10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

OR

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

FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number 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  x    No  ¨

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

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

Large accelerated filer  ¨                                                                    Accelerated filer   ¨

Non-accelerated filer  ¨                                                                      Smaller reporting company  x

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

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 17,385,351 shares of common stock issued and outstanding as of April 25, 2013.

TABLE OF CONTENTS

PART I
Item 1.     Consolidated Financial Statements	F-1
Consolidated Balance Sheets	F-1
Consolidated Statements of Operations (unaudited)	F-2
Consolidated Statements of Cash Flows (unaudited)	F-3
Notes to Consolidated Financial Statements  (unaudited)	F-4
Item 2.     Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	1
Item 3.     Quantitative And Qualitative Disclosures About Market Risk	19
Item 4.     Controls and Procedures	19

PART II
Item 1.     Legal Proceedings	20
Item 1A:  Risk Factors	20
Item 2.     Unregistered Sales Of Equity Securities And Use Of Proceeds	20
Item 3.     Defaults Upon Senior Securities	21
Item 4.     Mine Safety Disclosures	21
Item 5.     Other Information	21
Item 6.     Exhibits	21

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VERTEX ENERGY, INC.

CONTENTS TO FINANCIAL STATEMENTS

	Page
Consolidated  Financial Statements
Consolidated  Balance Sheets	F-1
Consolidated  Statements of  Operations (unaudited)	F-2
Consolidated  Statements of Cash Flows (unaudited)	F-3
Notes to Consolidated Financial Statements (unaudited)	F-4

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	March 31,		December 31,
	2013		2012
ASSETS
Current assets
Cash and cash equivalents	$	1,316,831	$	807,940
Accounts receivable, net		7,383,050		7,160,780
Inventory		5,907,992		5,870,121
Prepaid expenses		519,198		492,467
Total current assets		15,127,071		14,331,308
Noncurrent assets
Fixed assets, net		11,279,296		11,617,368
Intangible assets, net		15,680,721		15,934,724
Goodwill		3,515,977		3,515,977
Deferred federal income taxes		3,735,000		3,703,000
Total noncurrent assets		34,210,994		34,771,069
TOTAL ASSETS	$	49,338,065	$	49,102,377
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	10,641,158	$	8,869,234
Current portion of long-term debt		1,722,400		1,749,329
Total current liabilities		12,363,558		10,618,563
Long-term liabilities
Long-term debt		5,834,651		6,281,457
Contingent consideration		4,744,850		4,711,000
Line of credit		4,500,000		6,750,000
Deferred federal income tax		363,000		341,000
Total liabilities	$	27,806,059	$	28,702,020
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value per share:
50,000,000 shares authorized
Series A Convertible Preferred stock, $0.001 par value,     5,000,000 authorized and 1,428,923 and 1,512,891  issued and outstanding at March 31, 2013 and  December 31, 2012, respectively		1,429		1,513
Series B Preferred stock, $0.001 par value,      2,000,000 authorized, no shares outstanding		-		-
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 17,176,001 and 16,965,464 issued and outstanding at March 31, 2013 and    December 31, 2012, respectively		17,176		16,965
Additional paid-in capital		10,767,272		10,719,345
Retained earnings		10,746,129		9,662,534
Total stockholders’ equity		21,532,006		20,400,357
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	49,338,065	$	49,102,377

See accompanying notes to the consolidated financial statements.

F - 1

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
	March 31, 2013			March 31, 2012
Revenues	$	33,254,801		$	34,827,939
Cost of revenues		29,785,043			31,942,875
Gross profit		3,469,758			2,885,064
Selling, general and administrative expenses		2,221,492			1,194,747
Acquisition related expenses		36,592			-
Total selling, general and administrative expenses		2,258,084			1,194,747
Income from operations		1,211,674			1,690,317
Other income (expense)
Other income		25,289			-
Other expense		(40,726	)		-
Interest expense		(106,140	)		(44	)
Total other income (expense)		(121,577	)		(44	)
Income before income taxes		1,090,097			1,690,273
Income tax expense		(6,502	)		(116,000	)
Net income	$	1,083,595		$	1,574,273
Earnings per common share
Basic	$	0.06		$	0.17
Diluted	$	0.05		$	0.10
Shares used in computing earnings per common share
Basic		17,079,242			9,434,094
Diluted		20,139,182			15,473,017

See accompanying notes to the consolidated financial statements.

F - 2

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)
	Three Months Ended
	March 31, 2013			March 31, 2012
Cash flows from operating activities
Net income	$	1,083,595		$	1,574,273
Adjustments to reconcile net income to cash
provided by operating activities
Stock-based compensation expense		48,054			44,441
Depreciation and amortization		532,718			40,913
Deferred federal income tax		(10,000	)		98,000
Changes in assets and liabilities
Accounts receivable		(222,270	)		(565,497	)
Accounts receivable- related parties		-			798
Inventory		(37,871	)		(549,934	)
Prepaid expenses		(26,731	)		27,775
Accounts payable		1,771,924			1,926,954
Accounts payable-related parties		-			606,588
Deposits		-			444,383
Net cash provided by operating activities		3,139,419			3,648,694
Cash flows from investing activities
Purchase of intangible assets		-			(59,519	)
Acquisition, net		(34,122	)		-
Refund of asset acquisition		675,558			-
Purchase of fixed assets		(548,229	)		(2,091	)
Net cash provided by (used in) investing activities		93,207			(61,610	)
Cash flows from financing activities
Line of credit payments, net		(2,250,000	)		-
Payments on note payable		(473,735	)		-
Proceeds from exercise of common stock warrants		-			34,187
Net cash provided by financing activities		(2,723,735	)		34,187
Net increase in cash and cash equivalents		508,891			3,621,271
Cash and cash equivalents at beginning of the period		807,940			675,188
Cash and cash equivalents at end of period	$	1,316,831		$	4,296,459
SUPPLEMENTAL INFORMATION
Cash paid for interest during the period	$	76,706		$	44
Cash paid for income taxes during the period	$	-		$	10,000
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common stock	$	84		$	34

See accompanying notes to the consolidated financial statements.

F - 3

VERTEX ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

(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 21, 2013 (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 2012 as reported in Form 10-K, have been omitted.

NOTE 2.  RELATED PARTIES

Prior to the Company’s September 11, 2012 (effective August 31, 2012) acquisition of a special purpose entity which owned substantially all of the assets and liabilities of Vertex Holdings, L.P., formerly Vertex Energy, L.P. (also defined herein as the “Partnership” or “Vertex LPrelating to the business of transporting, storing, processing and re-refining petroleum products, crudes and used lubricants and certain real-estate properties owned by a related party associated with such operations (the “Acquisition” as discussed in greater detail in the Form 10-K),  the Company had numerous transactions with the Partnership, including the lease of the Partnership’s storage facility, subletting of office space, transportation of feedstock to re-refiners and the Company’s storage facility, and delivery from the Company’s re-refinery to end customers. The pricing under these contracts was with certain wholly-owned subsidiaries of the Partnership and was priced at market, and reviewed periodically from time to time by the Board of Director’s Related Party Transaction committee.  The Related Party Transaction committee includes at least two independent directors and will review and pre-approve any and all related party transactions.

The consolidated financial statements include inventory purchases from related parties of $0 and $3,830,853 for the three months ended March 31, 2013 and 2012, respectively. The Company also incurred process costs of $0 and $2,031,932 for the three months ended March 31, 2013 and 2012, respectively.  The costs arise from the Thermal Chemical Extraction Process (“TCEP”) operating agreement with CMT(which entity was acquired as part of the Acquisition), whereby we paid up to $0.40 per gallon of processing costs.

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

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

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

F - 4

NOTE 3.  CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

The Company has concentrated credit risk for cash by maintaining deposits in one bank.  These balances are insured by the Federal Deposit Insurance Corporation up to $250,000.  From time to time during the three months ended March 31, 2013, the Company’s cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.

At March 31, 2013 and 2012 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2013						2012
	% of			% of			% of			% of
	Revenues			Receivables			Revenues			Receivables
Customer 1		0	%		0	%		46	%		24	%
Customer 2		7	%		0	%		12	%		40	%
Customer 3		8	%		13	%		12	%		16	%
Customer 4		4	%		7	%		8	%		9	%
Customer 5		59	%		64	%		7	%		0	%

The Company purchases goods and services from two companies that represented 13% and 10% of total purchases for the three months ended March 31, 2013 and 11% and 10% for the three months ended March 31, 2012, respectively.

The Company has had various debt facilities available for use, of which there was $12,057,051 and $0 outstanding as of March 31, 2013 and 2012, respectively. See Note 4 for further details.

In February 2013, Bank of America agreed to lease the Company up to $1,025,000 of equipment to enhance the 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, 2012, the Company had utilized approximately $8.1 million of these NOLs leaving approximately $33.9 million of potential NOLs of which we expect to utilize approximately $1.09 million for the three months ended March 31, 2013.  The Company recorded a change in valuation allowance as of March 31, 2013 for approximately $370,000.

