery as well as the recently acquired business of E-Source (of which we own a 100% interest). This segment was formed 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 decreased 41% mostly as a result of E-Source during the three months ended September 30, 2014. This division periodically participates in project work that is not ongoing thus we expect to see fluctuations in revenue and gross profit from this division from period to period.

Overall gross profit decreased 17% and our margin per barrel decreased approximately 47% for the three months ended September 30, 2014, compared to the same period in 2013. This decrease was largely a result of lower volumes than expected at each facility along with the slight decrease in overall business production at each of our facilities compared to what we plan for.

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The following table sets forth the high and low spot prices during the first nine 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	$	2.55	September 30
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.08	June 20	$	2.54	January 3
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	94.94	June 24	$	82.67	September 30
NYMEX Crude oil (Dollars per barrel)	$	107.26	June 20	$	91.16	September 30
Reported in Platt's US Marketscan (Gulf Coast)

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

2013
Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.25	February 12	$	2.57	April 17
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.21	February 15	$	2.52	September 23
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	101.02	February 14	$	87.49	April 17
NYMEX Crude oil (Dollars per barrel)	$	110.10	August 28	$	86.68	April 17
Reported in Platt's US Marketscan (Gulf Coast)

We saw a decrease during the first nine months 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, and our recently acquired VGO technology through our Marrero facility, 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 operating expenses of $7,060,631 for the three months ended September 30, 2014, which included $259,235 of acquisition related expenses, compared to $2,495,748 of total operating expenses for the prior year’s period, an increase of $4,564,883 or 183% from the prior period.  This increase is primarily due to the additional selling, general and administrative

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expenses generated by new business lines, specifically those business lines acquired from Omega Refining and as a part of the E-Source acquisition business, as well as increased sales expenses associated with our expansion into new West Coast markets.

We had a loss from operations of $1,126,685 for the three months ended September 30, 2014, compared to income from operations of $2,389,020 for the three months ended September 30, 2013, a decrease of $3,515,705 or 147% from the prior year’s period.  The decrease was mainly due to additional selling general and administrative expenses associated with new product lines, and acquired operations, and certain one-time expenses associated with acquisitions partially offset by an increase in volumes and revenues during the three month period ended September 30, 2014, and a $1,876,752 reduction in contingent liability during the three months ended September 30, 2014, which positively affected income from operations for the three months ended September 30, 2014.  

We also had interest expense of $947,325 for the three months ended September 30, 2014, compared to interest expense of $95,488 for the three months ended September 30, 2013, an increase in interest expense of $851,837 or 892% from the prior period mainly due to the new debt facilities with Goldman Sachs and BOA. We had total other expense of $744,710 for the three months ended September 30, 2014, mainly due to the increase in interest expense described above, compared to total other expense of $99,437 for the three months ended September 30, 2013, mainly due to interest expense.

We had net loss of $1,929,370 which includes a $1,876,752 reduction in contingent liability which positively affected loss from operations for the three months ended September 30, 2014, compared to net income of $2,329,794 for the three months ended September 30, 2013, a decrease in net income of $4,259,164 or 183% from the prior period for the reasons described above.

During the three months ended September 30, 2014, the processing costs for our Refining & Marketing business located at KMTEX were $1,043,243. In addition, we have provided the results of operations for this segment of our business below during the same three month period.

Three Months Ended September 30, 2014
	Refining & Marketing
Revenues	$	19,655,674
Income (loss) from operations	$	229,260

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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2013

Set forth below are our results of operations for the nine months ended September 30, 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. 

	Nine Months Ended September 30,
	2014			2013			$ Change			% Change
Revenues	$	196,332,796		$	115,196,850		$	81,135,946		70	%
Cost of Revenues	178,252,434			104,287,660			$	(73,964,774	)	(71	)%
Gross Profit	18,080,362			10,909,190			7,171,172			66	%
Reduction of contingent liability	(1,876,752		)	(1,850,000		)	26,752			1	%
Selling, general and administrative expenses	16,464,402			7,129,673			(9,334,729		)	(131	)%
Acquisition related expenses	2,819,065			—			(2,819,065		)	(100	)%
Income from operations	673,647			5,629,517			(4,955,870		)	(88	)%
Other Income	110,357			—			110,357			100	%
Bargain purchase gain related to Omega acquisition	6,573,686			—			6,573,686			100	%
Other expense	(10,866		)	(31,690		)	20,824			66	%
Interest Expense	(1,680,371		)	(314,627		)	(1,365,744		)	(434	)%
Total other income (expense)	4,992,806			(346,317		)	5,339,123			(1,542	)%
Income before income taxes	5,666,453			5,283,200			383,253			7	%
Income tax (expense) benefit	(57,975		)	21,460			(79,435		)	(370	)%
Net income	5,608,478			5,304,660			303,818			6	%
Net loss attributable to non-controlling interest	325,399			—			325,399			100	%
Net income attributable to Vertex Energy, Inc.	$	5,933,877		$	5,304,660		$	629,217		12	%

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Each of our segments’ gross profit during the nine months ended September 30, 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):

	Nine Months Ended September 30,
Black Oil Segment	2014			2013		$ Change			% Change
Total revenue	$	124,884,174		$	65,412,393	$	59,471,781		91	%
Total cost of revenue	113,355,127			60,471,980		(52,883,147		)	(87	)%
Gross profit	11,529,047			4,940,413		6,588,634			133	%
Reduction in contingent consideration	1,876,752			1,850,000		26,752			1	%
Selling general and administrative expense	13,017,764			5,514,240		(7,503,524		)	(136	)%
Income from operations	$	388,035		$	1,276,173	$	(888,138	)	(70	)%
Refining Segment
Total revenue	$	58,000,951		$	38,979,504	$	19,021,447		49	%
Total cost of revenue	53,555,931			35,293,112		(18,262,819		)	(52	)%
Gross profit	4,445,020			3,686,392		758,628			21	%
Selling general and administrative expense	2,676,977			1,425,558		(1,251,419		)	(88	)%
Income from operations	$	1,768,043		$	2,260,834	$	(492,791	)	(22	)%
Recovery Segment
Total revenue	$	13,447,671		$	10,804,953	$	2,642,718		24	%
Total cost of revenue	11,341,376			8,522,568		(2,818,808		)	(33	)%
Gross profit	2,106,295			2,282,385		(176,090		)	(8	)%
Selling general and administrative expense	3,588,726			189,875		(3,398,851		)	(1,790	)%
Income (loss) from operations	$	(1,482,431	)	$	2,092,510	$	(3,574,941	)	(171	)%

The following schedule separates revenues and gross profit contributed by our recently acquired business entities, Omega Refining and E-Source, during the nine month period ending September 30, 2014. The isolated figures are presented in dollars and as a percentage of total consolidated results.

	Nine Months Ended September 30, 2014
	Consolidated Results		Omega Refining		% Contributed by Omega Refining
Total Revenue	$	196,332,796	$	51,077,061	26%
Gross Profit	18,080,362		4,867,522		27%
	Consolidated Results		E-Source		% Contributed by E-Source
Total Revenue	$	196,332,796	$	6,320,286	3%
Gross Profit	18,080,362		1,562,879		9%

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 70% for the nine months ended September 30, 2014, compared to the same period in 2013, due primarily to an increase in overall volume of product sold during the nine months ended September 30, 2014 compared to 2013. Total volume increased 60% largely as a result of the increased volume the Company has seen over the past twelve months of Cutterstock produced through our TCEP operation as well as through our Refining and Marketing division and the recent addition during the nine months ended September 30, 2014 of the Marrero facility which produces a VGO finished product. Gross profit increased

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66% for the nine months ended September 30, 2014 compared to the same period in 2013. Additionally, our per barrel margin increased 4% relative to the nine months ended September 30, 2013. This increase was a result of the acquisition of the Omega Refining business which is now part of our Black Oil division, the acquisition of E-Source, which is part of our Recovery division, as well as some improved margins and volumes in our other divisions. The 71% increase in cost of revenues for the nine months ended September 30, 2014 compared to the same period in 2013 is mainly a result of our increased revenues.

Our Black Oil division's volume increased approximately 72% during the nine months ended September 30, 2014 compared to the same period in 2013. This increase was due to an increased amount of volume managed through our TCEP operation (described in greater detail below), as well as the increased volume we realized from the Marrero facility (beginning May 2, 2014) which produces a VGO finished product. Volumes collected by H&H through our Black Oil division, which collects oil directly from generators such as oil change service stations and automotive repair shops, increased 43% during the nine months ended September 30, 2014 compared to the same period in 2013.

Overall volume for the Refining and Marketing division increased 52% during the nine month period ended September 30, 2014 as compared to the same period in 2013. This division experienced an increase in production of 45% for its gasoline blendstock for the nine months ended September 30, 2014, compared to the same period in 2013. Our fuel oil cutterstock volumes increased 47% for the nine months ended September 30, 2014, compared to the same period in 2013. Our pygas volumes increased 79% for the nine months ended September 30, 2014 as compared to the same period in 2013. These increases are a result of new feedstock streams that we started managing during the third quarter of 2013.

We experienced a 49% increase in the volume of our TCEP refined product during the nine months ended September 30, 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. Commodity prices decreased approximately 4% for the nine months ended September 30, 2014, compared to the same period in 2013. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the nine months ended September 30, 2014 decreased $4.14 per barrel from a nine month average of $93.66 per barrel for the nine months ended September 30, 2013, to $89.52 per barrel for the nine months ended September 30, 2014.

Our Recovery division includes the business operations of Vertex Recovery as well as the recently acquired business of E-Source (of which we own a 100% interest). This segment was formed 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 24% as a result of E-Source during the nine months ended September 30, 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.

Our TCEP technology generated revenues of $56,974,352 during the nine months ended September 30, 2014, with cost of revenues of $50,140,715, producing a gross profit of $6,833,637.  The per barrel margin for our TCEP product increased 6% as compared to the same period during 2013.  This increase was a result of increased production as well as reductions in overall feedstock prices during this period.

We had total operating expenses of $19,283,467 for the nine months ended September 30, 2014, which included $2,819,065 of acquisition related expenses compared to $7,129,673 of total operating expenses for the prior year’s period, an increase of $12,153,794 or 171% 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 acquisition of Omega Refining's operations and the E-source acquisition, as well as increased sales expenses associated with our expansion into new markets. The Company incurred $2,819,065 of legal, accounting, auditing, investment banking expenses and other one-time expenses related to acquisitions during the nine months ended September 30, 2014, which expenses were not represented in the prior period.

We had income from operations of $673,647 for the nine months ended September 30, 2014, compared to income from operations of $5,629,517 for the nine-months ended September 30, 2013, a decrease of $4,955,870 or 88% from the prior period.  The decrease was mainly due to increased expenses associated with new product lines and acquired operations, and certain one-time expenses associated with acquisitions partially offset by an increase in volumes and revenues during the nine month period ended September 30, 2014 and a $1,876,752 reduction in contingent liability during the nine months ended September 30, 2014, which positively affected income from operations for the nine months ended September 30, 2014. During the nine months ended September 30, 2013 we had a $1,850,000 reduction in contingent liability which positively affected income from operations during the prior period.

We had total other income of $4,992,806 for the nine months ended September 30, 2014, mainly due to increase in other income described below, compared to other expense of $346,317 for the nine months ended September 30, 2013. Included in other income for the nine months ended September 30, 2014, was a one-time non-cash bargain purchase benefit from the purchase price of the

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Omega assets of $6,573,686. We also had interest expense of $1,680,371 for the nine months ended September 30, 2014, compared to interest expense of $314,627 for the nine months ended September 30, 2013, an increase in interest expense of $1,365,744 or 434% from the prior period mainly due to the recent financing from Goldman Sachs.

We had net income of $5,608,478 for the nine months ended September 30, 2014, compared to net income of $5,304,660 for the nine months ended September 30, 2013, an increase in net income of $303,818 or 6% from the prior period. Net loss related to the 30% minority interest in E-Source was $325,399 for the nine months ended September 30, 2014. We had net income attributable to the Company of $5,933,877 for the nine months ended September 30, 2014 compared to the $5,304,660 for the nine months ended September 30, 2013, an increase in net income of $629,217 or 12% from the prior year period.

During the nine months ended September 30, 2014, the processing costs for our Refining & Marketing business located at KMTEX were $3,485,283. In addition, we have provided the results of operations for this segment of our business below during the same three month period.

Nine Months Ended September 30, 2014
	Refining & Marketing
Revenues	$	58,000,951
Income (loss) from operations	$	1,768,043

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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, 2013 and March 31, and June 30, and September 30, 2014 respectively.

	Statements of Operations by Quarter
	Fiscal 2014									Fiscal 2013
	Third			Second			First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter
Revenues	$	76,903,516		$	72,079,622		$	47,349,658		$	46,770,402		$	46,830,647		$	35,111,402		$	33,254,801
Cost of Revenues	72,846,322			63,200,942			42,205,170			41,340,555			41,945,879			32,556,738			29,785,043
Gross Profit	4,057,194			8,878,680			5,144,488			5,429,847			4,884,768			2,554,664			3,469,758
Reduction of contingent liability	(1,876,752		)	—			—			(388,750		)	—			(1,850,000		)	—
Selling, general and administrative expenses	6,801,396			6,075,517			3,587,489			4,359,857			2,495,748			2,395,745			2,221,492
Acquisition related expenses	259,235			1,959,418			600,412			17,150			—			—			36,592
Total selling, general and administrative expenses	7,060,631			8,034,935			4,187,901			4,377,007			2,495,748			2,395,745			2,258,084
Income (loss) from operations	(1,126,685		)	843,745			956,587			1,441,590			2,389,020			2,008,919			1,211,674
Other income (expense)
Other income	109,980			7			370			4,809			—			7,598			25,289
Bargain purchase gain	92,635			6,481,051			—			—			—			—			—
Other expense	—			(10,866		)	—			(9,838		)	(3,949		)	—			(40,726		)
Interest expense	(947,325		)	(657,235		)	(75,811		)	(108,327		)	(95,488		)	(112,999		)	(106,140		)
Total other income (expense)	(744,710		)	5,812,957			(75,441		)	(113,356		)	(99,437		)	(105,401		)	(121,577		)
Income (loss) before income taxes	(1,871,395		)	6,656,702			881,146			1,328,234			2,289,583			1,903,518			1,090,097
Income tax benefit (expense)	(57,975		)	—			—			1,678,539			40,211			(12,248		)	(6,502		)
Net income (loss)	$	(1,929,370	)	$	6,656,702		$	881,146		$	3,006,773		$	2,329,794		$	1,891,270		$	1,083,595
Net income attributable to non controlling interest	—			344,380			(18,981		)	(431,962		)	—			—			—
Net income attributable to Vertex Energy, Inc.	$	(1,929,370	)	$	7,001,082		$	862,165		$	2,574,811		$	2,329,794		$	1,891,270		$	1,083,595
Number of weighted average common shares outstanding
Basic	25,151,660			22,826,102			21,232,949			17,830,194			17,715,786			17,409,034			17,079,242
Diluted	25,151,660			24,847,456			21,738,018			20,182,829			19,997,257			19,887,288			20,139,182

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The below graph charts our total quarterly revenue over time from March 31, 2012 to September 30, 2014:

	Statements of Operations by Segments
	Fiscal 2014						Fiscal 2013
	Third		Second		First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter
Black Oil
Revenues	$	52,434,252	$	48,878,522	$	23,571,400	$	23,660,574	$	22,766,929	$	19,493,407	$	23,199,308
Cost of revenues	49,933,205		42,330,639		21,091,283		21,717,508		21,632,211		18,363,098		20,416,314
Gross profit	$	2,501,047	$	6,547,883	$	2,480,117	$	1,943,066	$	1,134,718	$	1,130,309	$	2,782,994
Refining & Marketing
Revenues	$	19,655,674	$	18,517,819	$	19,827,459	$	16,749,930	$	15,913,554	$	14,234,204	$	8,831,746
Cost of revenues	18,679,687		16,626,178		18,250,066		15,207,097		14,244,023		12,824,955		8,224,134
Gross profit	$	975,987	$	1,891,641	$	1,577,393	$	1,542,833	$	1,669,531	$	1,409,249	$	607,612
Recovery
Revenues	$	4,813,590	$	4,683,281	$	3,950,799	$	6,359,898	$	8,150,164	$	1,383,791	$	1,223,747
Cost of revenues	4,233,430		4,244,125		2,863,821		4,415,950		6,069,645		1,368,685		1,144,595
Gross profit	$	580,160	$	439,156	$	1,086,978	$	1,943,948	$	2,080,519	$	15,106	$	79,152

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.

