securities & exchange commission edgar...

SECURITIES & EXCHANGE COMMISSION EDGAR FILING

Vertex Energy Inc.

Form: 10-Q

Date Filed: 2015-08-11

Corporate Issuer CIK: 890447

© Copyright 2015, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to theterms of use.

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the fiscal quarter ended June 30, 2015

❑ 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, TEXAS77058

(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 SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ❑ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ❑

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

Large accelerated filer ❑ Accelerated filer ýNon-accelerated filer ❑ Smaller reporting company ❑

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

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 28,181,761 shares of commonstock issued and outstanding as of August 7, 2015.

EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

TABLE OF CONTENTS

Page PART I Item 1. Financial Statements Consolidated Balance Sheets (unaudited) F-1 Consolidated Statements of Operations (unaudited) F-3 Consolidated Statements of Equity (unaudited) F-4 Consolidated Statements of Cash Flows (unaudited) F-5 Notes to Consolidated Financial Statements (unaudited) F-7 Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3. Quantitative and Qualitative Disclosures About Market Risk 34 Item 4. Controls and Procedures 34 PART II Item 1. Legal Proceedings 36 Item 1A. Risk Factors 37 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43 Item 3. Defaults Upon Senior Securities 44 Item 4. Mine Safety Disclosures 44 Item 5. Other Information 44 Item 6. Exhibits 48


PART I – FINANCIAL INFORMATIONItem 1. Financial Statements

VERTEX ENERGY, INC.CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

2015 December 31,

2014ASSETS Current assets

Cash and cash equivalents $ 5,717,543 $ 6,017,076Accounts receivable, net 13,033,513 9,936,948Current portion of notes receivable 1,000,000 3,150,000Inventory 9,088,290 12,620,616Prepaid expenses 2,803,310 1,245,307Costs in excess of billings — 779,285

Total current assets 31,642,656 33,749,232

Noncurrent assets Fixed assets, at cost 61,032,202 59,919,721

Less accumulated depreciation (5,739,802) (3,758,373)

Net fixed assets 55,292,400 56,161,348Notes receivable 8,308,000 8,308,000Intangible assets, net 17,640,950 18,512,960Goodwill 4,922,353 4,922,353Deferred financing cost. net 1,942,880 2,191,888Deferred federal income tax — 9,495,000Other assets 481,450 481,450

Total noncurrent assets 88,588,033 100,072,999

TOTAL ASSETS $ 120,230,689 $ 133,822,231

LIABILITIES AND EQUITY Current liabilities

Accounts payable and accrued expenses $ 21,143,784 $ 21,984,136Capital leases 408,145 492,755Current portion of long-term debt 4,387,831 40,136,584Revolving note 1,815,795 —Deferred revenue 524,923 463,210

Total current liabilities 28,280,478 63,076,685

Long-term liabilities Long-term debt 22,555,893 1,867,574Derivative liability 5,211,085 —Contingent consideration 6,069,000 6,069,000Deferred federal income tax — 4,189,000

Total liabilities 62,116,456 75,202,259

COMMITMENTS AND CONTINGENCIES Series B Preferred shares, $.001 par value per share:

10,000,000 shares authorized, 8,064,534 and 0 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively with liquidation preference 10,791,675 —of $25,025,000 at June 30, 2015

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 612,943 and 630,419 issued


and outstanding at June 30, 2015 and December 31,

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2014, respectively 613 630Common stock, $0.001 par value per share;

750,000,000 shares authorized; 28,181,761 and 28,108,105 issued and outstanding at June 30, 2015 and December 31, 2014, respectively 28,182 28,109

Additional paid-in capital 52,709,652 46,595,472Retained earnings (accumulated deficit) (5,415,889) 11,995,761

Total Equity $ 47,322,558 $ 58,619,972

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND EQUITY $ 120,230,689 $ 133,822,231See accompanying notes to the consolidated financial statements

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VERTEX ENERGY, INC.CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014(UNAUDITED)