F - 5

NOTE 4. NOTES PAYABLE

In September 2012, the Company entered into a credit agreement with Bank of America. Pursuant to the agreement, Bank of America agreed to loan the Company $8,500,000 in the form of a term loan and to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, to be used for feedstock purchases and general corporate purposes. The line of credit bears interest at the option of the Company of either the lender's prime commercial lending rate in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the revolving note is due and payable monthly in arrears and all amounts outstanding under the revolving note are due and payable on August 31, 2014.  The balance on the revolving line of credit was $4,500,000 at March 31, 2013.

Amounts borrowed under the term note bear interest at the option of the Company of either the lender's prime commercial lending rate then in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the term note is due and payable monthly in arrears and all amounts outstanding under the term note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,667 are due and payable on the term note monthly in arrears on the last day of each month and continuing until the maturity date. The balance of the term loan was $7,508,333 at March 31, 2013.

The financing arrangement discussed above is secured by all of the assets of the Company.  The loan contains certain restrictive covenants including a Fixed Charge Coverage Ratio, as defined in the agreement, of at least 1.25 to 1.00, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00. A tangible net worth requirement was included in the credit agreement in error. This requirement was waived and the credit agreement was amended in January 2013. The Company believes it was in compliance with all aspects of the agreement at March 31, 2013.

NOTE 5. STOCK-BASED COMPENSATION

Stock-based compensation expense was $48,054 and $44,441 for the three months ended March 31, 2013 and 2012, respectively, for options previously awarded by the Company.

Stock option activity for the three months ended March 31, 2013 is summarized as follows:

	Shares			Weighted Average  Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		2,939,167		$	5.70			6.50	$	1,144,024
Options exercised		(35,000	)		(1.13	)		-		(23,149	)
Outstanding at March 31, 2013		2,904,167		$	5.76			6.25	$	1,120,875
Vested at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822
Exercisable at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822

F - 6

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2013 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		1,163,308		$	12.37			0.40	$	128,889
Warrants exercised		(175,000	)		(1.46	)		-		(25,075	)
Warrants cancelled/forfeited/expired		(40,554	)		(0.10	)		-		(2,433	)
Warrants at March 31, 2013		947,754		$	14.91			0.66	$	101,381
Vested at March 31, 2013		935,254		$	15.08			0.63	$	95,781
Exercisable at March 31, 2013		935,254		$	15.08			0.63	$	95,781

NOTE 6. EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the three months ended March 31, 2013 includes the weighted average of common shares outstanding.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.  The calculation of diluted earnings per share for the three months ended March 31, 2013 does not include options to purchase 1,513,989 shares and warrants to purchase 706,914 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 quarters ended March 31, 2013 and 2012:

	2013		2012
Basic Earnings per Share
Numerator:
Net income  available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Basic earnings per share	$	0.06	$	0.17
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Effect of dilutive securities
Stock options and warrants		1,631,017		1,645,815
Preferred stock		1,428,923		4,393,108
Diluted weighted-average shares outstanding		20,139,182		15,473,017
Diluted earnings per share	$	0.05	$	0.10

F - 7

NOTE 7. COMMON STOCK

The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of March 31, 2013, there were 17,176,001 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 holder of any shares of the Company's common stock has a preemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject to redemption or convertible into other securities.  Upon liquidation, dissolution or winding-up of the Company and after payment of creditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-share basis among the holders of the Company's common stock.  Each share of the Company's common stock is entitled to one vote.  Shares of the Company's common stock do not possess any cumulative voting rights.

During the three months ending March 31, 2013 there were 83,968 shares of the Company's Series A Preferred Stock converted into 83,968 shares of  the Company's common stock; warrants to purchase 175,000 shares of the Company's common stock were exercised for a net of 102,484 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $256,250 in connection with such exercise) and 102,484 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 35,000 shares of common stock were exercised for a net of 24,085 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $39,500 in connection with such exercises) and 24,085 shares of common stock were issued to the option holder in connection with such exercises.

NOTE 8.  PREFERRED STOCK

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Preferred Stock is 5,000,000 (“Series A Preferred”).  The total number of designated shares of the Company’s Series B Preferred Stock is 2,000,000. As of March 31, 2013, there were 1,428,923 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

NOTE 9.  ACQUISITION

On January 1, 2013, the Company purchased two trucks, miscellaneous operating assets and a used oil collection customer base from a used oil collection company in the Houston, Texas area.  The Company paid $123,845 for the business and has consideration of $33,850 due contingent on this customer base producing a specified number of gallons per month for three months. The portion of the acquired company was immediately integrated into the Company's operations.

F - 8

NOTE 10.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil and Refining & Marketing divisions.  Segment information for the three months ended March 31, 2013 and 2012 is as follows:

THREE MONTHS ENDED MARCH 31, 2013
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,423,055	$	8,831,746	$	33,254,801
Net income from operations	$	1,110,210	$	101,464	$	1,211,674
Total Assets	$	45,572,502	$	3,765,563	$	49,338,065
THREE MONTHS ENDED MARCH 31, 2012
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,160,235	$	10,667,704	$	34,827,939
Net income from operations	$	994,537	$	695,780	$	1,690,317

NOTE 11. SUBSEQUENT EVENTS

Subsequent to March 31, 2013, the available credit on the Line of Credit is $10,000,000.  As of May 3, 2013, the outstanding balance drawn on the line of credit is $7,000,000 leaving an available balance for draw downs of $3,000,000.

Subsequent to March 31, 2013, a total of 59,875 shares of the Company’s Series A Preferred Stock were converted into 59,875 shares of the Company’s common stock; warrants to purchase 250,000 shares of the Company’s common stock were exercised for a net of 105,955 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $437,500 in connection with such exercises) and 105,955 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 55,000 shares of the Company’s common stock were exercised for a net of 43,520 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $36,000 in connection with such exercise) and 43,520 shares of common stock were issued to the option holder in connection with such exercise.

F - 9

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

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

• our ability to respond to changes in our industry;

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

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

• our ability to scale our business;

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

• our ability to obtain and retain customers;

• our ability to produce our products at competitive rates;

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

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

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

• the impact of competitive services and products;

• our ability to maintain insurance;

• pending and potential future litigation, judgments and settlements;

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

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

• economic downturns both in the United States and globally;

• risk of increased regulation of our operations and products;

• negative publicity and public opposition to our operations;

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

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

• interruptions at our facilities;

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

• our ability to effectively manage our growth;

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

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

You should read the matters described in “Risk Factors” below and disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on March 21, 2013, and the other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

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

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

Corporate History of the Registrant:

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

Recent Acquisition

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.

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

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

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

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

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. A total of $1.0 million of the purchase price will be held in escrow for 18 months to satisfy indemnity claims.  We borrowed the funds used to acquire Acquisition Sub with the Credit Facility and Notes described in greater detail below under “Liquidity and Capital Resources”.

We had numerous relationships and related-party transactions with Holdings and its subsidiaries prior to the closing of the Acquisition, including the lease of a storage facility, the subletting of office space, and agreements to operate the TCEP 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.

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 two divisions- the Black Oil division and the Refining and Marketing division. Our Black Oil division collects and purchases used motor oil directly from third-party generators, aggregates used motor oil from an established network of local and regional collectors, and sells used motor oil to our customers for use as a feedstock or replacement fuel for industrial burners. Our Refining and Marketing division aggregates and manages the re-refinement of used motor oil and other petroleum by-products and sells the re-refined products to our customers.  We operate a refining facility that uses our proprietary TCEP technology and we also utilize third-party processing facilities.

Black Oil Division

Our Black Oil division is engaged in the collection, aggregation, and sale of used motor oil, as well as related transportation and storage activities.  We collect and purchase used oil directly from generators such as oil change service stations, automotive repair shops, manufacturing facilities, petroleum refineries, and petrochemical manufacturing operations.  We own a fleet of 13 collection vehicles which routinely visit generators to collect and purchase used motor oil.   We also aggregate used oil from a diverse network of approximately 50 suppliers who operate similar collection businesses to ours.

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

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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  arrangement 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.

We currently provide our services in 13 states, primarily in the Gulf Coast and Central Midwest regions of the United States.  During the twelve month period ending December 31, 2012, we aggregated approximately 60 million gallons of used motor oil and other petroleum by-product feedstocks and managed the re-refining of approximately 24.2 million gallons of used motor oil with our proprietary TCEP.

Biomass Renewable Energy

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

Thermal Chemical Extraction Process

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

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.

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Strategy and Plan of Operations

The principal elements of our strategy include:

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

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

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

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

Pursue Selective Strategic Relationships Or Acquisitions.  We plan to grow market share by consolidating feedstock supply through partnering with or acquiring collection and aggregation assets.  Such 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.