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We had total assets of $132,929,943 as of September 30, 2014 compared to $64,546,356 at December 31, 2013.   The increase was mainly due to the $46,680,000 of assets acquired from Omega in May 2014, and the $5,608,478 of net income which was generated during the nine months ended September 30, 2014. Total current assets as of September 30, 2014 of $55,527,328 consisted of cash and cash equivalents of $1,229,746, accounts receivable, net, of $21,675,824, notes receivable-related party of $11,458,000, inventory of $19,001,712, and prepaid expenses of $2,162,046. Non Current assets consisted of fixed assets, net, of $49,318,232, net intangible assets of $16,327,341, which primarily represents the value of the Company's TCEP patent and certain other patents acquired from Omega Refining, and $4,922,353 of goodwill (booked in connection with the Acquisition of Holdings and E-Source) and other assets of $2,797,842. Fixed assets increased $32,579,903 mainly as a result of our acquisition of certain assets and operations from Omega Refining in May 2014. 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 September 30, 2014 and 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 $64,446,017 as of September 30, 2014 compared to $16,053,032 at December 31, 2013.  This increase was largely due to the increase in our accounts payable during the nine months ended September 30, 2014, which accounts payable totaled $23,059,176 as of September 30, 2014, and an increase in capital lease liabilities obtained in connection with the acquisition with Omega Refining (described in greater detail below) of which the current portion outstanding at September 30, 2014 was $605,442. In addition, we had $40,781,399 of current liabilities associated with long-term debt of which $518,990 was related to the E-Source acquisition and $39,400,000 was related to the Omega acquisition. Debt associated with the Omega acquisition was moved from long-term to current liabilities after an event of default occurred (as described below) during the nine months ended September 30, 2014.

We had total liabilities of $70,236,451 as of September 30, 2014, including current liabilities of $64,446,017 and long-term liabilities of $5,790,434, and $2,040,598 related to E-Source debt and line of credit, $3,371,836 of contingent consideration, after the reduction described above, relating to the earn-out payments associated with the acquisition of Vertex Holdings, L.P., and certain assets from Omega Refining and $378,000 of deferred federal income tax.

We had negative working capital of $8,918,689 as of September 30, 2014, compared to working capital of $8,042,589 as of December 31, 2013.  The decrease in working capital from December 31, 2013 to September 30, 2014 is due to an increase in accounts receivable and inventory due to the Omega Refining acquisition and increase in accounts payable and reclassification of long-term debt to current.

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 “TermNote”) , 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; and (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.

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.

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

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

As of September 30, 2014, the Line of Credit had a balance of $0 and the Term Note had a balance of $0. During the three month period ending September 30, 2014, a default event occurred. As a result, the company has restricted access to the line of credit debt facility.

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 $2,341,572 as of September 30, 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 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

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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 (provided that as a result of the occurrence of various events of defaults as described below, BOA is not currently required to lend us any further amounts).

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 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.

The Credit Agreement had a balance of $39,400,000 as of September 30, 2014.

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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. During the three month period ended September 30, 2014, an event of default occurred, but has not been triggered, and we are currently working with our lenders to develop new amendments or modifications to our current agreements that would facilitate a mutually beneficial resolution. The Agent and Lenders have also communicated their intent to carefully monitor the situation to determine additional remedies.

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

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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 Initial Closing of the Purchase Agreement, pay costs associated with the Amended BOA Credit Agreement and for working capital and other general corporate purposes.

The Amended BOA Credit Agreement had a balance of $0 as of September 30, 2014.

Compliance with Covenants and Fulfillment of Conditions:

As of September 30,2014, the Company was not in compliance with certain covenants contained in its credit facilities, including the financial covenants noted below with Bank of America ("BOA") and Goldman Sachs Bank USA ("Goldman Sachs"):

• The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was done on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 was 4.6 and

• The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for the period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00)    .

In connection with the defaults above (and additional defaults described below), in October and November 2014, the Company received notices of events of default from Bank of America and Goldman Sachs, respectively, describing the occurrence of the following events of default under the credit agreements in addition to the prior financial covenant defaults described above:

• The Company entering into various letters of intent in violation of the permitted activities covenants of the Goldman Sachs Credit Agreement; and

• The Company failing to timely comply with various post-closing obligations set forth in the credit agreements including, among others, to deliver certificates of title of Company vehicles to the lenders, assignments of rights under various agreements from the Company to Vertex Operating, confirmation of the closing or transfer of various Company bank accounts, various surveys of mortgaged properties, and delivering a collateral access agreement to BOA.

Additionally, as each credit facility contains cross-default provisions, the default under each lender credit agreement constitutes a default under the agreement with the other lender. As events of default have occurred under the BOA credit agreement, BOA is not required to lend us any further funds under such agreement.

Notwithstanding the above described events of default, both the BOA and Goldman Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

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If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

Private Offering of Common Stock

On June 5, 2014, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to sell to the Investors an aggregate of 2.2 million shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), for $7.75 per Share (a 12.3% discount to the 30 day volume-weighted average price for the Common Stock as of the date the Purchase Agreement was entered into). Total gross proceeds from the offering of the Shares, which closed on June 11, 2014 (the “Offering”) was $17.1 million.

Craig-Hallum Capital Group LLC (the “Placement Agent”) acted as exclusive placement agent in connection with the Offering. The Placement Agent received a commission equal to 7% of gross proceeds, for an aggregate commission of $1.2 million.

Under the Purchase Agreement, the Company agreed to register the Shares under the Securities Act of 1933, as amended, for resale by the Investors by certain time periods set forth in the Purchase Agreement, which required time periods were satisfied by the effectiveness of the Company’s Form S-3 Registration Statement, registering the resale of the Shares, which was declared effective on July 29, 2014.

Under the Purchase Agreement, the Company has agreed to indemnify the Investors for liabilities arising out of or relating to (i) any untrue statement of a material fact contained in the registration statement, (ii) any inaccuracy in the representations and warranties of the Company contained in the Purchase Agreement or the failure of the Company to perform its obligations under the Purchase Agreement and (iii) any failure by the Company to fulfill any undertaking included in the registration statement, subject to certain exceptions. The Investors, severally, and not jointly agreed to indemnify the Company against (i) any failure by such Investor to comply with the covenants and agreements contained in the Purchase Agreement and (ii) any untrue statement of a material fact contained in the registration statement to the extent such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of that Investor specifically for use in preparation of the registration statement, subject to certain exceptions.

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 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, notwithstanding the above described events of default, both the BOA and Goldman

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Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

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 nine months ended September 30, 2014 compared to the nine months ended September 30, 2013

	Nine Months Ended September 30,
	2014			2013
Beginning cash and cash equivalents	$	2,678,628		$	807,940
Net cash provided by (used in):
Operating activities	(11,534,246		)	5,354,198
Investing activities	(34,391,520		)	(1,063,709		)
Financing activities	44,476,884			(4,567,203		)
Net increase (decrease)  in cash and cash equivalents	(1,448,882		)	(276,714		)
Ending cash and cash equivalents	$	1,229,746		$	531,226

Net cash used in operating activities was $11,534,246 for the nine months ended September 30, 2014 as compared to $5,354,198 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 decrease in cash provided by operating activities are related to net income of $5,608,478 (compared to $5,304,660 in the prior period), $2,981,393 of depreciation and amortization (compared to $1,615,657 in the prior period), and a $8,962,991 increase in accounts payable (compared to an increase of $3,516,056 in the prior period), offset by $6,573,686 of gain on the Omega acquisition.

Investing activities used cash of $34,391,520 for the nine months ended September 30, 2014 as compared to having used $1,063,709 of cash during the corresponding period in 2013.  Investing activities for the nine months ended September 30, 2014 are comprised of $4,227,056 invested in fixed assets, and $30,164,464 used for the Omega acquisition.

Financing activities provided cash of $44,476,884 for the nine months ended September 30, 2014 as compared to having used $4,567,203 of cash during the corresponding period in 2013.  Financing activities for the nine months ended September 30, 2014 are comprised of $41,372,315 of proceeds from notes payable of which $40,000,000 is related to the Omega acquisition, $15,803,000 of cash related to the primary stock offering undertaken by the Company in the second quarter of 2014, and $359,862 of cash provided during the nine months ended September 30, 2014 in connection with proceeds from the exercise of common stock warrants, offset by $10,469,474 in cash payments towards the repayment of the Term Note and Revolving Note and $2,452,157 of debt issue costs.

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 $2,600,000 for the nine months ended September 30, 2014.  The Company recorded a change in the valuation allowance as of September 30, 2014 for approximately $879,210

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.

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.

Business Combinations

We accounted for the acquisition in accordance with FASB topic 805. THe acquisition was accounted for undert he purchase method of accounting. The transaction resulted in a bargain purchase and was recognized in the net income as an acquisition date gain.

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).

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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 the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with the Commission on August 14, 2014, except as provided below and investors should review the risks provided below and in the Form 10-K and Form 10-Q, prior to making an investment in the Company.

We face risks associated with the integration of the businesses, assets and operations recently acquired from Vertex Holdings, L.P., E-Source Holdings, LLC and Omega and which we have agreed to acquire from Heartland.

We previously acquired substantially all of the assets and operations of Vertex Holdings, L.P., (formerly Vertex Energy, L.P.), a Texas limited partnership (“Holdings”). Those assets and operations included Cedar Marine Terminals, L.P. (“CMT”), which operates a 19-acre bulk liquid storage facility on the Houston Ship Channel; Crossroad Carriers, L.P. (“Crossroad”), which is a transportation carrier that provides transportation and logistical services for liquid petroleum products, as well as other hazardous materials and waste streams; Vertex Recovery, L.P. (“Vertex Recovery”) which collects and recycles used oil and residual materials from large regional and national customers throughout the U.S. and Canada; and H&H Oil, L.P. (“H&H Oil”), which collects and recycles used oil and residual materials from customers based in Austin, Baytown, and Corpus Christi, Texas.

Additionally, we previously acquired a 100% interest in E-Source, which provides dismantling, demolition, decommission and marine salvage services at industrial facilities throughout the Gulf Coast.

In May 2014, we acquired certain assets and operations from Omega Holdings including Omega Refining (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana) and ownership of Golden State, a strategic blending and storage facility located in Bakersfield, California.

In October 2014, we agreed to acquire substantially all of the assets of Heartland Group Holdings, LLC.

The majority of these acquisitions represented and in connection with the Heartland acquisition, will represent, new business lines and operations for us and while our management has significant prior experience in connection with the operations and management of Holdings, it does not have any experience with or in connection with the operations of E-Source or those assets and operations acquired by Omega or Heartland and we may not be able to successfully integrate the acquisitions into our operations and such acquisitions may not positively affect our operations and cash flow. Acquisitions such as these involve numerous risks, including difficulties in the assimilation of the acquired businesses. The consolidation of our operations with the operations of the acquired companies, including the consolidation of systems, procedures, personnel and facilities and the achievement of anticipated cost savings, economies of scale and other business efficiencies presents significant challenges to our management. The acquisition of the acquired businesses and/or our failure to successfully integrate the acquired businesses could have an adverse effect on our liquidity, financial condition and results of operations.

We have substantial indebtedness which could adversely affect our financial flexibility and our competitive position.  Our failure to comply with financial covenants in our debt agreements could result in such debt agreements being declared in default.

We have a significant amount of outstanding indebtedness. As of September 30, 2014, we owed approximately $23 million in accounts payable. Additionally, effective May 2, 2014, we, as well as certain of our other direct and indirect subsidiaries (other than E-Source) as guarantors, entered into the Credit Agreement.  Pursuant to the Credit Agreement, the Lender loaned us $40 million, which was evidenced by a Term Loan Note, which has a balance of $39,400,000 as of September 30, 2014.  The amount owed under the Credit Agreement is due and payable on May 2, 2019, provided that we are currently in default under the Credit

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Agreement and BOA can require us to repay the amount due under the Credit Agreement at any time without notice due to such event of default.  On May 2, 2014, we and Vertex Operating entered into the Amended BOA Credit Agreement 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, subject to the terms of the Amended BOA Credit Agreement and certain lending ratios set forth therein provided that due to the occurrence of certain events of default, BOA is not currently required to loan us any additional funds.

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

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

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

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

• restrict us from taking advantage of business opportunities;

• make it more difficult to satisfy our financial obligations;

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

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

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

We are currently in default under the terms of the Credit Agreement and Amended BOA Credit Agreement.

As of September 30,2014, the Company was not in compliance with certain covenants contained in its credit facilities, including the financial covenants noted below with Bank of America ("BOA") and Goldman Sachs Bank USA ("Goldman Sachs"):

• The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was done on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 was 1:4.6 and

• The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for the period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00)    .

In connection with the defaults above (and additional defaults described below), in October and November 2014, the Company received notices of events of default from Bank of America and Goldman Sachs, respectively, describing the occurrence of the following events of default under the credit agreements in addition to the prior financial covenant defaults described above:

• The Company entering into various letters of intent in violation of the permitted activities covenants of the Goldman Sachs Credit Agreement; and

• The Company failing to timely comply with various post-closing obligations set forth in the credit agreements including, among others, to deliver certificates of title of Company vehicles to the lenders, assignments of rights under various agreements from the Company to Vertex Operating, confirmation of the closing or transfer of various Company bank accounts, various surveys of mortgaged properties, and delivering a collateral access agreement to BOA.

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Additionally, as each credit facility contains cross-default provisions, the default under each lender credit agreement constitutes a default under the agreement with the other lender. As events of default have occurred under the BOA credit agreement, BOA is not required to lend us any further funds under such agreement.

Notwithstanding the above described events of default, both the BOA and Goldman Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

Due to the above, the lenders could elect to declare all amounts outstanding under such credit agreements, including accrued interest or other obligations, to be immediately due and payable without notice. If amounts outstanding under such credit agreements were to be accelerated, our assets might not be sufficient to repay in full that indebtedness and our other indebtedness.

And we may not be able to raise funds from alternative sources to repay such obligations on favorable terms, on a timely basis or at all. Alternatively, such acceleration could require us to sell assets and otherwise curtail operations to pay our creditors. The proceeds of such a sale of assets, or curtailment of operations, might not enable us to pay all of our liabilities. As such, the value of our securities may decline in value or become worthless in the event our creditors accelerate the repayment of our outstanding obligations under the credit agreements, which as described above, were in default as of the filing of this report. Additionally, such defaults may harm our credit rating and our ability to obtain additional financing on acceptable terms.