Three Months Ended

June 30, Six Months Ended June 30, 2015 2014 2015 2014Revenues $ 49,119,711 $ 72,079,622 $ 86,804,050 $ 119,429,280Cost of revenues 43,635,177 63,844,569 81,643,633 106,188,202

Gross profit 5,484,534 8,235,053 5,160,417 13,241,078 Operating expenses: Selling, general and administrative expenses (exclusive of acquisition related expenses) 5,641,250 4,363,617 11,011,278 7,079,966 Depreciation and amortization expense 1,561,314 1,068,273 3,118,296 1,800,950 Acquisition related expenses — 1,959,418 157,678 2,559,830

Total operating expenses 7,202,564 7,391,308 14,287,252 11,440,746

Income (loss) from operations (1,718,030) 843,745 (9,126,835) 1,800,332 Other income (expense):

Provision for doubtful accounts — — (2,650,000) —Other income 10 7 18 377Gain on bargain purchase — 6,481,051 — 6,481,051Other income (expense) 12,818 (10,866) (57,660) (10,866)Gain on change in value of derivative liability 1,816,982 — 1,816,982 —Interest expense (556,975) (657,235) (2,088,155) (733,046)

Total other income (expense) 1,272,835 5,812,957 (2,978,815) 5,737,516

Income (loss) before income tax (445,195) 6,656,702 (12,105,650) 7,537,848 Income tax benefit (expense) — — (5,306,000) —

Net income (loss) $ (445,195) $ 6,656,702 $ (17,411,650) $ 7,537,848

Net income (loss) attributable to non-controllinginterest $ — $ 344,380 $ — $ 325,399

Net income (loss) attributable to Vertex Energy, Inc. $ (445,195) $ 7,001,082 $ (17,411,650) $ 7,863,247

Earnings (loss) per common share

Basic $ (0.02) $ 0.31 $ (0.62) $ 0.36

Diluted $ (0.02) $ 0.28 $ (0.62) $ 0.33

Shares used in computing earnings per share

Basic 28,130,575 22,826,102 28,124,492 22,025,316

Diluted 28,130,575 24,847,456 28,124,492 23,879,500

See accompanying notes to the consolidated financial statements

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VERTEX ENERGY, INC.CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2015

CommonStock

Shares

CommonStock $.001

Par

Series APreferred Stock

Shares

Series APreferred Stock

$.001 Par Additional

Paid-in Capital RetainedEarnings Total Equity

Balance on January 1, 2015 28,108,105 $ 28,109 630,419 $ 630 46,595,472 $11,995,761 $ 58,619,972Share based compensationexpense, total — — — — 176,426 — 176,426Issuance of restricted commonstock 56,180 56 — — 199,944 — 200,000Conversion of preferred A stockto common 17,476 17 (17,476) (17) — — —Beneficial conversion feature onPreferred stock (APIC) — — — — 5,737,810 — 5,737,810

Net income (loss) — — — — — (17,411,650) (17,411,650)

Balance on June 30, 2015 28,181,761 $ 28,182 612,943 $ 613 $ 52,709,652 $ (5,415,889) $ 47,322,558

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VERTEX ENERGY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2015 AND 2014(UNAUDITED)

Six Months Ended

June 30,

2015 June 30,

2014Cash flows from operating activities

Net income (loss) $ (17,411,650) $ 7,537,848 Adjustments to reconcile net income to cash provided by (used in) operating activities

Stock based compensation expense 176,426 101,378Depreciation and amortization 3,118,296 1,800,950Gain on acquisition — (6,481,051)Loss on asset sale 63,410 —Gain on change in fair value of derivative liability (1,816,982) —Deferred federal income tax 5,306,000 —

Changes in operating assets and liabilities Accounts receivable (3,096,566) (2,237,992)Accounts receivable - other — 950,000Allowance for doubtful accounts 2,650,000 —Notes receivable-related party — (1,027,321)Inventory 3,532,326 (3,679,989)Prepaid expenses (327,343) (2,717,571)Costs in excess of billings 779,285 —Accounts payable (640,352) 9,464,956Deferred revenue 61,713 —