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

RESULTS OF OPERATIONS

Description of Material Financial Line Items:

Revenues

We generate revenues from two existing operating divisions as follows:

BLACK OIL - Revenues for our Black Oil division are comprised primarily of feedstock sales (used motor oil) which are purchased from generators of used motor oil such as oil change shops and garages, as well as a network of local and regional suppliers.  Volumes are consolidated for efficient delivery and then sold to third-party re-refiners and fuel oil blenders for the export market.  In addition, through used oil re-refining, we re-refine used oil through TCEP.  The finished product is then sold by barge as a fuel oil cutterstock and a feedstock component for major refineries.

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

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

Cost of Revenues

BLACK OIL - Cost of revenues for our Black Oil division are comprised primarily of feedstock purchases from a network of providers. Other cost of revenues include 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.

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

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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 MARCH 31, 2013 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2012

Set forth below are our results of operations for the three months ended March 31, 2013, as compared to the same period in 2012.  In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without parentheses while decreases in revenue/income or increases in expense (unfavorable variances) are shown with parentheses in the “$ Change” and “% Change” columns.

	Three Months Ended March 31,
	2013			2012			$ Change			% Change
Revenues	$	33,254,801		$	34,827,939		$	(1,573,138	)		(5	%)
Cost of Revenues		29,785,043			31,942,875			2,157,832			7	%
Gross Profit		3,469,758			2,885,064			584,694			20	%
Selling, general and administrative expenses		2,258,084			1,194,747			(1,063,337	)		(89	%)
Income from operations		1,211,674			1,690,317			(478,643	)		(28	%)
Other Income		25,289			-			25,289			100	%
Other Expense		(40,726	)		-			(40,726	)		(100	%)
Interest Expense		(106,140	)		(44	)		(106,096	)		(241,127	%)
Total other income (expense)		(121,577	)		(44	)		(121,533	)		(276,211	%)
Income before income taxes		1,090,097			1,690,273			(600,176	)		(36	%)
Income tax expense		(6,502	)		(116,000	)		109,498			(94	%)
Net income		1,083,595			1,574,273			(490,678	)		(31	%)

Each of our segments’ gross profit during the three months ended March 31, 2013 and 2012 was as follows (increases in revenue and/or decreases in cost of revenues are shown without parentheses while decreases in revenue and/or increases in cost of revenues are shown with parentheses in the “$ Change” and “% Change” columns):

	Three Months Ended March 31,
Black Oil Segment	2013		2012		$ Change			% Change
Total revenue	$	24,423,055	$	24,160,235	$	262,820			1	%
Total cost of revenue	$	21,560,909	$	22,367,745		806,836			4	%
Gross profit	$	2,862,146	$	1,792,490	$	1,069,656			60	%
Refining and Marketing Segment
Total revenue	$	8,831,746	$	10,667,704	$	(1,835,958	)		(17	%)
Total cost of revenue	$	8,224,134	$	9,575,130		1,350,996			14	%
Gross profit	$	607,612	$	1,092,574	$	(484,962	)		(44	%)

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Effective for the quarter ended December 31, 2012, we moved the results of operations and related expenses of the TCEP from our Refining and Marketing segment to our Black Oil segment, which we believe more accurately reflects its appropriate segment position in the Company following the Acquisition (described above).  The segment information described in this report and the financials included herein have been retroactively adjusted to reflect such December 31, 2012 change in segment reporting.

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 decreased 5% for the first quarter of 2013, compared to the same period in 2012, due primarily to a decrease in overall commodity prices during the first quarter of 2013, compared to the first quarter of 2012.

Total volume increased 10% and gross profit increased 20% for the three months ended March 31, 2013.  Additionally, our per barrel margin increased 9% relative to the three months ended March 31, 2012.  This increase was a result of decreases in operational expenses related to terminaling, transporting and overall processing costs for all products.

Our Black Oil division’s volume increased approximately 20% during the period ended March 31, 2013 compared to the same period in 2012.  This increase was due to the increased production of product processed through the TCEP process as well as increased volume delivered to third-party re-refiners and fuel oil blenders. Overall volume for the Refining and Marketing division decreased 15% during the three month period ended March 31, 2013 as compared to the same period in 2012.  This division experienced a decrease in production of 50% for its pygas product for the three months ended March 31, 2013, compared to the same period in 2012. The decrease in the overall volume of the Refining and Marketing division and of our pygas product was a result of planned operational turnarounds at two of the supplier facilities from which we receive a large volume of our product.  Our gasoline blendstock increased 44% for the three months ended March 31, 2013, compared to the same period in 2012.  Our fuel oil cutter volumes decreased 9% for the three months ended March 31, 2013 as compared to the same period in 2012.  We experienced a 7% increase in the volume of our TCEP refined product during the three months ended March 31, 2013, compared to the same period in 2012.   In addition, commodity prices decreased approximately 5% for the three months ended March 31, 2013, compared to the same period in 2012. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the three months ended March 31, 2013 decreased $10.69 per barrel from a three month average of $107.83 per barrel during the three months ended March 31, 2012 to $97.13 per barrel during the three months ended March 31, 2013.   

Overall gross profit increased and our margin per barrel increased approximately 17% for the three months ended March 31, 2013, compared to the quarter ended December 31, 2012.  This margin improvement was a result of increases in commodity prices from the end of the fourth quarter of 2012 to the first quarter of 2013, which was further positively impacted by the Company’s reduction of operating costs during the first quarter of 2013 compared to the quarter ended December 31, 2012.

Our TCEP technology generated revenues of $15,210,497 during the three months ended March 31, 2013, with cost of revenues of $12,505,911, producing a gross profit of $2,704,586.  As discussed above, our margins are impacted by what we are able to pay for raw materials and what we are able to sell our finished products for.    Operating expenses during the three months ended March 31, 2013 decreased 20% as compared to the same period in 2012.  The Company is focused on decreasing overall operating expenses for TCEP during the remainder of fiscal 2013.

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

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

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

Benchmark	High		Date	Low		Date
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)	$	3.27	February 24	$	2.97	January 20
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)	$	3.41	March 28	$	2.71	January 5
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)	$	114.35	March 1	$	101.35	January 20
NYMEX Crude oil (dollars per barrel)	$	109.74	February 24	$	96.36	February 2
Reported in Platt's US Marketscan (Gulf Coast)

We saw a decrease during the first quarter of 2013 in each of the benchmark commodities we track compared to the same period during 2012.

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

            During the three months ended March 31, 2013, gross profit increased 20% from the same period in 2012, primarily due to increases in commodity prices from the fourth quarter 2012 into the first quarter 2013 which change directly impacted the Company as it relates to any inventories being carried over from period to period, and increases in volume.  In addition, during the three month period ended March 31, 2013, the Company also reduced its per barrel operating costs during this period.

We had selling, general and administrative expenses of $2,258,084 for the three months ended March 31, 2013, compared to $1,194,747 from the prior year’s period, an increase of $1,063,337 or 89% from the prior period.  This increase is primarily due to the additional selling, general and administrative expenses generated by the new business lines and additional compensation expenses associated with employees acquired as a result of the Acquisition (described above) which occurred during the month of September 2012 (effective August 31, 2012).

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We had net income from operations of $1,211,674 for the three months ended March 31, 2013, compared to net income from operations of $1,690,317 for the three months ended March 31, 2012, a decrease of $478,643 or 28% from the prior year’s period.  The decrease was mainly due to the operational slowdown of product delivered into our Refining and Marketing segment during the three months ending March 31, 2013, as described above.   We anticipate these volumes returning to normal during the balance of 2013.    We had an income tax expense of $6,502 for the three months ended March 31, 2013, compared to an income tax expense of $116,000 for the same period of 2012.  The decrease is due to a greater net benefit in prior year for income taxes, for which the Company has recorded a net deferred asset based on reducing its valuation allowance related to its approximately $34 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.

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

If we are unable to effectively compete with additional technologies brought to market by our competitors, our finished products could be worth less and if our competitors are willing to pay more for feedstock than we are, they could drive up prices, which would cause our revenues to decrease, 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.

Set forth below, we have disclosed a quarter-by-quarter summary of our statement of operations and statement of operations by segment information for the quarter ended March 31, 2013, and the fiscal years ended December 31, 2012 and 2011.