Our ability to service our indebtedness will depend on our ability to generate cash in the future.

Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.

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There is no guarantee that the proposed final acquisition of Omega’s assets or our acquisition of Heartland Group Holdings LLC will be completed; the failure to acquire the final Omega assets or Heartland Group Holdings LLC could adversely affect our business and results of operations.

We entered into the Purchase Agreement pursuant to which we have agreed to purchase substantially all of the assets of Omega (as described in greater detail above). The acquisition is planned to close in two separate closings, the Initial Closing of which occurred on May 2, 2014 and the Final Closing which is planned to occur in or around November 2014 subject to certain closing conditions being met. Our obligation to consummate the Final Closing is subject to among other things, that the Bango, Nevada plant operated by Bango Refining be fully restored and operational, as well as the plant meeting certain used motor oil proceeding 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 amount due at the Final Closing, in consideration for the acquisition of Bango Refining, will be the assumption of certain loans made pursuant to a secured note provided to Omega, the issuance of 1,500,000 shares of our common stock (which shares we are not required to register with the Commission and do not currently anticipate registering with the Commission) of which 650,000 shares (with an agreed value of $3.2301 per share or approximately $2.1 million) will be held in escrow and used to satisfy indemnification claims and secure the repayment of the Omega secured note (the “Pledged Shares”), 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.

Additionally, in October 2014, we entered into an Asset Purchase Agreement with Heartland to acquire substantially all of the assets of Heartland related to and used in the operating of the Heartland Business, including raw materials, finished products and work-in-process, equipment and other fixed assets, customer lists and marketing information, the name ‘Heartland’ and other related trade names, Heartland’s real property relating to its used oil refining facility located in Columbus, Ohio, used oil storage and transfer facilities located in Columbus, Zanesville and Norwalk, Ohio, and leases related to storage and transfer facilities located in Zanesville, Ohio, Mount Sterling, Kentucky, and Ravenswood, West Virginia (collectively, the “Heartland Assets”) and to assume certain liabilities of Heartland associated with certain assumed and acquired agreements.  The main assets excluded from the purchased assets pursuant to the Purchase Agreement are Heartland’s cash and cash equivalents, receivables, certain prepaid expenses, refunds and related claims, rights to certain tax refunds, certain assets used in the operations of Heartland which are used more than incidentally by Heartland’s majority equity owner (Warren Distribution, Inc. (“Warren”)) in connection with the operation of its other businesses and certain real property assets

The completion of the Final Closing is subject to customary closing conditions and other requirements as summarized above which are required to be completed prior to the Final Closing. The completion of the acquisition with Heartland is subject to various closing conditions. Such conditions to closing may not be met. These acquisitions represent a significant business opportunity for us. If the acquisitions are completed, we could be forced to pay significant earn-out payments to the sellers if the required EBITDA targets are met which could decrease the amount of funds we have available for working capital. If we fail to complete the acquisitions or the acquisitions are not successful, our anticipated business and results of operations could be adversely affected.

Our obligations under the Credit Agreement and Amended BOA Credit Agreement are secured by a first priority security interest in substantially all of our assets.

Our obligations under the Credit Agreement and Amended BOA Credit Agreement, which as described above, are currently in default, are secured by a first priority security interest in substantially all of our assets. Additionally, substantially all of our subsidiaries agreed to guarantee our obligations under the Credit Agreement and Amended BOA Credit Agreement. As such,our creditors may enforce their security interests over our assets and/or our subsidiaries which secure the repayment of such obligations, and we could be forced to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company could become worthless.

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

We have historically been able to maintain lines of credit and other credit facilities similar to the Credit Agreement and Amended BOA Credit Agreement. We rely heavily on the availability and utilization of these lines of credit and credit facilities for our operations and for the purchase of inventory. If we are unable to renew or replace our facility or are unable to borrow funds under such facility or any future facility-provided that our lenders are not required to provide any additional funding to us under such credit facilities due to the defaults described above), we may be forced to curtail or abandon our current and/or future planned business operations.

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

During the nine months ended September 30, 2014 a total of 688,583 shares of the Company's Series A Preferred Stock were converted into 688,583 shares of our common stock on a one-for-one basis.  Warrants to purchase 6,250 shares of common stock were exercised with $10,937 of exercise price paid in cash. Options to purchase 634,000 shares of common stock were exercised for a net of 605,972 shares of common stock (when adjusting for a cashless exercise of 212,500 of such options and the payment, in shares of common stock, of an aggregate exercise price of $205,125, along with an exercise price of $348,925 paid in cash in connections with such exercises) and 605,972 shares of common stock were issued to the option holders in connection with such exercises.

In August, 2014, the company granted one employee Incentive Stock Options to purchase an aggregate of 100,000 shares of the Company's common stock, which have a term of ten years, and exercise price of $8.44 per share and vest at the rate of 25,000 of such options on grant date and 18,750 on each of the first four anniversaries of the grant date.

Subsequent to September 30, 2014, an option holder exercised options to purchase 3,750 shares shares of the Company's common stock at an exercise price of $2.75 per share for $10,313 of cash and was issued 13,750 shares of our common stock.

In September 2014, 207,743 shares of the Company common stock, valued at $1,790,745, were issued by the Company as payment for the remaining 30% ownership in E-Source Holding, LLC.

Effective October 3, 2014, we entered into a consulting agreement with our director, Timothy C. Harvey, pursuant to which Mr. Harvey agreed to provide consulting services to us in connection with overseeing our trading and selling of finished products and assisting us with finding the best markets for products from our facilities for a term of one year (automatically renewable thereafter unless either party provides the other 30 days written notice of their intent not to renew), provided that we can terminate the agreement at any time with thirty days prior written notice.  In consideration for agreeing to provide services under the agreement, we agreed to pay Mr. Harvey $10,000 per month, and to grant him an option to purchase up to 75,000 shares of our common stock at an exercise price of $6.615 per share, the mean between the highest and lowest quoted selling prices of our common stock on October 2, 2014 (the day immediately preceding the approval by the Board of Directors of the agreement), which vest at the rate of 1/4th of such options per year, subject to Mr. Harvey’s continued consulting, employment or service as our director, which options were granted under the Company's 2013 Stock Incentive Plan.

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)(9) and 3(a)(10) of the Securities Exchange Act of 1934, as amended. All of the option grants and all 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 exercise of the warrants and the E-Source acquisition, were 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 issuances and grants did not involve a public offering, the recipients took the securities for investment and not resale, we took appropriate measures to restrict transfer, and the recipients were "accredited investors" and/or had information regarding the Company similar to what would be included in a Registration Statement under the Securities Act of 1933, as amended. With respect to the transactions described above, no general solicitation was made either by us or by any person acting on our behalf.

Item 3.  Defaults Upon Senior Securities

As of September 30, 2014, the Company was not in compliance with certain covenants contained in its credit facilities, including the financial covenants noted below with Bank of America (“BOA”) and Goldman Sachs Bank USA (“Goldman Sachs”):

• The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was due on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 (the actual Ratio of Consolidated Total Debt for the twelve month period ending on August 31, 2014 was 1:4.6); and

• The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for the period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00).

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In connection with the defaults above (and additional defaults described below), in October and November 2014, the Company received notices of events of default from Bank of America and Goldman Sachs, respectively, describing the occurrence of the following events of default under the credit agreements in addition to the prior financial covenant defaults described above:

• The Company entering into various letters of intent in violation of the permitted activities covenants of the Goldman Sachs Credit Agreement; and

• The Company failing to timely comply with various post-closing obligations set forth in the credit agreements including, among others, to deliver certificates of title of Company vehicles to the lenders, assignments of rights under various agreements from the Company to Vertex Operating, confirmation of the closing or transfer of various Company bank accounts, various surveys of mortgaged properties, and delivering a collateral access agreement to BOA.

Additionally, as each credit facility contains cross-default provisions, the default under each lender credit agreement constitutes a default under the agreement with the other lender. As events of default have occurred under the BOA credit agreement, BOA is not required to lend us any further funds under such agreement.

Notwithstanding the above described events of default, both the BOA and Goldman Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

Effective July 24, 2014, the Board of Directors approved certain amendments to the Charter of the Compensation Committee of the Board of Directors to comply with applicable NASDAQ rules and requirements. A copy of the Charter of the Compensation Committee as amended is incorporated by reference herein as Exhibit 99.2.

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Effective October 3, 2014, we entered into a consulting agreement with our director, Timothy C. Harvey, pursuant to which Mr. Harvey agreed to provide consulting services to us in connection with overseeing our trading and selling of finished products and assisting us with finding the best markets for products from our facilities for a term of one year (automatically renewable thereafter unless either party provides the other 30 days written notice of their intent not to renew), provided that we can terminate the agreement at any time with thirty days prior written notice.  In consideration for agreeing to provide services under the agreement, we agreed to pay Mr. Harvey $10,000 per month, and to grant him an option to purchase up to 75,000 shares of our common stock at an exercise price of $6.615 per share, the mean between the highest and lowest quoted selling prices of our common stock on October 2, 2014 (the day immediately preceding the approval by the Board of Directors of the agreement), which vest at the rate of 1/4th of such options per year, subject to Mr. Harvey’s continued consulting, employment or service as our director, which options were granted under Vertex’s 2013 Stock Incentive Plan.

The Company filed with the Securities and Exchange Commission (the “Commission”) a Definitive Proxy Statement on Schedule 14A on April 23, 2014 (the “Proxy Statement”), which included information incorporated by reference into Part III of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Commission on March 25, 2014.

The Summary Compensation Table that was included in the Proxy Statement did not include bonus compensation for the 2013 fiscal year for Benjamin P. Cowart, the Company’s Chairman, Chief Executive Officer and President, because the amount of such bonus was not determined and calculable at the time the Proxy Statement was filed.

On November 13, 2014, the Compensation Committee of the Board of Directors of the Company authorized and approved the payment of a cash bonus to Mr. Cowart for the 2013 fiscal year in the amount of $543,960. The table below reflects the amount of Mr. Cowart’s fiscal 2013 bonus, Mr. Cowart’s total fiscal 2013 compensation as reported in the Proxy Statement and the total recalculated compensation, including bonus payment approved for Mr. Cowart for fiscal year 2013.

Name and Principal Position	Fiscal 2013 Bonus			Total Fiscal 2013 Compensation as Reported in the Proxy Statement			Total Fiscal 2013 Compensation Including Fiscal 2013 Bonus
Benjamin P. Cowart Chairman, CEO and President		$	543,960		$	270,567		$	814,527

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: November 14, 2014	By: /s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)
Date: November 14, 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
2.7	Asset Purchase Agreement by and among Vertex Energy Operating, LLC, Vertex Refining OH, LLC, Vertex Energy Inc. and Heartland Group Holdings, LLC (October 21, 2014)		8-K	2.1	10/27/2014	001-11476
4.1	Vertex Energy, Inc. - 2013 Stock Incentive Plan		S-8	4.1	7/28/2014	333-197659
4.2	Vertex Energy, Inc. - Form of 2013 Stock Incentive Plan Restricted Stock Grant Agreement		S-8	4.3	7/28/2014	333-197659
10.1(+)	Tolling Agreement between KMTEX, Ltd. and Vertex Energy Inc., dated April 17, 2013		8-K	10.1	11/12/2013	001-11476

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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	10.40	9/12/2012	000-53619
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
10.18	At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement with David Peel (April 2014)***	8-K	10.1	6/24/14	001-11476
10.19	Retention and Noncompetition Agreement with David Peel (April 2014)***	8-K	10.2	6/24/14	001-11476

53

10.20	Employment Agreement between Vertex Refining LA, LLC and James P. Gregory (Effective May 2, 2014)***		8-K	10.1	07/29/2014	001-11476
10.21	Form of Common Stock Purchase Agreement dated June 5, 2014 by and between Vertex Energy, Inc. and the purchasers named therein		8-K	10.1	6/6/2014	001-11476
10.22	Land Lease between Marrero Terminal LLC, as Landlord and Omega Refining, LLC, as Tenant, relating to the Used Motor Oil Re-Refinery Located at 5000 River Road, Marrero, Louisiana 70094, dated as of April 30, 2008 and amendments		10-Q	10.22	6/30/14	001-11476
10.23	Commercial Lease between Plaquemines Holdings, LLC as Landlord and Omega Refining, LLC, as Tenant, relating to the Myrtle Grove Facility Located at 278 East Ravenna Road, Myrtle Grove, LA, dated as of May 25, 2012 and amendments		10-Q	10.23	6/30/14	001-11476
10.24	Operation and Maintenance Agreement dated as of November 3, 2010, by and between Magellan Terminals Holdings, L.P. (f/k/a Marrero Terminal, LLC) and Omega Refining, LLC		10-Q	10.24	6/30/14	001-11476
10.25(##)	Terminaling Services Agreement between Marrero Terminal LLC (Owner) and Omega Refining, LLC (Customer) dated as of May 1, 2008		10-Q	10.25	6/30/14	001-11476
10.26(##)	Second Use Motor Oil Buy/Sell Contract dated August 1, 2012, by and between Thermo Fluids, Inc. and Omega Refining, LLC		10-Q	10.26	6/30/14	001-11476
10.27	Consulting Agreement, Timothy C. Harvey (October 3, 2014)***		8-K	10.1	10/9/14	001-11476
10.28	Consulting Agreement between Heartland Group Holdings, LLC and Vertex Energy Operating, LLC (July 28, 2014)		8-K	10.1	10/27/14	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
99.2	Amended Charter of the Compensation Committee effective July 24, 2014	X	8-K/A	99.1	07/18/2014

54

99.3	Audited Balance Sheets of Omega Refining, LLC as of December 31, 2013 and 2012, Audited Statements of Operations and Member’s Equity for the years ended December 31, 2013 and 2012, Audited Statements of Cash Flows for the years ended December 31, 2013 and 2012, and the notes thereto		8-K/A	99.2	07/18/2014	001-11476
99.4	Unaudited Balance Sheet of Omega Refining, LLC as of March 31, 2014, and the Unaudited Statements of Operations and Member’s Equity for the three months ended March 31, 2014 and 2013, and the notes thereto		8-K/A	99.2	07/18/2014	001-11476
99.5	Unaudited Pro Forma Combined Balance Sheet of Vertex Energy, Inc. as of March 31, 2014, Unaudited Pro Forma Combined Statement of Operations for the three months ended March 31, 2014, and Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2013		8-K/A	99.3	07/18/2014	001-11476
101.INS++	XBRL Instance Document	X
101.SCH++	XBRL Taxonomy Extension Schema Document	X
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 these documents (which portions have been replaced by "***'s") have been omitted in connection with a request for Confidential Treatment which has been accepted by the Commission. This entire exhibit including the omitted confidential information has been filed separately with the Commission.

## Certain portions of these documents (which portions have been replaced by "***'s") have been omitted in connection with a request for Confidential Treatment which has been accepted by 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.

55

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: November 14, 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: November 14, 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 September 30, 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: November 14, 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 September 30, 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: November 14, 2014	By:	/s/ Chris Carlson
		Chris Carlson Chief Financial Officer (Principal Accounting Officer)

EX-99.2

VERTEX ENERGY, INC.

AMENDED CHARTER OF THE:

COMPENSATION COMMITTEE

Effective July 24, 2014

Vertex Energy, Inc.

Committee Charters

Page 1 of 4

Vertex Energy, Inc. (the “Company”)

Compensation Committee Charter

Role:

The Compensation Committee's role is to discharge the Board of Directors (the “Board's”) responsibilities relating to compensation of the Company's executives and to oversee and advise the Board on the adoption of policies that govern the Company's compensation and benefit programs.