Other assets — (79,806)

Net cash provided by (used in) operating activities (7,605,437) 3,631,402

Cash flows from investing activities

Acquisition of Omega — (28,764,099)Purchase of fixed assets (1,196,240) (2,635,882)Proceeds from asset sales 4,500 —Notes receivable (500,000) —

Net cash used in investing activities (1,691,740) (31,399,981)

Cash flows from financing activities

Line of credit payments, net — 304,000Proceeds from sale of stock 23,557,552 15,803,000Payments on notes payable (16,375,703) (9,634,029)Proceeds from note payable — 40,509,906Proceeds from revolving note 1,815,795 —Debt issue cost — (2,452,157)Proceeds from exercise of common stock options and warrants — 211,062

Net cash provided by (used in) financing activities 8,997,644 44,741,782

Net change in cash and cash equivalents (299,533) 16,973,203 Cash and cash equivalents at beginning of the period 6,017,076 2,678,628

Cash and cash equivalents at end of period $ 5,717,543 $ 19,651,831

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SUPPLEMENTAL INFORMATION

Cash paid for interest $ 2,071,299 $ 733,046

Cash paid for income taxes $ — $ —

NON-CASH INVESTING AND FINANCING TRANSACTIONS

Conversion of Series A Preferred Stock into common stock $ 17 $ 644

Note payable for acquisition of E-Source interest $ — $ 854,050

Additional paid in capital for acquisition of E-Source interest $ — $ 231,260

Shares issued as payment $ 200,000 $ —

Beneficial conversion feature for Series B Preferred stock $ 5,725,819 $ —

Fair value of warrants issued with series B Preferred stock $ 7,028,067 $ —

See accompanying notes to the consolidated financial statements

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VERTEX ENERGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS

The accompanying unaudited consolidated interim financial statements of Vertex Energy, Inc. (the “Company,” "Vertex" or “VertexEnergy”) have been prepared in accordance with accounting principles generally accepted in the United States of America and therules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financialstatements and notes thereto contained in the Company’s annual consolidated financial statements as filed with the SEC on Form10-K/A on April 15, 2015 (the “Form 10-K”). In the opinion of management, all adjustments, consisting of normal recurringadjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented havebeen reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for thefull year. Certain prior period amounts have been reclassified to conform to current period presentation. Notes to the consolidatedfinancial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements forthe most recent fiscal year 2014 as reported in Form 10-K, have been omitted.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Pronouncements

In April, 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuancecosts to be presented in the balance sheet as a direct deduction from the associated debt liability. This ASU is effective for theCompany beginning in the first quarter of 2016, with early adoption permitted. The Company does not expect that the ASU will have amaterial impact on the consolidated financial statements.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompanyaccounts and transactions have been eliminated in consolidation. The subsidiaries are as follows:

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

• Crossroad Carriers, L.P. (“Crossroad”) is a third-party common carrier that provides transportation and logistical services forliquid petroleum products, as well as other hazardous materials and product streams.

• Vertex Recovery, L.P. (“Vertex Recovery”) is a generator solutions company for the recycling and collection of used oil and oil-related residual materials from large regional and national customers throughout the U.S. It facilitates its services through anetwork of independent recyclers and franchise collectors.

• H&H Oil, L.P. (“H&H Oil”) collects and recycles used oil and residual materials from customers based in Austin, Baytown, SanAntonio and Corpus Christi, Texas.

• E-Source Holdings, LLC (“E-Source”) provides dismantling and demolition services at industrial facilities throughout the GulfCoast.

• Vertex Refining, LA, LLC is a used oil re refinery based in Marrero, Louisiana and also has assets in Belle Chasse,Louisiana.

• Vertex Refining, NV, LLC ("Vertex Refining") is a base oil marketing and distribution company with customers throughout theUnited States.

• Golden State Lubricant Works, LLC ("Golden State") operates an oil storage and blend facility based in Bakersfield,California.