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	Statement of Operations
	Fiscal 2013		Fiscal 2012									Fiscal 2011
	First		Fourth		Third		Second			First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter			Quarter		Quarter		Quarter		Quarter		Quarter
Revenue		33,254,801		32,256,541		36,195,570		31,293,193			34,827,939		31,339,168		30,301,326		27,790,860		20,290,925
Revenue-related parties		-		-		-		-			-		-		-		-		17,978
Total revenue		33,254,801		32,256,541		36,195,570		31,293,193			34,827,939		31,339,168		30,301,326		27,790,860		20,308,903
Cost of revenues		29,785,043		29,290,855		33,011,934		30,542,452			31,942,875		30,034,120		28,268,785		25,325,275		18,038,007
Gross profit		3,469,758		2,965,686		3,183,636		750,741			2,885,064		1,305,048		2,032,541		2,465,585		2,270,896
Selling, general and
administrative expenses		2,258,084		2,413,181		1,610,146		919,227			1,194,747		1,069,221		997,723		1,006,683		1,026,055
Acquisition related expenses		-		101,964		1,154,612		-			-		-		-		-		-
Total selling, general and administrative expenses		2,258,084		2,515,145		2,764,758		919,227			1,194,747		1,069,221		997,723		1,006,683		1,026,055
Income from operations		1,211,674		450,541		418,878		(168,486	)		1,690,317		235,827		1,034,818		1,458,902		1,244,841

Other income (expense)
Other income/ (expense)	(15,437	)	158		949		633		-		-		-		-		-
Interest expense	(106,140	)	(106,348	)	(28,972	)			(44	)	(4,875	)	(3,593	)	(25,177	)	(29,041	)
Total other income (expense)	(121,577	)	(106,190	)	(28,023	)	633		(44	)	(4,875	)	(3,593	)	(25,177	)	(29,041	)
Income before income tax	1,090,097		344,351		390,855		(167,853	)	1,690,273		230,952		1,031,225		1,433,725		1,215,800
Income tax expense	(6,502	)	(207,000	)	1,714,813		8,828		(116,000	)	1,887,502		(3,000	)	(22,986	)	(19,703	)
Net income	1,083,595		137,351		2,105,668		(159,025	)	1,574,273		2,118,454		1,028,225		1,410,739		1,196,097
Number of weighted average common shares
outstanding:
Basic	17,079,242		12,138,229		12,255,372		10,136,941		9,434,094		8,884,681		9,187,227		8,535,111		8,440,064
Diluted	20,139,182		14,866,134		16,484,023		10,136,941		15,473,017		14,775,339		15,851,393		13,937,618		13,935,781

11

	Statement of Operations by Segment (UNAUDITED)
	Fiscal 2013		Fiscal 2012								Fiscal 2011
	First		Fourth		Third		Second		First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter
Black Oil
Revenues		24,423,055		20,660,775		23,107,902		22,308,780		24,160,235		21,182,280		21,109,804		17,151,091		12,906,006
Cost of revenues		21,560,909		18,721,540		22,013,323		22,103,561		22,367,745		20,255,185		19,970,983		15,956,319		12,012,456
Gross profit		2,862,146		1,939,235		1,094,579		205,219		1,792,490		927,095		1,138,821		1,194,772		893,550
Refining & Marketing
Revenues		8,831,746		11,595,766		13,087,668		8,984,413		10,667,704		10,156,888		9,191,522		10,639,769		7,402,897
Cost of revenues		8,224,134		10,569,315		10,998,611		8,438,891		9,575,130		9,778,935		8,297,802		9,368,956		6,025,551
Gross profit		607,612		1,026,451		2,089,057		545,522		1,092,574		377,953		893,720		1,270,813		1,377,346

12

Liquidity and Capital Resources

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

We had total assets of $49,338,065 as of March 31, 2013 compared to $49,102,377 at December 31, 2012.  This increase was mainly due to small increases in cash and cash equivalents, accounts receivable and inventory, compared to the year ended December 31, 2012.  Our cash, accounts receivable, inventory and accounts payable fluctuate and are somewhat tied to one another based on the timing of our inventory cycles and sales. Included in total assets was net fixed assets of $11,279,296 consisting of five used oil collection branch locations and associated storage facilities and rolling stock (collection and transport trucks), a 19 acre tank terminal storage facility located on the Houston ship-channel, and a small trucking operation; $15,680,721 of intangible assets which represented the value of the purchase of the patents and technology related to the TCEP operation; and $3,515,977 of goodwill (booked in connection with the Acquisition of Holdings).

We had total current liabilities of $12,363,558 as of March 31, 2013, compared to $10,618,563 at December 31, 2012.  This increase was largely due to the increase in our accounts payable during the three months ended March 31, 2013 of $1,771,924, in addition and in connection with the Acquisition, the Company obtained a term loan with Bank of America (described in greater detail below) of which the current portion outstanding at March 31, 2013 was $1,722,400.

We had total liabilities of $27,806,059 as of March 31, 2013, including current liabilities of $12,363,558 and long-term liabilities of $15,442,501, which included $5,834,651 of long-term debt representing amounts due on the Term Note (defined below), line of credit of $4,500,000, representing amounts borrowed under the Revolving Note (defined below), $4,744,850 of contingent consideration relating to the Earn-Out Payments associated with the Acquisition, and $363,000 of deferred federal income tax.

We had working capital of $2,763,513 as of March 31, 2013, compared to working capital of $3,712,745 as of December 31, 2012.  The reduction in working capital from December 31, 2012 to March 31, 2013 is mainly due to the increase in accounts payable, as a result of increased product volumes.

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. (the “Lender”) effective as of August 31, 2012, pursuant to which we borrowed $8,500,000 in the form of a term loan, which is evidenced by a Term Note(the “Term Note”) , and the Lender 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 can request loans from time to time under the Credit Facility, subject to the terms and conditions of the Credit Agreement, provided that the total amount loaned pursuant to the Credit Facility cannot exceed the lesser of (a) $10,000,000 and (b) an amount equal to the total of (i) 80% of our accounts in which Lender has a first-priority perfected security interest; (ii) 80% of our finished-goods inventory in which Lender holds a first-priority perfected security interest, in each case subject to the terms and conditions of the Credit Agreement.

13

Amounts borrowed under the Revolving Note bear interest at our option at the lesser of the Lender’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 the Lender’s prime commercial lending rate then in effect or the LIBOR rate in effect plus 2.75%.  Accrued and unpaid interest on the Term Note is due and payable monthly in arrears and all amounts outstanding under the Term Note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,667 are due and payable on the Term Note, monthly in arrears on the last day of each month beginning September 30, 2012, and continuing thereafter until the maturity date.

We agreed to comply with certain standard affirmative and negative covenants in connection with the Credit Agreement and agreed to meet the following financial covenants at such time as any loans or other obligations are outstanding under the Credit Agreement, commencing with the quarter ending September 30, 2012: (i) the ratio of (a) our EBITDA minus cash taxes, minus distributions, minus unfinanced capital expenditures, in each case for the immediately preceding four fiscal-quarter period, to (b) the sum of our interest expense for the immediately preceding four fiscal-quarter period, plus our current maturities of long-term debt, in each case, as of the last day of such four fiscal-quarter period, all as determined in accordance with GAAP, may not at any time be less than 1.25 to 1.00 (calculated and tested quarterly); (ii) the ratio of total debt funded under the Credit Agreement to our EBITDA cannot be greater than 2.00 to 1.00 (calculated and tested quarterly); and (iii) the sum of our tangible net worth cannot be less than $10,000,000 as of the last day of each fiscal quarter.  While we were not in compliance with the tangible net worth requirement of the Credit Agreement as of September 30, 2012 and December 31, 2012; the tangible net worth requirement was included in the Credit Agreement in error and we and the Lender entered into a waiver and amendment agreement in January 2013, pursuant to which the Lender agreed to waive such prior non-compliance with the tangible net worth requirement and to amend the Credit Agreement to remove such net tangible worth requirement moving forward.

The Credit Agreement includes customary events of default for facilities of similar nature and size as the Credit Agreement and also provides that an event of default occurs if (i) Benjamin P. Cowart, our Chief Executive Officer, President, Chairman of the Board and largest shareholder, ceases to be actively involved in our day-to-day management or operation or if Mr. Cowart ceases to own and control at least 25% of our equity interests; (ii) we cease at any time to own and control 100% of the Transferred Partnerships acquired pursuant to the closing of the Acquisition; Vertex II GP, LLC (“Vertex GP”), a wholly-owned subsidiary of the Company, formed for the purpose of the transaction, ceases to be the sole general partner of the Transferred Partnerships; (iii) an agreement, letter of intent, or agreement in principle is executed with respect to any proposed transaction or event or series of transactions or events which, individually or in the aggregate, could reasonably be expected to result in either (i) or (ii), above; or (iv) a default occurs under the lease agreement for certain premises leased by CMT.

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

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

14

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 have been 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 “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Recent Acquisition,” and to pay fees and costs associated with the closing of the Acquisition.

As of March 31, 2013, the Revolving Note had a balance of $4,500,000 and the Term Note had a balance of$7,508,333.

In February 2013, the Lender agreed to lease the Company up to $1,025,000 of equipment to enhance the TCEP operation. Monthly payments will be 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.

Our re-refining business will require significant capital to design and construct any new facilities other than the existing facility in Baytown, Texas.  We currently estimate that the cost to construct a new, fully functional full-scale commercial process at another location would be approximately $2.5 to $15.0 million, based on throughput capacity.  The facility infrastructure would be an additional capitalized expenditure to these proposed process costs and would depend on the location and site specifics of the facility.