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”). If the Committee is comprised of at least three members, one director who is not “independent” as defined under the rules of the Exchange and is not currently an executive officer or employee or a family member of an executive officer, may be appointed to the Committee if the Board, under exceptional and limited circumstances, determines that such individual's membership on the Committee is required by the best interests of the Company and its shareholders (with such member being defined as an “Excepted Member”). An Excepted Member may not serve longer than two years.

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, 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:

The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, including sole authority to approve the fees and other retention terms for such persons. 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.

Vertex Energy, Inc.

Committee Charters

Page 2 of 4

Except as otherwise delegated by the Board or the Committee, the Committee will act on behalf of the Board. The Committee will serve as the "Committee" established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the Committee under those plans, including making and authorizing grants, in accordance with the terms of those plans. The Committee may delegate to one or more executive officers the authority to make grants of stock options and stock awards to eligible individuals who are not executive officers. Any executive officer to whom the Committee grants such authority shall regularly report to the Committee grants so made. The Committee may revoke any such delegation of authority at any time.

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:

Subject to the sole determination of the Board, the principal responsibilities and functions of the Compensation Committee are as follows:

Vertex Energy, Inc.

Committee Charters

Page 3 of 4

1.	Review the competitiveness of the Company's executive compensation programs to ensure (a) the attraction and retention of executives, (b) the motivation of executives to achieve the Company's business objectives, and (c) the alignment of the interests of key leadership with the long-term interests of the Company's shareholders. The Committee shall have the responsibility to determine, or to recommend to the Board for approval, the compensation of the CEO and other executive officers of the Company. Assist the Board in establishing CEO annual goals and objectives. Notwithstanding the above, the CEO may not be present during voting or deliberations on his or her compensation.
2.	Review trends in executive compensation, oversee the development of new compensation plans, and, when necessary, approve the revision of existing plans.
3.	Review and approve the compensation structure for executives.
4.	Oversee an evaluation of the performance of the Company's executive officers and approve the annual compensation, including salary, bonus, incentive and equity compensation, for the executive officers. Review and approve compensation packages for new executive officers and termination packages for executive officers.
5.	Review and make recommendations concerning long-term incentive compensation plans, including the use of equity-based plans.
6.	Periodically review the compensation paid to non-employee directors and make recommendations to the Board for any adjustments. No member of the Committee will act to fix his or her own compensation except for uniform compensation to directors for their services as a director.
7.	Review periodic reports from management on matters relating to the Company's compensation practices.
8.	Produce an annual report of the Compensation Committee on executive compensation for the Company's annual proxy statement in compliance with and to the extent required by applicable Securities and Exchange Commission rules and regulations and any relevant listing authority.
9.	Obtain or perform an annual evaluation of the Committee's performance and make applicable recommendations about, among other things, changes to the charter of the Committee.
10.	Take whatever other action that the Board shall reasonably request in its sole determination.

The Committee shall also have the following responsibilities and authority as dictated by the Exchange:

(A) The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.

(B) The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the Committee.

(C) The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee.

(D) The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration factors set forth in the Exchange’s rules.

Vertex Energy, Inc.

Committee Charters

Page 4 of 4

XML

COMMON STOCK (Details Narrative) (USD $)	1 Months Ended	9 Months Ended			9 Months Ended	1 Months Ended	9 Months Ended	1 Months Ended
	Jun. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Sep. 30, 2014 Series A Preferred Stock	Jun. 30, 2014 Common stock	Sep. 30, 2014 Common stock	May 31, 2014 Omega Refining Restricted common stock	Sep. 30, 2014 E-Source Holdings, LLC Common stock
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		$ 0.001
Common stock, shares issued		25,414,156		21,205,609
Common stock, shares outstanding		25,414,156		21,205,609
Number of votes entitled to each common stock share		1
Preferred stock converted to common stock, shares					688,583
New shares as a result of stock conversion, in shares							688,583
Number of common shares issued for each convertible share					1
Options to purchase shares, exercised gross		634,000
Options to purchase shares, exercised net		605,972
Options to purchase shares, cashless exercise adjustment		212,500
Options to purchase shares, aggregate exercise price		$ 205,125
Proceeds from stock option exercise		348,925
Cash in connection with stock option exercises		10,937
Warrants and options exercised, shares		6,250
Warrants exercised, shares net		6,250
Stock issued during period, new issuance, shares						2,200,000		500,000	207,743
Proceeds from stock offering	15,803,000	15,803,000	0
Stock offering costs	1,247,000
Stock issued during period, new issuance, value						$ 17,050,000		$ 3,266,000	$ 1,790,745
Stock issued during period as part of business combination, percentage of remaining payment									30.00%

XML

ACQUISITION (Pro Forma Financial Information) (Details) (Omega Refining, USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Omega Refining
Business Acquisition [Line Items]
Revenues	$ 234,957,949	$ 221,836,815
Income from operations	1,478,186	8,047,532
Net income	6,216,035	7,329,101
Net loss attributable to non-controlling interest	325,399	0
Net income attributable to Vertex Energy, Inc.	$ 6,541,434	$ 7,329,101
Earnings per common share (in dollars per share)	$ 0.28	$ 0.42
Earnings per common share (in dollars per share)	$ 0.26	$ 0.37

XML

NOTES PAYABLE (Details 1) (USD $)	Sep. 30, 2014
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	$ 1,192,818
2015	3,508,634
2016	3,710,126
2017	3,675,358
2018	3,463,918
2019	3,436,066
Thereafter	24,440,519
Goldman Sachs, USA
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	300,000
2015	2,700,000
2016	3,200,000
2017	3,200,000
2018	3,200,000
2019	3,200,000
Thereafter	23,600,000
Capital Lease, maturity date - December 2014 | Pacific Western Bank
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	71,625
2015	0
2016	0
2017	0
2018	0
2019	0
Thereafter	0
Capital Lease, maturity date - August 2017 | Pacific Western Bank
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	41,060
2015	172,654
2016	186,948
2017	133,154
2018	0
2019	0
Thereafter	0
Term loan | Various institutions
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	30,394
2015	305,293
2016	323,178
2017	342,204
2018	263,918
2019	236,066
Thereafter	840,519
Other notes payable | E-Source Holdings, LLC
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	218,017
2015	0
2016	0
2017	0
2018	0
2019	0
Thereafter	0
Insurance premiums financed | Various institutions
Maturities of Long-term Debt and Capital Lease Obligations [Abstract]
Q4 2014	531,722
2015	330,687
2016	0
2017	0
2018	0
2019	0
Thereafter	$ 0

XML

SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2014 and 2013 is as follows:

NINE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil		Refining & Marketing		Recovery			Total
Revenues	$	124,884,174	$	58,000,951	$	13,447,671		$	196,332,796
Income (loss) from operations	$	388,035	$	1,768,043	$	(1,482,431	)	$	673,647

NINE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	65,412,393	$	38,979,504	$	10,804,953	$	115,196,850
Income from operations	$	1,276,173	$	2,260,834	$	2,092,510	$	5,629,517

THREE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil			Refining & Marketing		Recovery			Total
Revenues	$	52,434,252		$	19,655,674	$	4,813,590		$	76,903,516
Income (loss) from operations	$	(749,043	)	$	229,260	$	(606,902	)	$	(1,126,685	)

THREE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil			Refining & Marketing		Recovery		Total
Revenues	$	22,719,678		$	15,913,554	$	8,197,415	$	46,830,647
Income (loss) from operations	$	(791,121	)	$	1,158,637	$	2,021,504	$	2,389,020

XML

CONTINGENT CONSIDERATION (Details Narrative) (USD $)	3 Months Ended		9 Months Ended			9 Months Ended	0 Months Ended	9 Months Ended	0 Months Ended		3 Months Ended	9 Months Ended							0 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Sep. 30, 2014 Vertex Acquisition LP	May 02, 2014 Omega Refining	Sep. 30, 2014 Omega Refining	Sep. 04, 2014 E-Source Holdings, LLC	Jan. 01, 2014 E-Source Holdings, LLC	Sep. 30, 2014 E-Source Holdings, LLC	Sep. 30, 2014 E-Source Holdings, LLC	Sep. 04, 2014 E-Source Holdings, LLC	Jun. 30, 2014 E-Source Holdings, LLC	Jan. 03, 2014 E-Source Holdings, LLC	Dec. 31, 2013 E-Source Holdings, LLC	May 02, 2014 Maximum Omega Refining	Dec. 31, 2015 Maximum Forecast Omega Refining	Sep. 04, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Jan. 01, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Sep. 04, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC
Business Acquisition [Line Items]
Contingent consideration	$ 3,371,836		$ 3,371,836		$ 3,220,250	$ 2,233,000					$ 748,000	$ 748,000
Reduction of contingent liability	(1,876,752)	0	(1,876,752)	(1,850,000)		(1,850,000)		(99,164)
Increase (decrease) of 2014 contingent consideration						(1,555,000)
Discount on cash flows in year two, percent						100.00%
EBITDA measurement period							12 months
EBITDA performance period							18 months
Earnings before interest, taxes, depreciation, and amortization (EBITDA), target amount over succeeding 12-month period								8,000,000
Earnings before interest, taxes, depreciation, and amortization (EBITDA), shares (maximum)																	470,498	770,498
Earnings before interest, taxes, depreciation, and amortization (EBITDA), annual target amount (minimum)								9,000,000
Ownership percentage																51.00%
Payment to seller, 2014											260,000	260,000
Payment to seller, 2015														260,000
Payment to seller, 2016														260,000
Payment to seller, 2017														260,000
Payments on contingent consideration			136,662	0								136,662
Contingent consideration write off											611,338
Additional ownership acquired in equity method investment										19.00%									30.00%	19.00%
Number of shares issued as part of business acquisition									207,743
Ownership percentage																					70.00%
Number of shares issued in consideration for ownership											207,743	207,743
Estimated value of stock to be issued recorded in additional paid in capital	39,191,567		39,191,567		19,579,732										231,000
Shares issued in consideration for ownership, value													$ 1,790,745

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EARNINGS PER SHARE (Details Narrative)	9 Months Ended
	Sep. 30, 2014
Earnings Per Share [Abstract]
Options to purchase	1,006,000

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SUBSEQUENT EVENTS (Details Narrative) (USD $)	9 Months Ended	1 Months Ended		0 Months Ended		1 Months Ended				1 Months Ended										0 Months Ended	12 Months Ended
	Sep. 30, 2014	Nov. 13, 2014 Subsequent event	Nov. 13, 2014 Subsequent event Common stock	Nov. 13, 2014 Subsequent event Heartland Group Holdings, LLC	Oct. 03, 2014 Stock option Subsequent event	Nov. 30, 2014 Forecast Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Heartland Group Holdings, LLC Restricted common stock	Nov. 30, 2014 Forecast Operating losses through the earlier of closing or termination of purchase agreement Minimum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Operating losses through the earlier of closing or termination of purchase agreement Maximum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier one Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier one Maximum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier two Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier two Minimum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier three Minimum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier three Maximum Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier four Heartland Group Holdings, LLC	Nov. 30, 2014 Forecast Tier four Minimum Heartland Group Holdings, LLC	Nov. 13, 2014 Amended and Restated Credit Agreement 2014 Subsequent event	Nov. 10, 2014 Amended and Restated Credit Agreement 2014 Subsequent event	Oct. 03, 2014 Director Subsequent event	Aug. 31, 2014 Term loan 2014 Goldman Sachs Bank Credit Agreement
Subsequent Event [Line Items]
Options to purchase shares, exercised gross	634,000		3,750
Options to purchase shares, exercise price (in USD per share)	$ 0.87	$ 2.75
Cash from stock option exercise	$ 348,925	$ 10,313
Options to purchase shares, exercised net	605,972		3,750
Line of credit, available																		20,000,000
Line of credit, balance																			0
Line of credit, available																			20,000,000
Term of consulting agreement (years)																				1 year
Consulting fee (monthly)																				10,000
Maximum number of shares per option granted																				75,000
Exercise price of shares (in USD per share)																				$ 6.615
Annual vesting percentage					25.00%
Consideration transferred						8,276,792
Number of shares issued as part of business acquisition							1,189,637
Number of shares issued held in escrow							150,000
Indemnification obligations of the seller (maximum)						4,000,000
Commitment to cover operating losses recognized through closing								1,800,000	2,000,000
Maximum project costs to be paid by acquiree prior to closing						788,500
Estimated project costs prior to closing						1,600,000
Period which shares are held in escrow to satisfy indemnification claims						24 months
Payment into escrow in exchange for shares						333,333
Escrow shares exchanged for cash increment						50,000
Maximum earn-out consideration						8,276,792
EBITDA measurement period						12 months
EBITDA generated during earnout period											1,650,000		1,650,000	1,650,000	3,300,000		3,300,000
Contingent payment due										0		4,138,396		4,138,396	8,276,792	8,276,792
Contingent payment, cash, (percentage)						50.00%
Contingent payment due, shares (percentage)						50.00%
Number of consecutive trading days used to compute weighted-average closing price per share						10 days
Contingent consideration, reduction percentage of capital expenditures incurred						66.67%
Contingent consideration reduction (maximum)						866,667
Aggregate capital expenditures incurred						1,300,000
Maximum number of common stock shares to be issued to outstanding shares of common stock outstanding, percentage						19.90%
Maximum combined voting power, percentage						19.90%
Minimum shares required to be registered within 30 days following closing				1,189,637
Maximum number of shares sold following Purchase Agreement (per week)				50,000
Prepayment amount																					$ 6,299,567
Covenant terms, maximum consolidated debt to consolidated pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio																					4
Covenant compliance, consolidated debt to consolidated pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio																					4.6
Covenant terms, minimum fixed charge coverage ratio	1.25
Covenant compliance, fixed charge coverage ratio	1.00

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GOODWILL

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

At September 30, 2014 and December 31, 2013, goodwill totaled $4,922,353 and 4,502,743, respectively. The increase in goodwill during the nine months ended September 30, 2013 is attributable to the acquisition of E-Source (as described in Notes 11 and 12) and allocated to the recovery segment. The excess purchase price over the fair value of the net tangible assets and intangible assets was recorded as goodwill. The total carrying value of goodwill for all periods has been tested and it was determined that no impairment charges were necessary as of September 30, 2014.