• Vertex Refining, OH, LLC collects and re refines used oil and residual materials from customers throughout the Midwest.Refinery operations are based in Columbus, Ohio and has collection branches located in Norwalk, Ohio Zanesville, Ohio,Ravenswood, West Virginia, and Mt. Sterling, Kentucky.

• Vertex Energy Operating, LLC ("Vertex Operating"), a holding company for various of the subsidiaries describedabove.

Accounts receivable

Accounts receivable represents amounts due from customers. Accounts receivable are recorded at invoiced amounts, net of reservesand allowances, and do not bear interest. The Company uses its best estimate to determine the required allowance for doubtful

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accounts based on a variety of factors, including the length of time receivables are past due, economic trends and conditionsaffecting its customer base, significant one-time events and historical write-off experience. Specific provisions are recorded forindividual receivables when we become aware of a customer’s inability to meet its financial obligations. The Company reviews theadequacy of its reserves and allowances quarterly.

Receivable balances greater than 30 days past due are individually reviewed for collectability and if deemed uncollectible, arecharged off against the allowance accounts after all means of collection have been exhausted and the potential for recovery isconsidered remote. The Company does not have any significant off balance sheet credit exposure related to its customers. Theallowance was $316,715 and $316,715 at June 30, 2015 and December 31, 2014, respectively.

Inventory

Inventories of products consist of feedstocks and refined petroleum products and are reported at the lower of cost or market. Cost isdetermined using the first-in, first-out (“FIFO”) method. The Company reviews its inventory commodities whenever events orcircumstances indicate that the value may not be recoverable. The Company recognized an inventory impairment loss of $0 and$467,911 at June 30, 2015 and December 31, 2014, respectively.

Revenue recognition

Revenue for each of the Company’s divisions is recognized when persuasive evidence of an arrangement exists, goods are delivered,sales price is determinable, and collection is reasonably assured. Revenue is recognized upon delivery by truck and railcar offeedstock to its re-refining customers and upon product leaving the Company’s terminal facilities and third party processing facility viabarge. Revenue is also recognized as recovered scrap materials are sold and projects are completed.

Income Taxes

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

As part of the process of preparing its consolidated financial statements, the Company is required to estimate its income taxes in eachof the jurisdictions in which it operates. This process requires the Company to estimate its actual current tax liability and to assesstemporary differences resulting from differing book versus tax treatment of items, such as deferred revenue, compensation andbenefits expense and depreciation. These temporary differences result in deferred tax assets and liabilities, which are included withinthe Company’s consolidated statements of financial condition. Significant management judgment is required in determining theCompany’s provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its netdeferred tax assets. In assessing the realization of deferred tax assets, management considers whether it is more likely than not thatsome portion or all of the deferred tax assets will be realized and, when necessary, valuation allowances are established. Theultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in whichtemporary differences become deductible. Management considers the level of historical taxable income, scheduled reversals ofdeferred taxes, projected future taxable income and tax planning strategies that can be implemented by the Company in making thisassessment. If actual results differ from these estimates or the Company adjusts these estimates in future periods, the Company mayneed to adjust its valuation allowance, which could materially impact the Company’s consolidated financial position and results ofoperations. Tax contingencies can involve complex issues and may require an extended period of time to resolve. Changes in the level of annualpre-tax income can affect the Company’s overall effective tax rate. Significant management judgment is required in determining theCompany’s provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its netdeferred tax assets. Furthermore, the Company’s interpretation of complex tax laws may impact its recognition and measurement ofcurrent and deferred income taxes.

The loss during the quarter ended March 31, 2015 put the Company in an accumulated loss position for the cumulative 12 quartersthen ended. The Company did not have sufficient positive evidence to overcome the recent losses and determined it was more likelythan not the deferred tax assets would not be realized as of March 31, 2015 and as a result the Company incurred deferred taxexpense of $5,306,000 during the three month period ended March 31, 2015

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Earnings per share

Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common shareholders by theweighted average number of common and common equivalent shares outstanding during the period. Common share equivalentsincluded in the diluted computation represent shares issuable upon assumed exercise of stock options and warrants using thetreasury stock and “if converted” method. For periods in which net losses are incurred, weighted average shares outstanding is thesame for basic and diluted loss per share calculations, as the inclusion of common share equivalents would have an anti-dilutiveeffect.