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

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

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

(1)	actual or anticipated variations in our results of operations;
(2)	our ability or inability to generate new revenues; and
(3)	the number of shares in our public float.

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

15

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.

Cash flows for the three months ended March 31, 2013 compared to the three months ended March 31, 2012

	Three Months Ended March 31,
	2013			2012
Beginning cash and cash equivalents	$	807,940		$	675,188
Net cash provided by (used in):
Operating activities		3,139,419			3,648,694
Investing activities		93,207			(61,610	)
Financing activities		(2,723,735	)		34,187
Net increase in cash and cash equivalents		508,891			3,621,271
Ending cash and cash equivalents	$	1,316,831		$	4,296,459

Operating activities provided cash of $3,139,419 for the three months ended March 31, 2013 as compared to $3,648,694 of cash being provided during the corresponding period in 2012.  Our primary sources of liquidity are cash flows from our operations and the availability to borrow funds under Credit Facility, 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 the net income of $1,083,595, compared to $1,574,273 in the corresponding period during 2012, the increase in accounts receivable of $222,270 (compared to $565,497 in the prior period), the increase in inventory of $37,871 (compared to $549,934 in the prior period) and the increase in prepaid expenses of $26,731 (compared to a decrease of $27,775 in the prior period), for the three months ended March 31, 2013 compared to the three months ended March 31, 2012, offset by increases in depreciation and amortization of $532,718 and $48,054, in non-cash expense related to stock compensation expenses for the three months ended March 31, 2013.

Investing activities provided cash of $93,207 for the three months ended March 31, 2013 as compared to having used $61,610 during the corresponding period in 2012.  Investing activities for the three months ended March 31, 2013 are comprised of $34,122 in cash payments used to purchase miscellaneous operating assets and a used oil collection customer base, $548,229 used to purchase fixed assets, and a $675,558 refund of a prior year asset acquisition.

Financing activities used cash of $2,723,735 for the three months ended March 31, 2013 as compared to having provided $34,187 of cash during the corresponding period in 2012.  Financing activities for the three months ended March 31, 2013 are comprised of $2,250,000 and $473,735 in cash payments towards the repayment of the line of credit and notes.

16

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, 2012, the Company had utilized approximately $8.1 million of these NOLs leaving approximately $33.9 million of potential NOLs of which we expect to utilize approximately $1.09 million for the three months ended March 31, 2013.  The Company recorded a change in the valuation allowance as of March 31, 2013 for approximately $370,000.

Critical Accounting Policies and Use of Estimates

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

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 our re-refining customers and upon product leaving our terminal facilities via barge.

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.

17

Intangible assets

Intangible assets are amortized over their estimated useful lives. Amortizable intangible assets are reviewed at least annually to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Goodwill

Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the dates of acquisition. Goodwill is reviewed at least annually to assess the carrying value of goodwill associated with each of its distinct business units that comprise its business segments of the Company to determine if impairment in value has occurred

Income Taxes

We record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and when temporary differences become deductible.  We consider, among other available information, uncertainties surrounding the recoverability of deferred tax assets, scheduled reversals of deferred tax liabilities, projected future taxable income, and other matters in making this assessment.

Recently Issued Accounting Pronouncements

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

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

Market Risk

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

18

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control Over Financial Reporting

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

19

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

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

The total amount of damages claimed by Buffalo as to all parties is approximately $10,000,000.  While the Company believes that Buffalo’s claims are without merit, any damages awarded would be reduced by the percentage of negligence of all other parties, including Buffalo. The Company has engaged legal counsel in the matter and filed an answer to the complaint denying Buffalo’s allegations.  Currently, the Company's defense is being provided through its General Liability Insurance Policy carrier under a reservation of rights letter.  While the parties are currently in negotiations regarding a potential settlement of the claims, at this stage of the litigation the outcome cannot be predicted with any degree of reasonable certainty. In the event the matter is not settled, the Company intends to continue to vigorously defend itself against Buffalo’s claims.

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

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Commission on March 21, 2013, and investors are encouraged to review such risk factors prior to making an investment in the Company.

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

During the three months ended March 31, 2013, a total of 83,968 shares of the Company's Series A Preferred Stock were converted into 83,968 shares of our common stock on a one-for-one basis.  Additionally, warrants to purchase 175,000 shares of the Company's common stock were exercised for a net of 102,484 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $256,250 in connection with such exercise) and 102,484 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 35,000 shares of common stock were exercised for a net of 24,085 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $39,500 in connection with such exercises) and 24,085 shares of common stock were issued to the option holders in connection with such exercises.

Subsequent to March 31, 2013, a total of 59,875 shares of the Company’s Series A Preferred Stock were converted into 59,875 shares of the Company’s common stock on a one-for-one basis; warrants to purchase 250,000 shares of the Company’s common stock were exercised for a net of 105,955 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $437,500 in connection with such exercise) and 105,955 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 55,000 shares of the Company’s common stock were exercised for a net of 43,520 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $36,000 in connection with such exercise) and 43,520 shares of common stock were issued to the option holder in connection with such exercises.

20

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

Item 3. Defaults Upon Senior Securities   None.

Item 4. Mine Safety Disclosures   Not applicable.

Item 5. Other Information.   None.

Item 6. Exhibits  

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

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SIGNATURES

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

	VERTEX ENERGY, INC.
Date: May 6, 2013	By: /s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)
Date: May 6, 2013	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.
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	8/15/12	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	9/12/12	000-53619
3.1	Articles of Incorporation (and amendments thereto) of Vertex Energy, Inc.		8-K/A	3.1	6/26/09	000-53619
3.2	Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Vertex Energy, Inc.'s Series A Convertible Preferred Stock.		8-K	3.1	7/16/10	000-53619
3.3	Bylaws of Vertex Energy, Inc.		8-K/A	3.4	6/26/09	000-53619
10.1(+)	Tolling (Processing) Agreement with KMTEX effective July 1, 2009		10-K	10.14	12/31/04	000-53619

10.2	Credit Agreement between Vertex Energy, Inc. and Bank of America, N.A. dated August 31, 2012	8-K	10.1	9/12/12	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	9/12/12	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	9/12/12	000-53619
10.5	Security Agreement with Bank of America, N.A. dated August 31, 2012	8-K	10.4	9/12/12	000-53619
10.6	Corporate Guaranty in favor of Bank of America, N.A. dated August 31, 2012	8-K	10.5	9/12/12	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	9/30/12	000-53619

23

10.8 Non-Competition and Non-Solicitation Agreement by Vertex Holdings, L.P., B & S Cowart Family L.P., Benjamin P. Cowart, Chris Carlson and Greg Wallace in favor of Vertex Energy, Inc., dated August 31, 2012*** 10-Q 10.19 9/30/12 000-53619

10.9	Waiver and Second Amendment to Credit Agreement with Bank of America, N.A. (January 2013)		10-K	10.30	12/31/12	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	12/31/12	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 as (which portions have been replaced by "X's") have been omitted in connection with a request for Confidential Treatment.   This entire exhibit including the omitted confidential information has been filed separately with the Commission.

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

24

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin P. Cowart, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Vertex Energy, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

Date: May 6, 2013	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 an Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 6, 2013
	By:	/s/ Chris Carlson
		Chris Carlson
		Chief Financial Officer (Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

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

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2013, 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.

May 6, 2013	/s/ Benjamin P. Cowart
	Benjamin P. Cowart
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

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

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2013, 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.

May 6, 2013	/s/ Chris Carlson
	Chris Carlson
	Chief Financial Officer (Principal Accounting Officer)

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SEGMENT REPORTING (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Revenues	$ 33,254,801	$ 34,827,939
Income from operations	1,211,674	1,690,317
Total Assets	49,338,065		49,102,377
Black Oil
Revenues	24,423,055	24,160,235
Income from operations	1,110,210	994,537
Total Assets	45,572,502
Refining & Marketing
Revenues	8,831,746	10,667,704
Income from operations	101,464	695,780
Total Assets	$ 3,765,563

XML

STOCK BASED COMPENSATION (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Stock Based Compensation Details Narrative
Stock based compensation expense	$ 48,054	$ 44,441

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NOTES PAYABLE

3 Months Ended

Mar. 31, 2013

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4. NOTES PAYABLE

In September 2012, the Company entered into a credit agreement with Bank of America. Pursuant to the agreement, Bank of America agreed to loan the Company $8,500,000 in the form of a term loan and to provide the Company with an additional $10,000,000 in the form of a revolving line of credit, to be used for feedstock purchases and general corporate purposes. The line of credit bears interest at the option of the Company of either the lender's prime commercial lending rate in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the revolving note is due and payable monthly in arrears and all amounts outstanding under the revolving note are due and payable on August 31, 2014.  The balance on the revolving line of credit was $4,500,000 at March 31, 2013.