The following table contains consideration paid in excess of the net assets of the company's acquired, allocated to the respective business segment is as of September 30, 2014:

	Black Oil	Refining & Marketing	Recovery	Total
Balance as of December 31, 2013	$3,554,515	$—	$948,228	$4,502,743
Acquisitions	—	—	419,610	419,610
Balance as of September 30, 2014	$3,554,515	$—	$1,367,838	$4,922,353

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ACQUISITION (Details Narrative) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended			0 Months Ended	3 Months Ended		0 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 04, 2014 E-Source Holdings, LLC	Jan. 01, 2014 E-Source Holdings, LLC	Sep. 04, 2014 E-Source Holdings, LLC	May 02, 2014 Omega Refining	Sep. 30, 2014 Omega Refining	May 02, 2014 Omega Refining	May 02, 2014 Omega Refining Restricted common stock	Sep. 04, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Jan. 01, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Sep. 04, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC
Business Acquisition [Line Items]
Additional ownership acquired in equity method investment						19.00%						30.00%	19.00%
Ownership percentage														70.00%
Amount paid for business acquisition								$ 28,764,000
Number of shares issued as part of business acquisition					207,743						500,000
Shares issued in consideration for ownership, value							1,790,745
Value of shares issued as part of business acquisition											3,266,000
Amount of loan provided to acquiree										13,800,000
Bargain purchase gain related to Omega acquisition	92,635	0	6,573,686	0				6,481,051	6,573,686
Additional amount recognized as a bargain purchase gain during period									92,635
Total identifiable assets, excluding Goodwill										39,010,000
Consideration transferred								32,436,000
Costs incurred associated with acquisition	$ 259,235	$ 0	$ 2,819,065	$ 0				$ 2,559,830

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GOODWILL (Details Narrative) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 4,922,353	$ 4,502,743

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details) (Customer concentration risk)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Revenues | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	28.00%	1.00%
Revenues | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	13.00%	46.00%
Revenues | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	11.00%	10.00%
Revenues | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	9.00%	0.00%
Revenues | Customer 5
Revenue, Major Customer [Line Items]
Concentration percentage	7.00%	8.00%
Revenues | Customer 6
Revenue, Major Customer [Line Items]
Concentration percentage	2.00%	0.00%
Revenues | Customer 7
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	10.00%
Revenues | Customer 8
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	2.00%
Receivables | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Receivables | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	8.00%	27.00%
Receivables | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Receivables | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	47.00%	0.00%
Receivables | Customer 5
Revenue, Major Customer [Line Items]
Concentration percentage	12.00%	16.00%
Receivables | Customer 6
Revenue, Major Customer [Line Items]
Concentration percentage	11.00%	0.00%
Receivables | Customer 7
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	16.00%
Receivables | Customer 8
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	24.00%
Black Oil | Revenues | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	100.00%	100.00%
Black Oil | Revenues | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	8.00%	17.00%
Black Oil | Revenues | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Black Oil | Revenues | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	92.00%	0.00%
Black Oil | Revenues | Customer 5
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Black Oil | Revenues | Customer 6
Revenue, Major Customer [Line Items]
Concentration percentage	94.00%	0.00%
Black Oil | Revenues | Customer 7
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	77.00%
Black Oil | Revenues | Customer 8
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	100.00%
Refining | Revenues | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Refining | Revenues | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	92.00%	83.00%
Refining | Revenues | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	100.00%	100.00%
Refining | Revenues | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Refining | Revenues | Customer 5
Revenue, Major Customer [Line Items]
Concentration percentage	100.00%	100.00%
Refining | Revenues | Customer 6
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Refining | Revenues | Customer 7
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	23.00%
Refining | Revenues | Customer 8
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 1
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 2
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 3
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 4
Revenue, Major Customer [Line Items]
Concentration percentage	2.00%	0.00%
Recovery | Revenues | Customer 5
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 6
Revenue, Major Customer [Line Items]
Concentration percentage	6.00%	0.00%
Recovery | Revenues | Customer 7
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%
Recovery | Revenues | Customer 8
Revenue, Major Customer [Line Items]
Concentration percentage	0.00%	0.00%

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ACQUISITION (Purchase Price Allocation) (Details) (Omega Refining, USD $)	0 Months Ended
	May 02, 2014	May 02, 2014
Omega Refining
Business Acquisition [Line Items]
Cash and cash equivalents		$ 406,000
Accounts receivable		950,000
Inventory		4,192,000
Prepaid expenses		71,000
Property, plant and equipment		30,000,000
Deposits		400,000
Bango secured note issued to Vertex		8,308,000
Technology		2,287,000
Non-compete agreements		66,000
Total identifiable net assets		46,680,000
Less liabilities assumed, including contingent consideration		(7,670,000)
Gain on purchase		(6,574,000)
Total purchase price	$ 32,436,000

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GOODWILL (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Goodwill [Roll Forward]
Beginning balance	$ 4,502,743
Acquisitions	419,610
Ending balance	4,922,353
Operating segments | Black Oil
Goodwill [Roll Forward]
Beginning balance	3,554,515
Acquisitions	0
Ending balance	3,554,515
Operating segments | Refining & Marketing
Goodwill [Roll Forward]
Beginning balance	0
Acquisitions	0
Ending balance	0
Operating segments | Recovery
Goodwill [Roll Forward]
Beginning balance	948,228
Acquisitions	419,610
Ending balance	$ 1,367,838

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NOTES PAYABLE (Details Narrative) (USD $)	3 Months Ended	9 Months Ended			9 Months Ended				3 Months Ended	12 Months Ended		9 Months Ended		0 Months Ended							9 Months Ended		9 Months Ended	0 Months Ended			3 Months Ended			0 Months Ended			9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Sep. 30, 2014 Revolving line of credit 2012 Credit Agreement	May 31, 2014 Revolving line of credit 2012 Credit Agreement	Sep. 30, 2012 Revolving line of credit 2012 Credit Agreement	Sep. 30, 2012 Term loan 2012 Credit Agreement	Sep. 30, 2014 Term loan 2014 Goldman Sachs Bank Credit Agreement	Aug. 31, 2014 Term loan 2014 Goldman Sachs Bank Credit Agreement	May 02, 2014 Term loan 2014 Goldman Sachs Bank Credit Agreement	Sep. 30, 2014 Term loan Bank of America LIBOR rate 2012 Credit Agreement	Sep. 30, 2014 Notes payable	Sep. 04, 2014 E-Source Holdings, LLC	Apr. 11, 2014 E-Source Holdings, LLC	Jan. 01, 2014 E-Source Holdings, LLC	Jan. 03, 2014 E-Source Holdings, LLC	Dec. 31, 2013 E-Source Holdings, LLC	Sep. 30, 2014 E-Source Holdings, LLC Other notes payable	May 02, 2014 Omega Refining lease	Sep. 30, 2014 Minimum Term loan Bank of America LIBOR rate 2012 Credit Agreement	May 02, 2014 Maximum Term loan 2014 Goldman Sachs Bank Credit Agreement	Sep. 30, 2014 Maximum Term loan Bank of America LIBOR rate 2012 Credit Agreement	May 02, 2014 Maximum Term loan Bank of America LIBOR rate 2014 Goldman Sachs Bank Credit Agreement	May 02, 2014 Maximum Term loan ICE Benchmark Administration Limited 2014 Goldman Sachs Bank Credit Agreement	May 02, 2014 Maximum Notes payable Federal Funds rate 2014 Goldman Sachs Bank Credit Agreement	Mar. 31, 2015 Forecast 2014 Goldman Sachs Bank Credit Agreement	Dec. 31, 2014 Forecast 2014 Goldman Sachs Bank Credit Agreement	Jun. 30, 2015 Forecast Term loan 2014 Goldman Sachs Bank Credit Agreement	Sep. 04, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Jan. 01, 2014 Vertex Energy Operating, LLC E-Source Holdings, LLC	Sep. 30, 2014 Various institutions Notes payable	Sep. 30, 2014 Various institutions Insurance premiums financed
Line of Credit Facility [Line Items]
Term loan amount	$ 66,825,401	$ 66,825,401						$ 8,500,000			$ 40,000,000								$ 854,050													$ 2,690,677	$ 1,789,481
Line of credit, maximum borrowing capacity						20,000,000	10,000,000
Effective percentage rate, minimum												1.25%	5.00%
Effective percentage rate, maximum												2.00%	6.35%
Variable rate, basis spread																					2.35%		3.00%	1.00%		0.50%
Debt due date					May 02, 2017
Line of credit, balance					0
Debt instrument, stated rate																						4.50%
Basis spread on variable rate, numerator component																									1.50%
Loan monthly principal payments									300,000																		300,000	300,000	800,000
Loan amount									39,400,000
Prepayment amount										6,299,567
Covenant terms, maximum consolidated debt to consolidated pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio										4
Covenant compliance, consolidated debt to consolidated pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio										4.6
Covenant terms, minimum fixed charge coverage ratio	1.25	1.25
Covenant compliance, fixed charge coverage ratio	1.00	1.00
Number of capital leases assumed																				2
Capital lease amount assume as part of acquisition																				3,154,860
Capital lease payments made during period	2,549,418
Capital lease obligations	605,442	605,442		0
Interest rate, minimum																																	4.00%
Interest rate, maximum																																	4.52%
Remaining term of debt instrument (less than)																																	1 year
Outstanding debt balance	43,427,439	43,427,439																	218,016													2,341,572	862,409
Additional ownership acquired in equity method investment																19.00%														30.00%	19.00%
Ownership percentage																		51.00%
Payments on note payable for additional interest in equity method investment		10,469,474	1,372,453												200,000
Monthly installment of note payable																72,672
Estimated value of stock to be issued recorded in additional paid in capital	$ 39,191,567	$ 39,191,567		$ 19,579,732													$ 231,000
Number of shares issued as part of business acquisition														207,743

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LIQUIDITY

9 Months Ended

Sep. 30, 2014

Liquidity Disclosure [Abstract]

LIQUIDITY

LIQUIDITY

During the three month period ended September 30, 2014, an event of default occurred under our financing agreements (as described in Notes 5 and 13). If we fail to obtain a waiver of the defaults under the credit agreements or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding or initiating foreclosure or insolvency proceedings.  As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders.    In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014.

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NOTES PAYABLE (Details) (USD $)	Sep. 30, 2014
Line of Credit Facility [Line Items]
Loan Amount	$ 66,825,401
Total Outstanding Debt Facilities	43,427,439
Revolving line of credit | Bank of America
Line of Credit Facility [Line Items]
Loan Amount	20,000,000
Total Outstanding Debt Facilities	0
Term loan | Goldman Sachs, USA
Line of Credit Facility [Line Items]
Loan Amount	40,000,000
Total Outstanding Debt Facilities	39,400,000
Notes payable | Various institutions
Line of Credit Facility [Line Items]
Loan Amount	2,690,677
Total Outstanding Debt Facilities	2,341,572
Insurance premiums financed | Various institutions
Line of Credit Facility [Line Items]
Loan Amount	1,789,481
Total Outstanding Debt Facilities	862,409
E-Source Holdings, LLC | Other notes payable
Line of Credit Facility [Line Items]
Loan Amount	854,050
Total Outstanding Debt Facilities	218,016
Capital Lease, maturity date - December 2014 | Capital Lease | Pacific Western Bank
Line of Credit Facility [Line Items]
Loan Amount	970,974
Total Outstanding Debt Facilities	71,626
Capital Lease, maturity date - August 2017 | Capital Lease | Pacific Western Bank
Line of Credit Facility [Line Items]
Loan Amount	520,219
Total Outstanding Debt Facilities	$ 533,816

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PREFERRED STOCK (Details Narrative) (USD $)	Sep. 30, 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	630,419	1,319,002
Preferred stock, shares outstanding	630,419	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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CONSOLIDATED BALANCE SHEETS (unaudited) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 1,229,746	$ 2,678,628
Accounts receivable, net	21,675,824	11,714,813
Note receivable-related party	11,458,000	0
Inventory	19,001,712	8,540,459
Prepaid expenses	2,162,046	1,161,721
Total current assets	55,527,328	24,095,621
Noncurrent assets
Fixed assets, at cost	49,318,232	16,109,179
Less accumulated depreciation	(1,647,153)	(1,018,003)
Fixed assets, at cost	47,671,079	15,091,176
Intangible assets, net	16,327,341	15,172,816
Goodwill	4,922,353	4,502,743
Deferred federal income tax	5,684,000	5,684,000
Other assets	2,797,842	0
Total noncurrent assets	77,402,615	40,450,735
TOTAL ASSETS	132,929,943	64,546,356
Current liabilities
Accounts payable and accrued expenses	23,059,176	14,096,185
Capital leases	605,442	0
Current portion of long-term debt	40,781,399	1,956,847
Total current liabilities	64,446,017	16,053,032
Long-term liabilities
Long-term debt	2,040,598	6,558,851
Contingent consideration	3,371,836	3,220,250
Deferred federal income tax	378,000	378,000
Total liabilities	70,236,451	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 630,419 and 1,319,002 issued and outstanding at September 30, 2014 and December 31, 2013, respectively	630	1,319
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 25,414,156 and 21,205,609 issued and outstanding at September 30, 2014 and December 31, 2013, respectively	25,414	21,206
Additional paid-in capital	39,191,567	19,579,732
Retained earnings	23,475,881	17,542,004
Total Vertex Energy, Inc. stockholders' equity	62,693,492	37,144,261
Non-controlling interest	0	1,191,962
Total Equity	62,693,492	38,336,223
TOTAL LIABILITIES AND EQUITY	$ 132,929,943	$ 64,546,356

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ACQUISITION (Summary of Intangible Assets Acquired) (Details) (Omega Refining, USD $) In Thousands, unless otherwise specified	0 Months Ended
	May 02, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 2,353
Non-Competes
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	66
Finite-lived intangible assets, useful life	1 year
Technology
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 2,287
Finite-lived intangible assets, useful life	15 years

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BASIS OF PRESENTATION AND NATURE OF OPERATIONS

9 Months Ended

Sep. 30, 2014

Accounting Policies [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.

Leases

The company recognizes lease expense on a straight-line basis over the minimum lease terms which expire at various dates through 2032. These leases are for office and storage tank facilities and are classified as operating leases. For the leases that contain predetermined, fixed escalations of the minimum rentals, the Company recognizes the rent expense on a straight-line basis and records the difference between the rent expense and the rental amount payable in liabilities. Leasehold improvements made at the inception of the lease are amortized over the shorter of the asset life or the initial lease terms as described above. Leasehold improvements made during the lease term are also amortized over the shorter of the assets life or the remaining lease term.

For capital leases assumed as a result of an acquisition, the leased assets owned by the acquiree and financed through a capital lease are measured separately, at fair value, from the underlying lease to which they are subject. The present value of the lease is then calculated using the lease terms and implicit interest rate. For operating leases assumed as a result of an acquisition, the lease terms are measured, at acquisition date, to determine if the terms are favorable or unfavorable when compared to a comparable market lease with similar terms.

Business Combinations

The company accounts for business combinations using the acquisition method of accounting. The results of operations for the acquired entities are included in the company’s consolidated financial results from their associated acquisition dates. The company allocates the purchase price of acquisitions to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. A portion of purchase price for our acquisitions is contingent upon the realization of certain operating results. The fair values assigned to identifiable intangible assets acquired and contingent consideration were determined by third party specialists engaged by the company on a case by case basis. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill. If the purchase price is under the fair value of the identified assets and liabilities, a bargain purchase is recognized and included in income from continuing operations.