Derivative liabilities

The Company, in accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, convertible preferred shares are accounted for net, outside of shareholders' equity and warrants areaccounted for as liabilities at their fair value during periods where they can be net cash settled in case of a change in controltransaction.

The warrants are accounted for as a liability at their fair value at each reporting period. The value of the derivative warrant liability willbe re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value ofthese warrants, a Dynamic Black Scholes model is utilized that computes the impact of a possible change in control transaction uponthe exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike priceand volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Preferred Stock Classification

A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only uponthe liquidation or termination of the reporting entity.

A financial instrument issued in the form of shares is mandatorily redeemable if it embodies an unconditional obligation requiring theissuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event certain tooccur. A financial instrument that embodies a conditional obligation to redeem the instrument by transferring assets upon an event notcertain to occur becomes mandatorily redeemable-and, therefore, becomes a liability-if that event occurs, the condition is resolved, orthe event becomes certain to occur.

The Series B preferred stock requires the Company to redeem such preferred stock on the fifth anniversary of the issuance of theSeries B Preferred stock if the redemption would not be subject to then existing restrictions under the Company's senior creditagreement that prohibits redemption. SEC reporting requirements provide that any possible redemption outside of the control of theCompany requires the preferred stock to be classified outside of permanent equity.

NOTE 3. LIQUIDITY

During the six month period ending June 30, 2015, an event of default occurred under our financing agreements (as described inNote 8). We were able to obtain a waiver of the defaults under the credit agreements and to negotiate mutually agreed uponamendments to the credit agreements to bring the Company into compliance with such credit agreements. In June 2015, we raisedan additional $25 million in cash from the issuance of Series B Preferred Stock, as further described in Note 11. We used the netproceeds to repay amounts owed under the credit agreements in the amount of $15.1 million, and plan to use the remaining proceedsfor general corporate and working capital purposes. Based upon the revised terms of the credit agreements, the current net workingcapital, and our cash flow projections for the next twelve months, we believe that the Company will have sufficient liquidity to meet theCompany's obligations for the foreseeable future.

In the event further defaults occur under the credit agreements, the lenders may exercise any and all rights and remedies available tothem under their respective agreements, including demanding immediate repayment of all amounts then outstanding or initiatingforeclosure or insolvency proceedings. In the event we default upon our obligations under our credit facilities, our lenders demandrepayment of such obligations and we are unable to obtain alternative financing to repay or refinance such obligations, our businesswill be materially and adversely affected, and we may be forced to sharply curtail or cease our operations.

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NOTE 4. RELATED PARTIES

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

Subsequent to June 30, 2015, the Company acquired a collection route in the state of Louisiana. The President, Chief ExecutiveOfficer and owner of which is Dan Cowart, the brother of our Chief Executive Officer and largest stockholder, Benjamin P. Cowart, asdescribed in Note 14, Subsequent Events.

NOTE 5. CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES At June 30, 2015 and 2014 and for each of the six months then ended, the Company’s revenues and receivables were comprised ofthe following customer concentrations:

Six Months Ended June 30,

2015 Six Months Ended June 30,

2014

% of

Revenues % of

Receivables % of

Revenues % of

ReceivablesCustomer 1 24% —% —% —%Customer 2 15% 17% 16% 3%Customer 3 8% 25% 11% 9%Customer 4 7% 18% 7% 9%Customer 5 —% —% 36% 19%Customer 6 —% —% 14% 25% At June 30, 2015 and 2014 and for each of the six months then ended, the Company's segment revenues were comprised of thefollowing customer concentrations:

% of Revenue by Segment % Revenue by Segment Six Months Ended June 30, 2015 Six Months Ended June 30, 2014 Black Oil Refining Recovery Black Oil Refining RecoveryCustomer 1 100% —% —% —% —% —%Customer 2 54% 46% —% 22% 78% —%Customer 3 —% 100% —% —% 100% —%Customer 4 —% 100% —% —% 100% —%Customer 5 —% —% —% 100% —% —%Customer 6 —% —% —% 100% —% —%

The Company purchases goods and services from one company that represented 18% of total purchases for the six months endedJune 30, 2015 and one company that represented 10% of total purchases for the six months ended June 30, 2014.

