CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At June 30, 2018 and 2017 and for each of the six months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:



	Six Months Ended June 30, 2018		Six Months Ended June 30, 2017
	% of Revenues	% of Receivables	% of Revenues	% of Receivables
Customer 1	43%	18%	6%	—%
Customer 2	7%	—%	11%	5%
Customer 3	9%	3%	13%	11%
Customer 4	4%	1%	19%	—%
Customer 5	—%	—%	7%	21%

At June 30, 2018 and 2017 and for each of the six months then ended, the Company's segment revenues were comprised of the following customer concentrations:



	% of Revenue by Segment			% Revenue by Segment
	Six Months Ended June 30, 2018			Six Months Ended June 30, 2017
	Black Oil	Refining	Recovery	Black Oil	Refining	Recovery
Customer 1	100%	—%	—%	100%	—%	—%
Customer 2	—%	100%	—%	—%	100%	—%
Customer 3	100%	—%	—%	100%	—%	—%
Customer 4	—%	—%	—%	100%	—%	—%
Customer 5	—%	—%	—%	100%	—%	—%

The Company had no vendors that represented 10% of total purchases or payables for the three and six months ended June 30, 2018 and 2017.

In February 2013, Bank of America agreed to lease the Company equipment to enhance the Thermal Chemical Extraction Process (“TCEP”) operation, which went into effect in April 2013. Under the current terms of the lease agreement, 4 monthly payments remain of approximately $13,328 each.

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, access to capital, and the quantities of petroleum-based products that the Company can economically produce.

Business commitment:

On June 5, 2016, Vertex Energy and Penthol C.V. (“Penthol”) of the Netherlands aka Penthol LLC (a Penthol subsidiary in the United States) reached an agreement for Vertex Energy to act as Penthol’s exclusive agent to provide marketing, sales, and logistical duties of Group III base oil from the United Arab Emirates to the United States. The start-up date was July 25, 2016, with a 5 year term through 2021 and the product will ship via truck, rail and barge.

Litigation:

The Company, in its normal course of business, is involved in various 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 are currently party to the following material litigation proceedings:

Vertex Refining LA, LLC ("Vertex Refining LA"), the wholly-owned subsidiary of Vertex Operating, LLC, our wholly-owned subsidiary ("Vertex Operating") was named as a defendant, along with numerous other parties, in five lawsuits filed on or about February 12, 2016, in the Second Parish Court for the Parish of Jefferson, State of Louisiana, Case No. 121749, by Russell Doucet et. al., Case No. 121750, by Kendra Cannon et. al., Case No. 121751, by Lashawn Jones et. al., Case No. 121752, by Joan Strauss et. al. and Case No. 121753, by Donna Allen et. al. The suits relate to alleged noxious and harmful emissions from our facility located in Marrero, Louisiana. The suits seek damages for physical and emotional injuries, pain and suffering, medical expenses and deprivation of the use and enjoyment of plaintiffs’ homes. We intend to vigorously defend ourselves and oppose the relief sought in the complaints, provided that at this stage of the litigation, the Company has no basis for determining whether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.

E-Source Holdings, LLC ("E-Source"), the wholly-owned subsidiary of Vertex Operating, was named as a defendant (along with Motiva Enterprises, LLC, ("Motiva")) in a lawsuit filed in the Sixtieth (60th) Judicial District, Jefferson County, Texas, on April 22, 2015. Pursuant to the lawsuit, Whole Environmental, Inc. ("Whole"), made certain allegations against E-Source and Motiva. The claims include Breach of Contract and Quantum Meruit actions relating to asbestos abatement and remediation operations performed for defendants at Motiva's facility in Port Arthur, Jefferson County, Texas. The plaintiff alleges it is due monies earned. Defendants have denied any amounts due to plaintiff. The suit seeks damages of approximately $864,000, along with pre-judgment and post-judgment interest, the fair value of certain property alleged to be converted by defendants and reimbursement of legal fees. E-Source has asserted a counterclaim against Whole for the filing of a mechanic's lien in excess of any amount(s) actually due, as well as a cross-claim against Motiva. Under the terms of E-Source's contract with Motiva, Motiva was to pay all sums due to any sub-contractors of E-Source. In management's opinion, any monies due to Whole, should be paid by Motiva. E-Source seeks to recover the balance due under its contract with Motiva of approximately $1,000,000. The Company is in the early stages of negotiations and hopes to reach a settlement in the third quarter. As of the date of this filing, we do not expect a material loss to impact the financial statements as a whole in connection with the planned settlement.