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STOCK-BASED COMPENSATION (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Stock Options
Outstanding, beginning - shares	3,060,834
Options granted - shares	250,000
Options forfeited/expired - shares	(91,667)
Options exercised - shares	(634,000)
Outstanding, ending - shares	2,585,167	3,060,834
Vested - shares	1,820,480
Exercisable - shares	1,820,480
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 granted - weighted average exercise price (in USD per share)	$ 7.91
Options forfeited/expired - weighted average exercise price (in USD per share)	$ 10.78
Options exercised - weighted average exercise price (in USD per share)	$ (0.87)
Outstanding, ending - weighted average exercise price (in USD per share)	$ 7.14	$ 5.89
Vested - weighted average exercise price (in USD per share)	$ 8.34
Exercisable - weighted average exercise price (in USD per share)	$ 8.34
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Outstanding, beginning - weighted average remaining contractual life (in years)	5 years 6 months 14 days	6 years 0 months 25 days
Options granted - weighted average remaining contractual life (in years)	9 years 9 months 18 days
Outstanding, ending - weighted average remaining contractual life (in years)	5 years 6 months 14 days	6 years 0 months 25 days
Vested - weighted average remaining contractual life (in years)	4 years 10 months 17 days
Exercisable - weighted average remaining contractual life (in years)	4 years 10 months 17 days
Outstanding, beginning - grant date fair value	$ 1,327,163
Options granted - grant date fair value	501,893
Options forfeited/expired - grant date fair value	(29,335)
Options exercised - grant date fair value	(262,241)
Outstanding, ending - grant date fair value	1,537,480	1,327,163
Vested - grant date fair value	657,010
Exercisable - grant date fair value	$ 657,010

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NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Schedule of outstanding debt facilities

The Company's outstanding debt facilities as of September 30, 2014 are summarized as follows:

Creditor	Loan Type	Origination Date	Maturity Date	Loan Amount		Balance on September 30, 2014
Bank of America	Revolving LOC	May, 2014	May, 2017	$	20,000,000	$	—
Goldman Sachs USA	Term Loan	May, 2014	May, 2019	40,000,000		39,400,000
Pacific Western Bank	Capital Lease	December, 2010	December, 2014	970,974		71,626
Pacific Western Bank	Capital Lease	September, 2012	August, 2017	520,219		533,816
Various institutions	Various	Various	Various	2,690,677		2,341,572
E-source note	Note	January, 2014	December, 2014	854,050		218,016
Various institutions	Insurance premiums financed	Various	> 1 year	1,789,481		862,409
				$	66,825,401	$	43,427,439

Schedule of future maturities of notes payable

Future contractual maturities of notes payable are summarized as follows:

Creditor	Q4 2014		2015		2016		2017		2018		2019		Thereafter
Goldman Sachs USA	$	300,000	$	2,700,000	$	3,200,000	$	3,200,000	$	3,200,000	$	3,200,000	$	23,600,000
Pacific Western Bank	71,625		—		—		—		—		—		—
Pacific Western Bank	41,060		172,654		186,948		133,154		—		—		—
Various institutions	30,394		305,293		323,178		342,204		263,918		236,066		840,519
E-source note	218,017		—		—		—		—		—		—
Various institutions	531,722		330,687		—		—		—		—		—
Totals	$	1,192,818	$	3,508,634	$	3,710,126	$	3,675,358	$	3,463,918	$	3,436,066	$	24,440,519

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STOCK-BASED COMPENSATION (Details 1) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Stock Warrants
Outstanding, beginning - shares	7,083
Warrants exercised - shares	(6,250)
Warrants cancelled/forfeited/expired - shares	(833)
Outstanding, ending - shares	0	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 exercised - weighted average exercise price (in USD per share)	$ (1.75)
Warrants cancelled/forfeited/expired - weighted average exercise price (in USD per share)	$ (10.00)
Outstanding, ending - weighted average exercise price (in USD per share)	$ 0.00	$ 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)	0 years	1 year 6 months 25 days
Outstanding, ending - weighted average remaining contractual life (in years)	0 years	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 exercised - grant date fair value	(2,800)
Warrants cancelled/forfeited/expired - grant date fair value	(100)
Outstanding, ending - grant date fair value	0	2,900
Vested - grant date fair value	0
Exercisable - grant date fair value	$ 0

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 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 nine months ended September 30, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Basic earnings per share	$	0.26	$	0.30
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Effect of dilutive securities
Stock options and warrants	1,116,993		1,039,925
Preferred stock	630,419		1,323,837
Diluted weighted-average shares outstanding	24,825,326		19,766,263
Diluted earnings per share	$	0.24	$	0.27

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

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

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At September 30, 2014 and 2013 and for each of the nine 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	28%	—%	1%	—%
Customer 2	13%	8%	46%	27%
Customer 3	11%	—%	10%	—%
Customer 4	9%	47%	—%	—%
Customer 5	7%	12%	8%	16%
Customer 6	2%	11%	—%	—%
Customer 7	—%	—%	10%	16%
Customer 8	—%	—%	2%	24%

At September 30, 2014 and 2013 and for each of the nine months then ended, the Company's segment revenues were comprised of the following customer concentrations:

	% of Revenue by Segment 2014			% Revenue by Segment 2013
	Black Oil	Refining	Recovery	Black Oil	Refining	Recovery
Customer 1	100%	—%	—%	100%	—%	—%
Customer 2	8%	92%	—%	17%	83%	—%
Customer 3	—%	100%	—%	—%	100%	—%
Customer 4	92%	—%	2%	—%	—%	—%
Customer 5	—%	100%	—%	—%	100%	—%
Customer 6	94%	—%	6%	—%	—%	—%
Customer 7	—%	—%	—%	77%	23%	—%
Customer 8	—%	—%	—%	100%	—%	—%

The Company purchases goods and services from one company that represented 10% of total purchases for the nine months ended September 30, 2014 and one company that represented 11% for the nine months ended September 30, 2013.

As a result of the Omega Refining acquisition on May 2, 2014, the Company assumed a feedstock purchase contract with an unrelated third party. The Company is required to purchase a minimum of 15,200,000 gallons of used motor oil per year until the contract expires on December 31, 2014. As of September 30, 2014, the company has purchased approximately 11,200,000 gallons from this vendor, leaving a 4,000,000 gallon purchase obligation. The purchase price for this contract is calculated as discount to Platts U.S. Gulf Coast No. 6 Fuel Oil, 3% Sulphur per gallon for the month prior to the date the product is released.

The Company has had various debt facilities available for use, of which there was $43,427,439 and $10,158,333 outstanding as of September 30, 2014 and September 30, 2013, respectively. See Note 5 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 $2.6 million for the nine months ended September 30, 2014.  The Company recorded a change in valuation allowance for the nine months ended September 30, 2014 of approximately $879,210.

Additionally, pursuant to a Consulting Agreement previously entered into with Heartland Group Holdings, LLC ("Heartland") in July 2014, pursuant to which Vertex Operating, LLC (the Company's wholly-owned subsidiary, "Vertex Operating") agreed to provide consulting services to Heartland (the "Consulting Agreement") while the parties negotiated the definitive terms of a purchase agreement relating to the acquisition by the Company of substantially all the assets of Heartland, which agreement was entered into by both parties in October, 2014. Vertex Operating agreed to reimburse Heartland for its operating losses (on a cash basis net of interest, depreciation, corporate overhead expenses and insurance proceeds received)(“Operating Losses”) during the period from July 16, 2014 through the earlier of the closing of the purchase agreement or the termination of the purchase agreement, which reimbursement (estimated to total approximately $1.8 to $2 million at closing) will be paid to Heartland at the closing, or if the closing does not occur as a result of the breach of the purchase agreement or default thereunder by Vertex Operating (or its affiliates), or the failure of any closing condition of Vertex Operating (or its affiliates) thereunder, such amount is due within thirty days of the date it has been determined that such closing will not occur.  In the event the closing does not occur due to the breach or default by Heartland (or its affiliates) of the purchase agreement, Heartland is required to reimburse Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating ("Vertex OH") for costs and expenses incurred by it and Vertex Operating in connection with such Operating Losses. The closing of the purchase agreement is anticipated to occur prior to the end of November 2014.

Vertex OH and Vertex Operating also agreed to share equally with Heartland in the costs of certain projects undertaken by Heartland prior to the closing of the purchase agreement, provided that Heartland is not required to pay more than $788,500 of its costs associated with such project costs (a substantial portion of which amount has been fully funded by Heartland to date) which are estimated to total approximately $1.6 million.  In connection therewith, following the closing, Vertex OH will first pay, up to the amount expended by Heartland as of closing for such costs, any amounts due in connection with such projects, and the remaining amount of such projects will be split equally by Vertex OH and Heartland.  All projects undertaken following closing, if any, are in the sole discretion of Vertex OH.  Additionally, in the event of the termination of the purchase agreement due to a breach or default by Heartland (or its affiliates) under the purchase agreement, subject to any cure provision, Heartland is required to reimburse Vertex OH for any costs or expenses incurred by it or Vertex Operating in connection with such capital projects and pay Vertex OH’s portion of any capital project committed to prior to the date of termination, within thirty days of the date it has been determined that the closing will not occur. No amounts had been expended for these capital projects as of September 30, 2014.

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CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Sep. 30, 2014	Jun. 30, 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	$ 0.001
Common stock, shares authorized	750,000,000		750,000,000
Common stock, shares issued	25,414,156		21,205,609
Common stock, shares outstanding	25,414,156		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	630,419		1,319,002
Preferred stock, shares outstanding	630,419		1,319,002

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ACQUISITION

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Acquisition

ACQUISITION

E-SourceHoldings Transaction

On September 4, 2014, the Company acquired the remaining 30% interest in E-Source Holdings, LLC, of which it had previously acquired 70%. In consideration for the 30%, the Company issued 207,743 shares of common stock, valued at approximately $1,790,745. The transaction was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 810-10-45.

Omega Refining Transaction

On May 2, 2014, the Company completed its acquisition of substantially all of the assets of Omega Refining, LLC (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana ("Omega Refining") and ownership of Golden State Lubricant Works, LLC for the purpose of re-refining used lubricating oils into processed oils and other products for the distribution, supply and sale to end-customers with related products and support services. The purchase price paid at the closing was approximately $28,764,000 in cash, 500,000 shares of our restricted common stock (valued at $3,266,000) 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 Holdings a loan in the amount of up to approximately $13.8 million.

The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration paid by the Company was allocated to Omega Refining's net tangible assets and intangible assets based on their estimated fair values as of May 2, 2014. The transaction resulted in a bargain purchase of $6,481,051 recognized in net income as an acquisition-date gain. During the three month period ending September 30, 2014, an additional $92,635 bargain purchase gain was recognized after capital lease balances were true up, resulting in a total bargain purchase gain of $6,573,686. The Omega Refining purchase qualifies as a bargain purchase since the acquisition date amounts of the identifiable net asset acquired, excluding goodwill ($39.01 million), exceed the value of the consideration transferred ($32.44 million). The difference of $6.57 million is a gain as of the acquisition date. The bargain purchase resulted from the financial distress that Omega was in due to the large amount of debt held by Omega and the unexpected decrease in crack spreads that made the debt level overbearing. The Company retained an independent third party to assist management in determining the fair value of tangible and intangible assets transferred and liabilities assumed. The allocation of the purchase price is based on the best estimates of management.

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

	(in thousands)
Cash and cash equivalents	$	406
Accounts receivable	950
Inventory	4,192
Prepaid expenses	71
Property, plant and equipment	30,000
Deposits	400
Bango secured note issued to Vertex	8,308
Technology	2,287
Non-compete agreements	66
Total identifiable net assets	$	46,680
Less liabilities assumed, including contingent consideration	(7,670		)
Gain on purchase	(6,574		)
Total purchase price	$	32,436

The Company incurred $2,559,830 in costs associated with the Omega Refining acquisition. These included legal, accounting, environmental and investment banking.

The following table summarizes the cost of amortizable intangible assets related to the Omega Refining acquisition: 

	Estimated Cost (in thousands)		Useful life (years)
Non-Competes	$	66	1
Technology	2,287		15
Total	$	2,353

The results of Omega Refining are included in the consolidated financial statements subsequent to May 2, 2014. The following schedule contains pro forma results from operations as if the acquisition had occurred on January 1, 2014. The pro forma results do not report actual results that would have occurred had the merger taken place on January 1, 2014, nor do they necessarily suggest future operating results

	Nine Months Ended September 30,
	2014		2013
Revenues	$	234,957,949	$	221,836,815
Income from operations	1,478,186		8,047,532
Net income	6,216,035		7,329,101
Net loss attributable to non-controlling interest	325,399		—
Net income attributable to Vertex Energy, Inc.	$	6,541,434	$	7,329,101
Earnings  per common share
Basic	$0.28		$0.42
Diluted	$0.26		$0.37

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 08, 2014
Document And Entity Information
Entity Registrant Name	Vertex Energy Inc.
Entity Central Index Key	0000890447
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		25,417,906
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2014

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2014

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Subsequent to September 30, 2014, an option holder exercised options to purchase 3,750 shares of the Company's common stock at an exercise price of $2.75 per share for $10,313 of cash and was issued 3,750 shares of our common stock.

Subsequent to September 30, 2014, the available credit on the Line of Credit was $20,000,000. As of November 10, 2014, the outstanding balance drawn on the line of credit is $0, leaving an available balance for draw downs of $20,000,000.

Effective October 3, 2014, the Company entered into a consulting agreement with its director, Timothy C. Harvey, pursuant to which Mr. Harvey agreed to provide consulting services to the Company in connection with overseeing the Company’s trading and selling of finished products and assisting the Company with finding the best markets for products from the Company’s facilities for a term of one year.  In consideration for agreeing to provide services under the agreement, the Company agreed to pay Mr. Harvey $10,000 per month, and to grant him an option to purchase up to 75,000 shares of the Company's common stock at an exercise price of $6.615 per share, the mean between the highest and lowest quoted selling prices of the Company's common stock on October 2, 2014 (the day immediately preceding the approval by the Board of Directors of the agreement), which vest at the rate of 1/4th of such options per year, subject to Mr. Harvey’s continued consulting, employment or service as a director of the Company, which options were granted under the Company's 2013 Stock Incentive Plan.

On October 21, 2014, the Company entered into anAsset Purchase Agreement (the “Purchase Agreement”) by and among the Company, Vertex Operating, Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating (“Vertex OH”), and Heartland Group Holdings, LLC (“Heartland”).  Heartland is in the business of operating an oil re-refinery and, in connection therewith, collecting, aggregating and purchasing used lubricating oils and re-refining such oils into processed oils and other products for the distribution, supply and sale to end-customers (collectively, the “Heartland Business”).

Pursuant to the Purchase Agreement, we agreed to acquire substantially all of the assets of Heartland related to and used in the operating of the Heartland Business, including raw materials, finished products and work-in-process, equipment and other fixed assets, customer lists and marketing information, the name ‘Heartland’ and other related trade names, Heartland’s real property relating to its used oil refining facility located in Columbus, Ohio, used oil storage and transfer facilities located in Columbus, Zanesville and Norwalk, Ohio, and leases related to storage and transfer facilities located in Zanesville, Ohio, Mount Sterling, Kentucky, and Ravenswood, West Virginia (collectively, the “Heartland Assets”) and to assume certain liabilities of Heartland associated with certain assumed and acquired agreements.  The main assets excluded from the purchased assets pursuant to the Purchase Agreement are Heartland’s cash and cash equivalents, receivables, certain prepaid expenses, refunds and related claims, rights to certain tax refunds, certain assets used in the operations of Heartland which are used more than incidentally by Heartland’s majority equity owner (Warren Distribution, Inc. (“Warren”)) in connection with the operation of its other businesses and certain real property assets.

The transactions contemplated by the Purchase Agreement are planned to close on or before November 30, 2014 (such closing date, the “Closing”).

The purchase price payable in consideration for the Heartland Assets is $8,276,792 and the assumption of the assumed liabilities (subject to adjustment in connection with certain required inventory levels at closing as set forth in the Purchase Agreement), which amount is payable by way of the issuance to Heartland (or its assigns) of 1,189,637 shares of the Company’s restricted common stock, of which 150,000 shares of restricted common stock will be held in escrow and used to satisfy indemnification claims (the “Escrow Shares”).  The purchase price is subject to certain negotiated exceptions for excluded liabilities, taxes and other fundamental items. Heartland’s indemnification obligations under the Purchase Agreement are capped at $4 million.