The Company has had various debt facilities available for use, of which there was $29,167,664 and $42,496,913 outstanding as ofJune 30, 2015 and December 31, 2014, respectively. See Note 8 for further details.

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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 due ofapproximately $13,328.

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

For tax reporting purposes, we have NOLs of approximately $48.1 million as of June 30, 2015 that are available to reduce futuretaxable income. In determining the carrying value of our net deferred tax asset, the Company considered all negative and positiveevidence. The Company has incurred a cumulative pre-tax loss of $14.7 million over a three year period ended June 30, 2015. As aresult, we determined that a full valuation allowance for our deferred tax assets at June 30, 2015 of $5.3 million was appropriate.

NOTE 6. ACCOUNTS RECEIVABLE

Accounts receivable, net, consists of the following at:

June 30, 2015 December 31, 2014Accounts receivable $13,350,228 $10,253,663Allowance for doubtful accounts (316,715) (316,715)

Accounts receivable, net $13,033,513 $9,936,948

Accounts receivable represents amounts due from customers. Accounts receivable are recorded at invoiced amounts, net of reservesand allowances, and do not bear interest. The Company uses its best estimate to determine the required allowance for doubtfulaccounts based on a variety of factors, including the length of time receivables are past due, economic trends and conditionsaffecting its customer base, significant one-time events and historical write-off experience. Specific provisions are recorded forindividual receivables when we become aware of a customer’s inability to meet its financial obligations. The Company reviews theadequacy of its reserves and allowances quarterly.

Receivable balances greater than 30 days past due are individually reviewed for collectability and if deemed uncollectible, arecharged off against the allowance accounts after all means of collection have been exhausted and the potential for recovery isconsidered remote. The Company does not have any significant off balance sheet credit exposure related to its customers.

NOTE 7. NOTES RECEIVABLE

Current portion of notes receivable, net, consists of the following at:

June 30, 2015 December 31, 2014Notes receivable - current $5,346,452 $4,846,452Allowance (4,346,452) (1,696,452)

Notes receivable - current, net $1,000,000 $3,150,000

The current portion of notes receivable represents amounts due from Omega Holdings, LLC. Of the total notes receivable balance,$1,696,452 represents invoiced amounts that do not bear interest as of June 30, 2015. Based on management's assessment, theCompany recognized an allowance of $1,696,452 related to the receivable. The write off was necessary because the Company'sreceivable was unsecured and the amount that the Company may ultimately recover, if any, is not presently determinable.

As of June 30, 2015, $3,650,000 of the current notes receivable balance represents short-term loans that carry an interest rate of9.5% per annum. No accrued interest is included in the balance. Based on management's assessment, the Company recognized an

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allowance of $2,650,000 during three months ended March 31, 2015. The note is collateralized by insurance proceeds expected tobe collected in 2015 and the allowance was a result of revised insurance proceed expectations.

The long-term notes receivable represents amounts due from Omega Holdings, LLC. The $8,308,000 due to Vertex is based on thepurchase price allocated to the Nevada facility, which has not yet closed. The note is collateralized by assets at the Nevada facilityand carries an interest rate of 9.5% per annum. It is anticipated the balance of the note will be satisfied in connection with aforeclosure of the property and equipment pledged as collateral to secure the note. No accrued interest is included in the accountbalance. The aggregate receivable balance has been classified as noncurrent because they are not expected to be collected withinone year from the balance sheet date. The note is currently in default as of June 30, 2015.