Amounts borrowed under the term note bear interest at the option of the Company of either the lender's prime commercial lending rate then in effect or the Bank of America LIBOR rate plus 2.75%.  Accrued and unpaid interest on the term note is due and payable monthly in arrears and all amounts outstanding under the term note are due and payable on August 31, 2015.  Additionally, payments of principal in the amount of $141,667 are due and payable on the term note monthly in arrears on the last day of each month and continuing until the maturity date. The balance of the term loan was $7,508,333 at March 31, 2013.

The financing arrangement discussed above is secured by all of the assets of the Company.  The loan contains certain restrictive covenants including a Fixed Charge Coverage Ratio, as defined in the agreement, of at least 1.25 to 1.00, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00. A tangible net worth requirement was included in the credit agreement in error. This requirement was waived and the credit agreement was amended in January 2013. The Company believes it was in compliance with all aspects of the agreement at March 31, 2013.

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EARNINGS (LOSS) PER SHARE (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Numerator:
Net income available to common shareholdersic	$ 1,083,595	$ 1,574,273
Denominator:
Weighted-average common shares outstanding	17,079,242	9,434,094
Basic earnings per share	$ 0.06	$ 0.17
Effect of dilutive securities
Stock options and warrants	1,631,017	1,645,815
Preferred stock	1,428,923	4,393,108
Diluted weighted-average shares outstanding	20,139,182	15,473,017
Diluted earnings per share	$ 0.05	$ 0.10

XML

EARNINGS (LOSS) PER SHARE (Details Narrative)	3 Months Ended
	Mar. 31, 2013
Earnings Loss Per Share Details Narrative
Options to purchase	1,513,989
Warrants to purchase	706,914

XML

COMMON STOCK (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common Stock Details Narrative
Common stock, par value	$ 0.001		$ 0.001
Common stock, shares authorized	750,000,000		750,000,000
Common stock, shares issued	17,176,001		16,965,464
Common stock, shares outstanding	17,176,001		16,965,464
Preferred stock converted to common stock, shares	83,968
Warrants exercised, shares	175,000
Warrants exercised, shares net	102,484
Warrants exercised, value	$ 256,250
Options to purchase shares, exercised gross	35,000	15,000
Options to purchase shares, exercised net	24,085
Options to purchase shares, value		$ 39,500

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PREFERRED STOCK (Details Narrative) (USD $)	Mar. 31, 2013	Dec. 31, 2011	Mar. 31, 2013 Series A Preferred Stock	Dec. 31, 2011 Series A Preferred Stock	Mar. 31, 2013 Series B Preferred Stock	Dec. 31, 2012 Series B Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000	5,000,000	5,000,000	2,000,000	2,000,000
Preferred stock, shares issued			1,428,923	1,512,891
Preferred stock, shares outstanding			1,428,923	1,512,891

XML

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2013

Concentrations Significant Customers Commitments And Contingencies

CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

NOTE 3.  CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

The Company has concentrated credit risk for cash by maintaining deposits in one bank.  These balances are insured by the Federal Deposit Insurance Corporation up to $250,000.  From time to time during the three months ended March 31, 2013, the Company’s cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.

At March 31, 2013 and 2012 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2013						2012
	% of			% of			% of			% of
	Revenues			Receivables			Revenues			Receivables
Customer 1		0	%		0	%		46	%		24	%
Customer 2		7	%		0	%		12	%		40	%
Customer 3		8	%		13	%		12	%		16	%
Customer 4		4	%		7	%		8	%		9	%
Customer 5		59	%		64	%		7	%		0	%

The Company purchases goods and services from two companies that represented 13% and 10% of total purchases for the three months ended March 31, 2013 and 11% and 10% for the three months ended March 31, 2012, respectively.

The Company has had various debt facilities available for use, of which there was $12,057,051 and $0 outstanding as of March 31, 2013 and 2012, respectively. See Note 4 for further details.

In February 2013, Bank of America agreed to lease the Company up to $1,025,000 of equipment to enhance the 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, 2012, the Company had utilized approximately $8.1 million of these NOLs leaving approximately $33.9 million of potential NOLs of which we expect to utilize approximately $1.09 million for the three months ended March 31, 2013.  The Company recorded a change in valuation allowance as of March 31, 2013 for approximately $370,000.

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ACQUISITION (Details Narrative) (USD $)	Dec. 31, 2012
Acquisition Details Narrative
Acquisition, cash paid	$ 123,845
Total amount of contingent consideration	$ 33,850

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 1,316,831	$ 807,940
Accounts receivable, net	7,383,050	7,160,780
Inventory	5,907,992	5,870,121
Prepaid expenses	519,198	492,467
Total current assets	15,127,071	14,331,308
Noncurrent assets
Fixed assets, net	11,279,296	11,617,368
Intangible assets	15,680,721	15,934,724
Goodwill	3,515,977	3,515,977
Deferred federal income taxes	3,735,000	3,703,000
Total noncurrent assets	34,210,994	34,771,069
TOTAL ASSETS	49,338,065	49,102,377
Current liabilities
Accounts payable and accrued expenses	10,641,158	8,869,234
Current portion of long-term debt	1,722,400	1,749,329
Total current liabilities	12,363,558	10,618,563
Long-term liabilities
Long-term debt	5,834,651	6,281,457
Contingent consideration	4,744,850	4,711,000
Line of credit	4,500,000	6,750,000
Deferred federal income tax	363,000	341,000
Total liabilities	27,806,059	28,702,020
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized Series A Convertible Preferred stock, $0.001 par value, 5,000,000 authorized and 1,428,923 and 1,512,891 issued and outstanding at March 31, 2013 and December 31, 2012, respectively; Series B Preferred stock, $0.001 par value, 2,000,000 authorized, no shares outstanding	1,429	1,513
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 17,176,001 and 16,965,464 issued and outstanding at March 31, 2013 and December 31, 2012, respectively	17,176	16,965
Additional paid-in capital	10,767,272	10,719,345
Retained earnings	10,746,129	9,662,534
Total stockholders' equity	21,532,006	20,400,357
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	49,338,065	49,102,377
Series A Preferred Stock
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized Series A Convertible Preferred stock, $0.001 par value, 5,000,000 authorized and 1,428,923 and 1,512,891 issued and outstanding at March 31, 2013 and December 31, 2012, respectively; Series B Preferred stock, $0.001 par value, 2,000,000 authorized, no shares outstanding	1,429	1,513
Series B Preferred Stock
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized Series A Convertible Preferred stock, $0.001 par value, 5,000,000 authorized and 1,428,923 and 1,512,891 issued and outstanding at March 31, 2013 and December 31, 2012, respectively; Series B Preferred stock, $0.001 par value, 2,000,000 authorized, no shares outstanding

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BASIS OF PRESENTATION AND NATURE OF OPERATIONS

3 Months Ended

Mar. 31, 2013

Basis Of Presentation And Nature Of Operations

BASIS OF PRESENTATION AND NATURE OF OPERATIONS

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 21, 2013 (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 2012 as reported in Form 10-K, have been omitted.

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	3 Months Ended			3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2013 Supplier 1	Mar. 31, 2012 Supplier 1	Mar. 31, 2013 Supplier 2	Mar. 31, 2012 Supplier 2
FDIC insurance amount		$ 250,000
Percentage of purchases of goods and services				13.00%	11.00%	10.00%	10.00%
Debt facilities outstanding	12,057,051	12,057,051
Equipment leased to the company	1,025,000
Monthly lease payments for equipment leased to the company	13,328
Number of payments	60
Net operating losses acquired as a result of a merger		42,000,000
NOL utilized			8,100,000
NOL remaining balance			33,900,000
NOL expected to be utilized	1,090,000
Change in valuation allowance	$ 370,000

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NOTES PAYABLE (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013
Line of Credit
Line of credit, balance	$ 4,500,000
Line of credit, maximum borrowing capacity	10,000,000
Variable rate, decription	LIBOR rate
Variable rate, basis spread	2.75%
Term Loan
Restrictive covenants	The loan contains certain restrictive covenants including a Fixed Charge Coverage Ratio, as defined in the agreement, of at least 1.25 to 1.00, and a Senior Funded Debt to EBITDA Ratio, as defined in the agreement, not to exceed 2.00 to 1.00. A tangible net worth requirement was included in the credit agreement in error. This requirement was waived and the credit agreement was amended in January 2013.
Note payable	8,500,000
Note payable, monthly principal payments	$ 141,667
Variable rate, decription	LIBOR rate
Variable rate, basis spread	2.75%

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RELATED PARTIES

3 Months Ended

Mar. 31, 2013

Related Parties

RELATED PARTIES

NOTE 2.  RELATED PARTIES

Prior to the Company’s September 11, 2012 (effective August 31, 2012) acquisition of a special purpose entity which owned substantially all of the assets and liabilities of Vertex Holdings, L.P., formerly Vertex Energy, L.P. (also defined herein as the “Partnership” or “Vertex LPrelating to the business of transporting, storing, processing and re-refining petroleum products, crudes and used lubricants and certain real-estate properties owned by a related party associated with such operations (the “Acquisition” as discussed in greater detail in the Form 10-K),  the Company had numerous transactions with the Partnership, including the lease of the Partnership’s storage facility, subletting of office space, transportation of feedstock to re-refiners and the Company’s storage facility, and delivery from the Company’s re-refinery to end customers. The pricing under these contracts was with certain wholly-owned subsidiaries of the Partnership and was priced at market, and reviewed periodically from time to time by the Board of Director’s Related Party Transaction committee.  The Related Party Transaction committee includes at least two independent directors and will review and pre-approve any and all related party transactions.