The Escrow Shares are to be held in escrow to satisfy indemnification claims for 24 months following the Closing; provided that Heartland has the option at any time to acquire such Escrow Shares and instead place cash in such escrow account, upon the payment into the escrow account of $333,333 in cash for each 50,000 Escrow Shares acquired by Heartland.  Any claims made against the Escrow Shares pursuant to the indemnification provisions of the Purchase Agreement result in the cancellation of Escrow Shares equal in value to the amount of the applicable claim divided by the ten-day volume weighted average price per share of the Company’s common stock ending on and including the trading day immediately preceding the date of such applicable claim.

Heartland will also have the right pursuant to the terms of the Purchase Agreement to earn additional earn-out consideration of up to a maximum of $8,276,792, based on total EBITDA related to the Heartland Business during the twelve month period beginning on the first day of the first full calendar month commencing on or after the first anniversary of the Closing (the “Earnout Period”), as follows (as applicable, the “Contingent Payment”):

EBITDA generated during Earnout Period	Contingent Payment Due
Less than $1,650,000	$0
At least $1,650,000	$4,138,396
More than $1,650,000 and less than $3,300,000	Pro-rated between $4,138,396 and $8,276,792
$3,300,000 or more	$8,276,792

Any Contingent Payment due is payable 50% in cash and 50% in shares of the Company’s common stock based on 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 commencing on the trading day immediately following the last day of the Earnout Period and ending on such tenth trading day thereafter.  Additionally, the amount of any Contingent Payment is reduced by two-thirds of the cumulative total of required capital expenditures incurred at Heartland’s refining facility in Columbus, Ohio, which are paid or funded by Vertex OH after the Closing, not to exceed $866,667, which capital expenditures are estimated to total $1.3 million in aggregate.

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 October 21, 2014, (ii) exceed 19.9% of the combined voting power of the Company on October 21, 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 Vertex OH 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.

 Additionally, we are required to file a registration statement within thirty days of the Closing registering at least 1,189,637 shares of the Company’s common stock and use commercially reasonable efforts to obtain effectiveness of the registration statement within 90 days of the filing date if the SEC does not review the registration statement or within 120 days if the SEC does review the registration statement filing.   Pursuant to the Purchase Agreement, Heartland agreed to not sell more than 50,000 shares of the Company’s common stock each week, if otherwise permitted pursuant to applicable law and regulation.

As of September 30, 2014, the Company was not in compliance with certain covenants contained in its credit facilities, including the financial covenants noted below with Bank of America (“BOA”) and Goldman Sachs Bank USA (“Goldman Sachs”):

• The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was due on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 (the actual Ratio of Consolidated Total Debt for the twelve month period ending on August 31, 2014 was 4.6:1); and

• The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for three month period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00).

In connection with the defaults above (and additional defaults described below), in October and November 2014, the Company received notices of events of default from Bank of America and Goldman Sachs, respectively, describing the occurrence of the following events of default under the credit agreements in addition to the prior financial covenant defaults described above:

• The Company entering into various letters of intent in violation of the permitted activities covenants of the Goldman Sachs Credit Agreement; and

• The Company failing to timely comply with various post-closing obligations set forth in the credit agreements including, among others, to deliver certificates of title of Company vehicles to the lenders, assignments of rights under various agreements from the Company to Vertex Operating, confirmation of the closing or transfer of various Company bank accounts, various surveys of mortgaged properties, and delivering a collateral access agreement to BOA.

Additionally, as each credit facility contains cross-default provisions, the default under each lender credit agreement constitutes a default under the agreement with the other lender. As events of default have occurred under the BOA credit agreement, BOA is not required to lend us any further funds under such agreement.

Notwithstanding the above described events of default, both the BOA and Goldman Sachs notices of default stated that while the lenders (and where applicable, their agents) are entitled to exercise any and all default-related rights and remedies under the credit agreements (including declaring the outstanding principal and interest under such facilities immediately due and payable, exercising rights of set-off and demanding further collateral under such credit agreements), neither of the lenders (or where applicable their agents) are charging default interest on such credit agreements or exercising any rights or remedies in connection with such events of default at this time; notwithstanding that neither lender has agreed to forbear from taking any such action in the future and have further reserved all rights, powers, privileges and remedies under their respective credit agreements and can exercise such rights, powers, privileges and remedies at any time without further notice to us.

If we fail to enter into formal forbearance agreements, cure the defaults, negotiate a waiver of the defaults under the credit agreements, or to negotiate mutually agreed upon amendments to the credit agreements to bring the Company into compliance with such credit agreements, the lenders may exercise any and all rights and remedies available to them under their respective agreements, including demanding immediate repayment of all amounts then outstanding under such credit agreements or initiating foreclosure or insolvency proceedings against us. As of the date of this filing we are engaged in ongoing discussions with our lenders, and, in connection therewith, we have provided updated financial projections to our lenders; however, as of the date of this filing, we have been unable to cure the events of default which have occurred and no events of default have been waived by such lenders. In the event we are not able to come to an agreement with our current lenders to either waive the existing defaults and amend the credit agreements or to enter into forbearance agreements that are mutually agreed upon and the lenders elect to exercise certain of their rights and remedies under the credit agreements, including demanding repayment of all amounts owing thereunder, and if we are unable to then obtain alternative financing, our business will be materially and adversely affected, and we may be forced to sharply curtail or cease our operations. In addition, if we are unable to obtain waivers of the existing defaults or enter into forbearance agreements that are mutually agreed upon, it is probable that our independent registered public accounting firm will include an explanatory paragraph with respect to our ability to continue as a going concern in its report on our financial statements for the year ending December 31, 2014 which could trigger additional defaults under agreements to which we are party and may further negatively affect our ability to maintain a listing of our common stock on the NASDAQ Capital Market.

As the credit agreements are secured by substantially all of our assets, there is a risk that if the lenders were to request the immediate repayment of such credit facilities and we did not have, and could not timely raise, funds to repay such obligations, that the lenders (or where applicable, their agents) could foreclose on our assets which could cause us to significantly curtail or cease operations.

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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Cash Flows [Abstract]
Revenues	$ 76,903,516	$ 46,830,647	$ 196,332,796	$ 115,196,850
Cost of revenues	72,846,322	41,945,879	178,252,434	104,287,660
Gross profit	4,057,194	4,884,768	18,080,362	10,909,190
Reduction of contingent liability	(1,876,752)	0	(1,876,752)	(1,850,000)
Operating expenses:
Selling, general and administrative expenses (exclusive of acquisition related expenses)	6,801,396	2,495,748	16,464,402	7,129,673
Acquisition related expenses	259,235	0	2,819,065	0
Total operating expenses	7,060,631	2,495,748	19,283,467	7,129,673
Income (loss) from operations	(1,126,685)	2,389,020	673,647	5,629,517
Other income (expense):
Other income	109,980	0	110,357	0
Bargain purchase gain related to Omega acquisition	92,635	0	6,573,686	0
Other expense	0	(3,949)	(10,866)	(31,690)
Interest expense	(947,325)	(95,488)	(1,680,371)	(314,627)
Total other income (expense)	(744,710)	(99,437)	4,992,806	(346,317)
Income (loss) before income tax	(1,871,395)	2,289,583	5,666,453	5,283,200
Income tax benefit (expense)	(57,975)	40,211	(57,975)	21,460
Net income (loss)	(1,929,370)	2,329,794	5,608,478	5,304,660
Net loss attributable to non-controlling interest	0	0	325,399	0
Net income (loss) attributable to Vertex Energy, Inc.	$ (1,929,370)	$ 2,329,794	$ 5,933,877	$ 5,304,660
Earnings (loss) per common share
Basic (in USD per share)	$ (0.08)	$ 0.13	$ 0.26	$ 0.30
Diluted (in USD per share)	$ (0.08)	$ 0.12	$ 0.24	$ 0.27
Shares used in computing earnings per share
Basic (shares)	25,151,660	17,715,786	23,077,914	17,402,501
Diluted (shares)	25,151,660	19,997,257	24,825,326	19,766,263

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 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 nine months ended September 30, 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 nine months ended September 30, 2014 does not include options to purchase 1,006,000 shares due to their anti-dilutive effect.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2014 and 2013: 

	2014		2013
Basic Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Basic earnings per share	$	0.26	$	0.30
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	5,933,877	$	5,304,660
Denominator:
Weighted-average shares outstanding	23,077,914		17,402,501
Effect of dilutive securities
Stock options and warrants	1,116,993		1,039,925
Preferred stock	630,419		1,323,837
Diluted weighted-average shares outstanding	24,825,326		19,766,263
Diluted earnings per share	$	0.24	$	0.27

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

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

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock-based compensation expense was $173,979 and $123,571 for the nine months ended September 30, 2014 and 2013, respectively, for options previously awarded by the Company.

Stock option activity for the nine months ended September 30, 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 granted	250,000		7.91			9.80	501,893
Options forfeited/expired	(91,667	)	10.78			—	(29,335		)
Options exercised	(634,000	)	(0.87		)	—	(262,241		)
Outstanding at September 30, 2014	2,585,167		$	7.14		5.54	$	1,537,480
Vested at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010
Exercisable at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 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 exercised	(6,250	)	(1.75		)	—	(2,800		)
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at September 30, 2014	—		$	—		—	$	—
Vested at September 30, 2014	—		$	—		—	$	—
Exercisable at September 30, 2014	—		$	—		—	$	—

In April 2014, the Company granted two employees Incentive Stock Options to purchase an aggregate of 150,000 shares of the Company's common stock, which have a term of ten years, an exercise price of $7.55 per share and vest at the rate of 1/4th of such options per year on each of the first four anniversaries of the grant date.

In August, 2014, the Company granted one employee Incentive Stock Options to purchase an aggregate of 100,000 shares of the Company's common stock, which have a term of ten years, and exercise price of $8.44 per share and vest at the rate of 25,000 of such options on grant date and 18,750 on each of the first four anniversaries of the grant date.

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2014

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

Schedule of Stock option activity

Stock option activity for the nine months ended September 30, 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 granted	250,000		7.91			9.80	501,893
Options forfeited/expired	(91,667	)	10.78			—	(29,335		)
Options exercised	(634,000	)	(0.87		)	—	(262,241		)
Outstanding at September 30, 2014	2,585,167		$	7.14		5.54	$	1,537,480
Vested at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010
Exercisable at September 30, 2014	1,820,480		$	8.34		4.88	$	657,010

Schedule of Stock warrant activity

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 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 exercised	(6,250	)	(1.75		)	—	(2,800		)
Warrants cancelled/forfeited/expired	(833	)	(10.00		)	—	(100		)
Warrants at September 30, 2014	—		$	—		—	$	—
Vested at September 30, 2014	—		$	—		—	$	—
Exercisable at September 30, 2014	—		$	—		—	$	—

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BASIS OF PRESENTATION AND NATURE OF OPERATIONS (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Leases

Leases

The company recognizes lease expense on a straight-line basis over the minimum lease terms which expire at various dates through 2032. These leases are for office and storage tank facilities and are classified as operating leases. For the leases that contain predetermined, fixed escalations of the minimum rentals, the Company recognizes the rent expense on a straight-line basis and records the difference between the rent expense and the rental amount payable in liabilities. Leasehold improvements made at the inception of the lease are amortized over the shorter of the asset life or the initial lease terms as described above. Leasehold improvements made during the lease term are also amortized over the shorter of the assets life or the remaining lease term.

For capital leases assumed as a result of an acquisition, the leased assets owned by the acquiree and financed through a capital lease are measured separately, at fair value, from the underlying lease to which they are subject. The present value of the lease is then calculated using the lease terms and implicit interest rate. For operating leases assumed as a result of an acquisition, the lease terms are measured, at acquisition date, to determine if the terms are favorable or unfavorable when compared to a comparable market lease with similar terms.

Business Combinations

Business Combinations

The company accounts for business combinations using the acquisition method of accounting. The results of operations for the acquired entities are included in the company’s consolidated financial results from their associated acquisition dates. The company allocates the purchase price of acquisitions to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. A portion of purchase price for our acquisitions is contingent upon the realization of certain operating results. The fair values assigned to identifiable intangible assets acquired and contingent consideration were determined by third party specialists engaged by the company on a case by case basis. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill. If the purchase price is under the fair value of the identified assets and liabilities, a bargain purchase is recognized and included in income from continuing operations.

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2014 and 2013 is as follows:

NINE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil		Refining & Marketing		Recovery			Total
Revenues	$	124,884,174	$	58,000,951	$	13,447,671		$	196,332,796
Income (loss) from operations	$	388,035	$	1,768,043	$	(1,482,431	)	$	673,647

NINE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil		Refining & Marketing		Recovery		Total
Revenues	$	65,412,393	$	38,979,504	$	10,804,953	$	115,196,850
Income from operations	$	1,276,173	$	2,260,834	$	2,092,510	$	5,629,517

THREE MONTHS ENDED SEPTEMBER 30, 2014
	Black Oil			Refining & Marketing		Recovery			Total
Revenues	$	52,434,252		$	19,655,674	$	4,813,590		$	76,903,516
Income (loss) from operations	$	(749,043	)	$	229,260	$	(606,902	)	$	(1,126,685	)

THREE MONTHS ENDED SEPTEMBER 30, 2013
	Black Oil			Refining & Marketing		Recovery		Total
Revenues	$	22,719,678		$	15,913,554	$	8,197,415	$	46,830,647
Income (loss) from operations	$	(791,121	)	$	1,158,637	$	2,021,504	$	2,389,020

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COMMON STOCK

9 Months Ended

Sep. 30, 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 September 30, 2014, there were 25,414,156 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 nine months ended September 30, 2014, a total of 688,583 shares of the Company's Series A Preferred Stock were converted into 688,583 shares of our common stock on a one-for-one basis. Warrants to purchase 6,250 shares of the Company's common stock were exercised for 6,250 shares of common stock with $10,937 of exercise price paid in cash. Options to purchase 634,000 shares of common stock were exercised for a net of 605,972 shares of common stock (when adjusting for a cashless exercise of 212,500 of such options and the payment, in shares of common stock, of an aggregate exercise price of $205,125, along with an exercise price of $348,925 paid in cash in connection with such exercises) and 605,972 shares of common stock were issued to the option holders in connection with such exercises. Additionally, in June 2014, 2,200,000 shares were sold in connection with an underwritten offering of the Company's common stock for net proceeds of $15,803,000 after deducting offering costs of $1,247,000 from the $17,050,000 raised. The shares have a par value per share of $0.001. In May 2014, 500,000 shares of our restricted common stock (valued at $3,266,000) were issued in connection with the initial closing of the Omega Refining acquisition (see note 10). In September, 2014, 207,743 shares of Company's common stock, valued at $1,790,745, were issued as payment for the remaining 30% ownership in E-Source (additional information included in Note 12).

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PREFERRED STOCK

9 Months Ended

Sep. 30, 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 September 30, 2014, there were 630,419 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

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CONTINGENT CONSIDERATION

9 Months Ended

Sep. 30, 2014

Business Combination, Contingent Consideration Arrangements [Abstract]

CONTINGENT CONSIDERATION

CONTINGENT CONSIDERATION

As part of the consideration paid related to the August 2012 acquisition of Vertex Holdings, L.P., 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 the 2014 earnings target would not be met and the contingent consideration was reduced by $1,555,000, which represents 100% of the discounted cash flows for year two.