The consolidated financial statements include inventory purchases from related parties of $0 and $3,830,853 for the three months ended March 31, 2013 and 2012, respectively. The Company also incurred process costs of $0 and $2,031,932 for the three months ended March 31, 2013 and 2012, respectively.  The costs arise from the Thermal Chemical Extraction Process (“TCEP”) operating agreement with CMT(which entity was acquired as part of the Acquisition), whereby we paid up to $0.40 per gallon of processing costs.

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

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

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

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2011	Mar. 31, 2013 Series A Preferred Stock	Dec. 31, 2011 Series A Preferred Stock	Mar. 31, 2013 Series B Preferred Stock	Dec. 31, 2012 Series B Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000	5,000,000	5,000,000	2,000,000	2,000,000
Preferred stock, shares issued			1,428,923	1,512,891
Preferred stock, shares outstanding			1,428,923	1,512,891
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	17,176,001	16,965,464
Common stock, shares outstanding	17,176,001	16,965,464

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2013

Concentrations Significant Customers Commitments And Contingencies Tables

Schedule of Concentrations

At March 31, 2013 and 2012 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:

	2013						2012
	% of			% of			% of			% of
	Revenues			Receivables			Revenues			Receivables
Customer 1		0	%		0	%		46	%		24	%
Customer 2		7	%		0	%		12	%		40	%
Customer 3		8	%		13	%		12	%		16	%
Customer 4		4	%		7	%		8	%		9	%
Customer 5		59	%		64	%		7	%		0	%

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 25, 2013
Document And Entity Information
Entity Registrant Name	Vertex Energy Inc.
Entity Central Index Key	0000890447
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		17,385,351
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

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STOCK BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2013

Stock Based Compensation Tables

Schedule of Stock option activity

Stock option activity for the three months ended March 31, 2013 is summarized as follows:

	Shares			Weighted Average  Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		2,939,167		$	5.70			6.50	$	1,144,024
Options exercised		(35,000	)		(1.13	)		-		(23,149	)
Outstanding at March 31, 2013		2,904,167		$	5.76			6.25	$	1,120,875
Vested at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822
Exercisable at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822

Schedule of Stock warrant activity

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2013 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		1,163,308		$	12.37			0.40	$	128,889
Warrants exercised		(175,000	)		(1.46	)		-		(25,075	)
Warrants cancelled/forfeited/expired		(40,554	)		(0.10	)		-		(2,433	)
Warrants at March 31, 2013		947,754		$	14.91			0.66	$	101,381
Vested at March 31, 2013		935,254		$	15.08			0.63	$	95,781
Exercisable at March 31, 2013		935,254		$	15.08			0.63	$	95,781

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Statement of Cash Flows [Abstract]
Revenues	$ 33,254,801	$ 34,827,939
Cost of revenues	29,785,043	31,942,875
Gross profit	3,469,758	2,885,064
Selling, general and administrative expenses	2,221,492	1,194,747
Acquisition related expenses	36,592
Total selling, general and administrative expenses	2,258,084	1,194,747
Income from operations	1,211,674	1,690,317
Other income (expense)
Other income	25,289
Other expense	(40,726)
Interest expense	(106,140)	(44)
Total other income (expense)	(121,577)	(44)
Income before income taxes	1,090,097	1,690,273
Income tax benefit	(6,502)	(116,000)
Net income	$ 1,083,595	$ 1,574,273
Earnings per common share
Basic	$ 0.06	$ 0.17
Diluted	$ 0.05	$ 0.10
Shares used in computing earnings per share
Basic	17,079,242	9,434,094
Diluted	20,139,182	15,473,017

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COMMON STOCK

3 Months Ended

Mar. 31, 2013

CommonStockAbstract

COMMON STOCK

NOTE 7. COMMON STOCK

The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of March 31, 2013, there were 17,176,001 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 holder of any shares of the Company's common stock has a preemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject to redemption or convertible into other securities.  Upon liquidation, dissolution or winding-up of the Company and after payment of creditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-share basis among the holders of the Company's common stock.  Each share of the Company's common stock is entitled to one vote.  Shares of the Company's common stock do not possess any cumulative voting rights.

During the three months ending March 31, 2013 there were 83,968 shares of the Company's Series A Preferred Stock converted into 83,968 shares of  the Company's common stock; warrants to purchase 175,000 shares of the Company's common stock were exercised for a net of 102,484 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $256,250 in connection with such exercise) and 102,484 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 35,000 shares of common stock were exercised for a net of 24,085 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $39,500 in connection with such exercises) and 24,085 shares of common stock were issued to the option holder in connection with such exercises.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2013

Earnings per common share

EARNINGS PER SHARE

NOTE 6. EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the three months ended March 31, 2013 includes the weighted average of common shares outstanding.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.  The calculation of diluted earnings per share for the three months ended March 31, 2013 does not include options to purchase 1,513,989 shares and warrants to purchase 706,914 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 quarters ended March 31, 2013 and 2012:

	2013		2012
Basic Earnings per Share
Numerator:
Net income  available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Basic earnings per share	$	0.06	$	0.17
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Effect of dilutive securities
Stock options and warrants		1,631,017		1,645,815
Preferred stock		1,428,923		4,393,108
Diluted weighted-average shares outstanding		20,139,182		15,473,017
Diluted earnings per share	$	0.05	$	0.10

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CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Customer 1
Revenue, percentage	0.00%	46.00%
Receivables, percentage	0.00%	24.00%
Customer 2
Revenue, percentage	7.00%	12.00%
Receivables, percentage	0.00%	40.00%
Customer 3
Revenue, percentage	8.00%	12.00%
Receivables, percentage	13.00%	16.00%
Customer 4
Revenue, percentage	4.00%	8.00%
Receivables, percentage	7.00%	9.00%
Customer 5
Revenue, percentage	59.00%	7.00%
Receivables, percentage	64.00%	0.00%

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EARNINGS (LOSS) PER SHARE (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Loss Per Share Tables

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 quarters ended March 31, 2013 and 2012:

	2013		2012
Basic Earnings per Share
Numerator:
Net income  available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Basic earnings per share	$	0.06	$	0.17
Diluted Earnings per Share
Numerator:
Net income available to common shareholders	$	1,083,595	$	1,574,273
Denominator:
Weighted-average shares outstanding		17,079,242		9,434,094
Effect of dilutive securities
Stock options and warrants		1,631,017		1,645,815
Preferred stock		1,428,923		4,393,108
Diluted weighted-average shares outstanding		20,139,182		15,473,017
Diluted earnings per share	$	0.05	$	0.10

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 10.  SEGMENT REPORTING

The Company’s reportable segments include the Black Oil and Refining & Marketing divisions.  Segment information for the three months ended March 31, 2013 and 2012 is as follows:

THREE MONTHS ENDED MARCH 31, 2013
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,423,055	$	8,831,746	$	33,254,801
Net income from operations	$	1,110,210	$	101,464	$	1,211,674
Total Assets	$	45,572,502	$	3,765,563	$	49,338,065
THREE MONTHS ENDED MARCH 31, 2012
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,160,235	$	10,667,704	$	34,827,939
Net income from operations	$	994,537	$	695,780	$	1,690,317

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PREFERRED STOCK

3 Months Ended

Mar. 31, 2013

PreferredStockAbstract

PREFERRED STOCK

NOTE 8.  PREFERRED STOCK

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Preferred Stock is 5,000,000 (“Series A Preferred”).  The total number of designated shares of the Company’s Series B Preferred Stock is 2,000,000. As of March 31, 2013, there were 1,428,923 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.

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ACQUISITION

3 Months Ended

Mar. 31, 2013

Acquisition

ACQUISITION

NOTE 9.  ACQUISITION

On January 1, 2013, the Company purchased two trucks, miscellaneous operating assets and a used oil collection customer base from a used oil collection company in the Houston, Texas area.  The Company paid $123,845 for the business and has consideration of $33,850 due contingent on this customer base producing a specified number of gallons per month for three months. The portion of the acquired company was immediately integrated into the Company's operations.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11. SUBSEQUENT EVENTS

Subsequent to March 31, 2013, the available credit on the Line of Credit is $10,000,000.  As of May 3, 2013, the outstanding balance drawn on the line of credit is $7,000,000 leaving an available balance for draw downs of $3,000,000.