As part of the consideration paid in connection with the acquisition of Omega Refining (see Note 12), the Company has agreed to pay the seller additional earn-out consideration in the event that certain EBITDA targets are met (a) during any twelve month period during the eighteen month period commencing on the first day of the first full calendar month following the May 2, 2014 initial closing date (which targets begin at $8,000,000 of EBITDA during such twelve month period) of up to 470,498 shares of common stock of the Company; and (b) during the calendar year ended December 31, 2015 (which targets begin at $9,000,000 of EBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capital expenditures. The contingent consideration has been evaluated by management and reduced by $99,164.

As part of the consideration paid in connection with the acquisition of 51% 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. Of this amount, $136,662 was paid during the three months ended September 30, 2014 and the remaining $611,338 was written off. The write off was triggered because certain terms of the contingent consideration agreement were not met by the acquiree.

As part of the consideration paid in connection with the acquisition of an additional 19% of E-source Holding, LLC, if certain targets were met, on January 31, 2015, 207,743 shares of the Company’s common stock were to be issued to the seller. The estimated fair value of the stock at the time of this agreement was approximately $231,000 and was recorded as additional paid in capital and a reduction of the non-controlling interest in accordance with ASC 850-10-45. This amount was written off during the three months ended September 30, 2014 after certain terms of the contingent consideration agreement were not met by the aquiree.

On September 4, 2014, the Company acquired the remaining 30% interest in E-Source Holdings, LLC, of which it had previously acquired 70%. In consideration for the 30% interest, the Company issued 207,743 shares of common stock, valued at approximately $1,790,745, which 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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STOCK-BASED COMPENSATION (Details Narrative) (USD $)	9 Months Ended		1 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Aug. 31, 2014 Incentive Stock Options employee	Apr. 30, 2014 Incentive Stock Options employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 173,979	$ 123,571
Number of employees who were granted options			1	2
Aggregate number of shares authorized for purchase	250,000		100,000	150,000
Term of awards	9 years 9 months 18 days		10 years	10 years
Exercise price of options (in USD per share)	$ 7.91		$ 8.44	$ 7.55
Award vesting period			4 years	4 years
Number of options vested on grant date			25,000
Annual vesting rights (shares)			18,750

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GOODWILL (Tables)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The following table contains consideration paid in excess of the net assets of the company's acquired, allocated to the respective business segment is as of September 30, 2014:

	Black Oil	Refining & Marketing	Recovery	Total
Balance as of December 31, 2013	$3,554,515	$—	$948,228	$4,502,743
Acquisitions	—	—	419,610	419,610
Balance as of September 30, 2014	$3,554,515	$—	$1,367,838	$4,922,353

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ACQUISITION (Tables)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Summary of Purchase Price Allocation, Fair Value

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

	(in thousands)
Cash and cash equivalents	$	406
Accounts receivable	950
Inventory	4,192
Prepaid expenses	71
Property, plant and equipment	30,000
Deposits	400
Bango secured note issued to Vertex	8,308
Technology	2,287
Non-compete agreements	66
Total identifiable net assets	$	46,680
Less liabilities assumed, including contingent consideration	(7,670		)
Gain on purchase	(6,574		)
Total purchase price	$	32,436

Schedule of Pro-Forma Information

The following schedule contains pro forma results from operations as if the acquisition had occurred on January 1, 2014. The pro forma results do not report actual results that would have occurred had the merger taken place on January 1, 2014, nor do they necessarily suggest future operating results

	Nine Months Ended September 30,
	2014		2013
Revenues	$	234,957,949	$	221,836,815
Income from operations	1,478,186		8,047,532
Net income	6,216,035		7,329,101
Net loss attributable to non-controlling interest	325,399		—
Net income attributable to Vertex Energy, Inc.	$	6,541,434	$	7,329,101
Earnings  per common share
Basic	$0.28		$0.42
Diluted	$0.26		$0.37

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SEGMENT REPORTING (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Segment Reporting Information [Line Items]
Revenues	$ 76,903,516	$ 46,830,647	$ 196,332,796	$ 115,196,850
Income (loss) from operations	(1,126,685)	2,389,020	673,647	5,629,517
Operating segments | Black Oil
Segment Reporting Information [Line Items]
Revenues	52,434,252	22,719,678	124,884,174	65,412,393
Income (loss) from operations	(749,043)	(791,121)	388,035	1,276,173
Operating segments | Refining & Marketing
Segment Reporting Information [Line Items]
Revenues	19,655,674	15,913,554	58,000,951	38,979,504
Income (loss) from operations	229,260	1,158,637	1,768,043	2,260,834
Operating segments | Recovery
Segment Reporting Information [Line Items]
Revenues	4,813,590	8,197,415	13,447,671	10,804,953
Income (loss) from operations	$ (606,902)	$ 2,021,504	$ (1,482,431)	$ 2,092,510

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 E-Source Holdings, LLC	Sep. 30, 2013 E-Source Holdings, LLC
Cash flows from operating activities
Net income	$ 5,608,478	$ 5,304,660
Adjustments to reconcile net income to cash provided by operating activities
Stock based compensation expense	173,979	123,571
Depreciation and amortization	2,981,393	1,615,657
Gain on acquisition	(6,573,686)	0
Deferred federal income tax	0	(144,000)
Reduction of contingent liability	(1,876,752)	(1,850,000)
Changes in operating assets and liabilities
Accounts receivable	(9,731,011)	(794,821)
Allowance for doubtful accounts	(230,000)	0
Notes receivable-related party	(3,150,000)	0
Inventory	(6,269,253)	(2,338,000)
Prepaid expenses	(1,348,935)	(78,925)
Accounts payable	8,962,991	3,516,056
Other assets	(81,450)	0
Net cash provided by (used in) operating activities	(11,534,246)	5,354,198
Cash flows from investing activities
Acquisition of Omega	(30,164,464)	(67,972)
Refund of asset acquisition	0	675,558
Purchase of fixed assets	(4,227,056)	(1,671,295)
Net cash used in investing activities	(34,391,520)	(1,063,709)
Cash flows from financing activities
Line of credit payments, net	0	(3,250,000)
Proceeds related to secondary stock offering	15,803,000	0
Payments on contingent consideration	(136,662)	0	(136,662)
Proceeds from note payable	41,372,315	0
Payments on note payable	(10,469,474)	(1,372,453)
Debt issue cost	(2,452,157)	0
Proceeds from exercise of common stock options and warrants	359,862	55,250
Net cash provided by (used in) financing activities	44,476,884	(4,567,203)
Net change in cash and cash equivalents	(1,448,882)	(276,714)
Cash and cash equivalents at beginning of the period	2,678,628	807,940
Cash and cash equivalents at end of period	1,229,746	531,226
SUPPLEMENTAL INFORMATION
Cash paid for interest	1,600,117	323,956
Cash paid for income taxes	80,158	122,001
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	689	189
Note payable for acquisition of E-Source interest			854,050	0
Additional paid in capital for acquisition of E-Source interest			$ 1,790,745	$ 0

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2014

Debt Disclosure [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.

In May 2014, the Company entered into an amended and restated credit agreement with Bank of America. The amended credit agreement amended and restated the prior credit agreement entered into with Bank of America in September 2012. Pursuant to the agreement, Bank of America agreed to loan the Company up to $20,000,000 in the form of a revolving line of credit, subject to certain terms and lending ratios, 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 then in effect between 1.25% and 2% per annum or the Bank of America LIBOR rate plus between 2.35% and 3% (both ranges dependent upon the Company's leverage ratio from time to time). 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 May 2, 2017.  The balance on the revolving line of credit was $0 at September 30, 2014.

The financing arrangement discussed above is secured by a first priority security interest in all of the assets and securities of our direct and indirect subsidiaries other than E-Source Holdings, LLC. The loan includes various covenants binding upon the Company, including, requiring that the Company comply with certain reporting requirements, provide notices of material corporate events and forecasts to Bank of America, and maintain certain financial ratios relating to debt leverage, consolidated EBITDA, maximum debt exposure, and minimum liquidity, including maintaining a ratio of quarterly consolidated EBITDA to certain fixed charges.

During the three month period ended September 30, 2014, an event of default occurred under the financing agreement (as described below and in Note 13) but we are currently working with our lenders to develop new amendments or modifications to our current agreements that would facilitate a mutually beneficial resolution. The default occurred as a result of our failure to satisfy certain requirements of the Credit Agreement including, but not limited to, the following:

The Company failed to make a prepayment of the term loan under the Goldman Sachs Credit Agreement in the amount of $6,299,567 which was due on August 31, 2014, which was required because the Company did not maintain a less than 4:1 Ratio of Consolidated Total Debt to Consolidated Pro Forma Adjusted EBITDA for the twelve month period ending on August 31, 2014 (The actual Ratio of Consolidated Total Debt for the twelve months ending August 31, 2014 was 4.6:1) and;

The Company failed to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00 for the period ending September 30, 2014 (the actual fixed charge coverage ratio for the period ending September 30, 2014 was 1.00 to 1.00).    

On May 2, 2014, the Company entered into a Credit and Guaranty Agreement with Goldman Sachs Bank USA. Pursuant to the agreement, Goldman Sachs Bank USA loaned the Company $40,000,000 in the form of a term loan. As set forth in 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 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 Adjusted LIBOR Rate. Interest on the Credit Agreement is payable monthly in arrears. 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 until maturity on May 2, 2019. The balance on the term loan was $39,400,000 at September 30, 2014.

The Goldman Sachs Bank USA financing arrangement is secured by all of the assets of the Company, but subordinate to the aforementioned Bank of America credit agreement. Amounts outstanding under this agreement have been recorded as current on the September 30, 2014 balance sheet.

The Credit Agreement contains customary representations, warranties, and covenants for facilities of similar nature and size as the Credit Agreement. The Credit Agreement also includes various covenants binding the Company including limits on indebtedness the Company may incur and maintenance of certain financial ratios relating to consolidated EBITDA and debt leverage. During the three month period ended September 30, 2014, an event of default occurred, under the credit facility (as a result of, among other things, the cross default of the Bank of America facility described above, see Note 13), and we are currently working with our lenders to develop new amendments or modifications to our current agreements that would facilitate a mutually beneficial resolution. The Agent and Lenders have also communicated their intent to carefully monitor the situation to determine additional remedies.

On May 2, 2014, in connection with the closing of the Omega Refining acquisition, the Company assumed two capital leases totaling $3,154,860. Payments of $2,549,418 were made and the balance was $605,442 at September 30, 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 $2,341,572 at September 30, 2014.

The Company financed insurance premiums through various financial institutions bearing interest rates from 4% to 4.52%. All such premium finance agreements have maturities of less than one year and have a balance of $862,409 at September 30, 2014.

Effective January 1, 2014, the Company purchased an additional 19% ownership interest in E-Source Holdings, LLC ("E-Source") of which it had previously acquired 51%. 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 through December 31, 2014. The balance of the note payable is $218,016 at September 30, 2014.

The Company's outstanding debt facilities as of September 30, 2014 are summarized as follows:

Creditor	Loan Type	Origination Date	Maturity Date	Loan Amount		Balance on September 30, 2014
Bank of America	Revolving LOC	May, 2014	May, 2017	$	20,000,000	$	—
Goldman Sachs USA	Term Loan	May, 2014	May, 2019	40,000,000		39,400,000
Pacific Western Bank	Capital Lease	December, 2010	December, 2014	970,974		71,626
Pacific Western Bank	Capital Lease	September, 2012	August, 2017	520,219		533,816
Various institutions	Various	Various	Various	2,690,677		2,341,572
E-source note	Note	January, 2014	December, 2014	854,050		218,016
Various institutions	Insurance premiums financed	Various	> 1 year	1,789,481		862,409
				$	66,825,401	$	43,427,439

Future contractual maturities of notes payable are summarized as follows:

Creditor	Q4 2014		2015		2016		2017		2018		2019		Thereafter
Goldman Sachs USA	$	300,000	$	2,700,000	$	3,200,000	$	3,200,000	$	3,200,000	$	3,200,000	$	23,600,000
Pacific Western Bank	71,625		—		—		—		—		—		—
Pacific Western Bank	41,060		172,654		186,948		133,154		—		—		—
Various institutions	30,394		305,293		323,178		342,204		263,918		236,066		840,519
E-source note	218,017		—		—		—		—		—		—
Various institutions	531,722		330,687		—		—		—		—		—
Totals	$	1,192,818	$	3,508,634	$	3,710,126	$	3,675,358	$	3,463,918	$	3,436,066	$	24,440,519

XML

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	9 Months Ended			9 Months Ended				1 Months Ended		1 Months Ended
	Sep. 30, 2014 Payment	Dec. 31, 2013	Feb. 28, 2013	Sep. 30, 2014 Purchases Supplier concentration risk Supplier 1 company	Sep. 30, 2013 Purchases Supplier concentration risk Supplier 2 company	Sep. 30, 2014 Used motor oil gal	May 02, 2014 Used motor oil gal	Nov. 30, 2014 Forecast Heartland Group Holdings, LLC	Nov. 30, 2014 Maximum Forecast Heartland Group Holdings, LLC Operating losses through the earlier of closing or termination of purchase agreement	Nov. 30, 2014 Minimum Forecast Heartland Group Holdings, LLC Operating losses through the earlier of closing or termination of purchase agreement
Revenue, Major Customer [Line Items]
Number of suppliers				1	1
Concentration percentage				10.00%	11.00%
Annual feedstock purchase commitment (minimum gallons)							15,200,000
Volume received under purchase contract (gallons)						11,200,000
Purchase obligation remaining (gallons)						4,000,000
Debt facilities outstanding	$ 43,427,439	$ 10,158,333
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	2,600,000
Change in valuation allowance	879,210
Commitment to cover operating losses recognized through closing									2,000,000	1,800,000
Reimbursement period if Purchase Agreement is breached										30 days
Maximum project costs to be paid by acquiree prior to closing								788,500
Estimated project costs prior to closing								$ 1,600,000

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Numerator:
Net income available to common shareholders			$ 5,933,877	$ 5,304,660
Denominator:
Weighted-average common shares outstanding (shares)	25,151,660	17,715,786	23,077,914	17,402,501
Basic earnings per share (in USD per share)	$ (0.08)	$ 0.13	$ 0.26	$ 0.30
Effect of dilutive securities
Stock options and warrants (shares)			1,116,993	1,039,925
Preferred stock (shares)			630,419	1,323,837
Diluted weighted-average shares outstanding	25,151,660	19,997,257	24,825,326	19,766,263
Diluted earnings per share (in USD per share)	$ (0.08)	$ 0.12	$ 0.24	$ 0.27

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2014

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

Schedule of Concentrations

At September 30, 2014 and 2013 and for each of the nine 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	28%	—%	1%	—%
Customer 2	13%	8%	46%	27%
Customer 3	11%	—%	10%	—%
Customer 4	9%	47%	—%	—%
Customer 5	7%	12%	8%	16%
Customer 6	2%	11%	—%	—%
Customer 7	—%	—%	10%	16%
Customer 8	—%	—%	2%	24%

At September 30, 2014 and 2013 and for each of the nine months then ended, the Company's segment revenues were comprised of the following customer concentrations:

	% of Revenue by Segment 2014			% Revenue by Segment 2013
	Black Oil	Refining	Recovery	Black Oil	Refining	Recovery
Customer 1	100%	—%	—%	100%	—%	—%
Customer 2	8%	92%	—%	17%	83%	—%
Customer 3	—%	100%	—%	—%	100%	—%
Customer 4	92%	—%	2%	—%	—%	—%
Customer 5	—%	100%	—%	—%	100%	—%
Customer 6	94%	—%	6%	—%	—%	—%
Customer 7	—%	—%	—%	77%	23%	—%
Customer 8	—%	—%	—%	100%	—%	—%