Subsequent to March 31, 2013, a total of 59,875 shares of the Company’s Series A Preferred Stock were converted into 59,875 shares of the Company’s common stock; warrants to purchase 250,000 shares of the Company’s common stock were exercised for a net of 105,955 shares of common stock (when adjusting for a cashless exercise of such warrants and the payment, in shares of common stock, of an aggregate exercise price of $437,500 in connection with such exercises) and 105,955 shares of common stock were issued to the warrant holders in connection with such exercises; and options to purchase 55,000 shares of the Company’s common stock were exercised for a net of 43,520 shares of common stock (when adjusting for a cashless exercise of such options and the payment, in shares of common stock, of an aggregate exercise price of $36,000 in connection with such exercise) and 43,520 shares of common stock were issued to the option holder in connection with such exercise.

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SUBSEQUENT EVENTS (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Preferred stock converted to common stock, shares	83,968
Warrants exercised, shares	175,000
Warrants exercised, shares net	102,484
Warrants exercised, value	$ 256,250
Options to purchase shares, exercised gross	35,000	15,000
Options to purchase shares, exercised net	24,085
Options to purchase shares, value		39,500
Subsequent Event
Line of credit, available	10,000,000
Line of credit, balance	7,000,000
Line of credit, remaining capacity	3,000,000
Preferred stock converted to common stock, shares	59,875
Warrants exercised, shares	250,000
Warrants exercised, shares net	105,955
Warrants exercised, value	437,500
Options to purchase shares, exercised gross	55,000
Options to purchase shares, exercised net	43,520
Options to purchase shares, value	$ 36,000

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RELATED PARTIES (Details Narrative) (USD $)	3 Months Ended			3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Mar. 31, 2013 Office Space	Mar. 31, 2013 Black Oil Storage facility bbl	Mar. 31, 2013 TCEP Storage facility bbl	Mar. 31, 2011 TCEP Storage facility bbl
Inventory purchases from related parties	$ 0	$ 3,830,853
Process costs incurred	0	2,031,932
Processing cost per gallon			0.40
Storage capacity of leased property					30,000		45,000
Monthly lease expense				$ 6,600	$ 22,500	$ 49,500	$ 45,000
Increase in leased property capacity						3,000

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STOCK BASED COMPENSATION (Details) (USD $)	3 Months Ended
	Mar. 31, 2013
Stock Options
Outstanding, beginning - Shares	2,939,167
Options exercised - Shares	(35,000)
Outstanding, ending - Shares	2,904,167
Vested - Shares	2,255,417
Exercisable - Shares	2,255,417
Outstanding, beginning - Weighted Average Exercise Price	$ 5.70
Options exercised - Weighted Average Exercise Price	$ (1.13)
Outstanding, ending - Weighted Average Exercise Price	$ 5.76
Vested - Weighted Average Exercise Price	$ 6.87
Exercisable - Weighted Average Exercise Price	$ 6.87
Outstanding, beginning - Weighted Average Remaining Contractual Life (in Years)	6 years 6 months
Outstanding, ending - Weighted Average Remaining Contractual Life (in Years)	6 years 3 months
Exercisable - Weighted Average Remaining Contractual Life (in Years)	5 years 8 months
Vested - Weighted Average Remaining Contractual Life (in Years)	5 years 8 months
Outstanding, beginning - Grant Date Fair Value	$ 1,144,024
Options exercised - Grant Date Fair Value	(23,149)
Outstanding, ending - Grant Date Fair Value	1,120,875
Vested - Grant Date Fair Value	692,822
Exercisable - Grant Date Fair Value	$ 692,822

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows operating activities
Net income	$ 1,083,595	$ 1,574,273
Adjustments to reconcile net income to cash provided by operating activities
Stock based compensation expense	48,054	44,441
Depreciation and amortization	532,718	40,913
Deferred federal income tax benefit	(10,000)	98,000
Changes in assets and liabilities
Accounts receivable	(222,270)	(565,497)
Accounts receivable- related parties		798
Inventory	(37,871)	(549,934)
Prepaid expenses	(26,731)	27,775
Accounts payable	1,771,924	1,926,954
Accounts payable-related parties		606,588
Deposits		444,383
Net cash provided by operating activities	3,139,419	3,648,694
Cash flows from investing activities
Purchase of intangible assets		(59,519)
Acquisition, net	(34,122)
Refund of asset acquisition	675,558
Purchase of fixed assets	(548,229)	(2,091)
Net cash provided by (used in) investing activities	93,207	(61,610)
Cash flows from financing activities
Line of credit proceeds, net	(2,250,000)
Payments on note payable	(473,735)
Proceeds from exercise of common stock warrants		34,187
Net cash provided by financing activities	(2,723,735)	34,187
Net increase in cash and cash equivalents	508,891	3,621,271
Cash and cash equivalents at beginning of the period	807,940	675,188
Cash and cash equivalents at end of period	1,316,831	4,296,459
SUPPLEMENTAL INFORMATION
Cash paid for interest during the period	76,706	44
Cash paid for income taxes during the period		10,000
NON-CASH TRANSACTIONS
Conversion of Series A Preferred Stock into common shares	$ 84	$ 34

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STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

Stock Based Compensation

STOCK BASED COMPENSATION

NOTE 5. STOCK-BASED COMPENSATION

Stock-based compensation expense was $48,054 and $44,441 for the three months ended March 31, 2013 and 2012, respectively, for options previously awarded by the Company.

Stock option activity for the three months ended March 31, 2013 is summarized as follows:

	Shares			Weighted Average  Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		2,939,167		$	5.70			6.50	$	1,144,024
Options exercised		(35,000	)		(1.13	)		-		(23,149	)
Outstanding at March 31, 2013		2,904,167		$	5.76			6.25	$	1,120,875
Vested at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822
Exercisable at March 31, 2013		2,255,417		$	6.87			5.71	$	692,822

A summary of the Company’s stock warrant activity and related information for the three months ended March 31, 2013 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		1,163,308		$	12.37			0.40	$	128,889
Warrants exercised		(175,000	)		(1.46	)		-		(25,075	)
Warrants cancelled/forfeited/expired		(40,554	)		(0.10	)		-		(2,433	)
Warrants at March 31, 2013		947,754		$	14.91			0.66	$	101,381
Vested at March 31, 2013		935,254		$	15.08			0.63	$	95,781
Exercisable at March 31, 2013		935,254		$	15.08			0.63	$	95,781

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STOCK BASED COMPENSATION (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Warrants
Outstanding, beginning - Shares	1,163,308		1,245,311
Warrants exercised - Shares	(175,000)
Warrants cancelled/forfeited/expired - Shares	(40,554)
Outstanding, ending - Shares	947,754		1,245,311
Vested - Shares	935,254
Exercisable - Shares	935,254	1,150,808
Outstanding, beginning - Weighted Average Exercise Price	$ 12.37
Warrants exercised - Weighted Average Exercise Price	$ (1.46)
Warrants cancelled/forfeited/expired - Weighted Average Exercise Price	$ (0.10)
Outstanding, ending - Weighted Average Exercise Price	$ 14.91
Exercisable - Weighted Average Exercise Price	$ 15.08	$ 12.50
Vested - Weighted Average Exercise Price	$ 15.08
Outstanding, beginning - Weighted Average Remaining Contractual Life (in Years)	0 years 5 months
Outstanding, ending - Weighted Average Remaining Contractual Life (in Years)	0 years 8 months
Vested - Weighted Average Remaining Contractual Life (in Years)	0 years 8 months
Exercisable - Weighted Average Remaining Contractual Life (in Years)	0 years 8 months
Outstanding, beginning - Grant Date Fair Value	$ 128,889		$ 142,065
Warrants exercised - Grant Date Fair Value	(25,075)
Warrants cancelled/forfeited/expired - Grant Date Fair Value	(2,433)
Outstanding, ending - Grant Date Fair Value	101,381		142,065
Vested - Grant Date Fair Value	95,781
Exercisable - Grant Date Fair Value	$ 95,781

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2013

Segment Reporting Tables

Schedule of the Company's reportable segment information

  Segment information for the three months ended March 31, 2013 and 2012 is as follows:

THREE MONTHS ENDED MARCH 31, 2013
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,423,055	$	8,831,746	$	33,254,801
Net income from operations	$	1,110,210	$	101,464	$	1,211,674
Total Assets	$	45,572,502	$	3,765,563	$	49,338,065
THREE MONTHS ENDED MARCH 31, 2012
			Refining &
	Black Oil		Marketing		Total
Revenues	$	24,160,235	$	10,667,704	$	34,827,939
Net income from operations	$	994,537	$	695,780	$	1,690,317