NOTE 8. LINE OF CREDIT AND LONG-TERM DEBT

In September 2012, the Company entered into a credit agreement with Bank of America. Pursuant to the agreement, Bank ofAmerica agreed to loan the Company $8,500,000 in the form of a term loan and to provide the Company with an additional$10,000,000 in the form of a revolving line of credit.

In May 2014, the Company entered into an amended and restated credit agreement with Bank of America. The amended creditagreement amended and restated the prior credit agreement entered into with Bank of America in September 2012. Pursuant to theagreement, Bank of America agreed to loan the Company up to $20,000,000 in the form of a revolving line of credit, subject to certainterms and lending ratios, to be used for feedstock purchases and general corporate purposes. The line of credit bears interest at theoption of the Company of either the lender's prime commercial lending rate then in effect between 1.25% and 2% per annum or theBank of America LIBOR rate plus between 2.35% and 3% (both ranges dependent upon the Company's leverage ratio from time totime). Accrued and unpaid interest on the revolving note is due and payable monthly in arrears and all amounts outstanding under therevolving note are due and payable on May 2, 2017. The balance on the revolving line of credit was $0 at June 30, 2015.

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

On May 2, 2014, the Company entered into a Credit and Guaranty Agreement with Goldman Sachs Bank USA. Pursuant to theagreement, Goldman Sachs Bank USA loaned the Company $40,000,000 in the form of a term loan. As set forth in the CreditAgreement, the Company has the option to select whether loans made under the Credit Agreement bear interest at (a) the greater of(i) the prime rate in effect, (ii) the weighted average of the rates on overnight Federal funds transactions with members of the FederalReserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate and (B) 1%, and (iv) 4.5% per annum; or (b) the greater of(i) 1.50% and (ii) the applicable ICE Benchmark Administration Limited interest rate, divided by (x) one minus, (y) the Adjusted LIBORRate. Interest on the Credit Agreement is payable monthly in arrears. Amortizing principal payments are due on the Credit AgreementLoan in the amount of $300,000 per fiscal quarter for June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015,and $800,000 per fiscal quarter thereafter until maturity on May 2, 2019. The balance on the term loan was $24,000,000 at June 30,2015.

The Goldman Sachs Bank USA financing arrangement is secured by all of the assets of the Company, but was subordinate to theaforementioned Bank of America credit agreement.

On March 26, 2015, we, Vertex Operating, and substantially all of our other subsidiaries (other than E-Source), Goldman SachsSpecialty Lending Holdings, Inc. (“Lender”) and Goldman Sachs Bank USA, as Administrative Agent and Collateral Agent for Lender(“Agent”), entered into a Second Amendment to Credit and Guaranty Agreement (the “Second Amendment”). The SecondAmendment amended that certain Credit and Guaranty Agreement entered into between the parties dated as of May 2, 2014 andamended by the First Amendment to Credit and Guaranty Agreement entered into on December 5, 2014 (the “First Amendment” andthe Credit and Guaranty Agreement as amended and modified by the First Amendment and Second Amendment, the “CreditAgreement”).

During the third quarter of 2014, various events of default had occurred and were continuing under the Credit Agreement and theparties entered into the Second Amendment to among other things, provide for the waiver of the prior defaults and to restructurecertain covenants and other financial requirements of the Credit Agreement and to allow for our entry into the MidCap LoanAgreement (described below).

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The amendments to the Credit Agreement effected by the Second Amendment include, but are not limited to:

• Effecting various amendments to the Credit Agreement to substitute the name of MidCap Business Credit, LLC andthe MidCap Loan Agreement (as described below) in place of Bank of America, NA (“BOA”), and the Company’s priorCredit Agreement with BOA.

• Increasing the interest rate of certain outstanding loans made under the terms of the Credit Agreement by up to 2%per annum, based on the leverage ratio of debt to consolidated EBITDA of the Company.

• Changing the calculation dates for certain fixed charge ratios required to be calculated pursuant to the terms of theCredit Agreement.

• Changing how certain debt leverage ratios are calculated under the terms of the CreditAgreement.

• Increasing the additional default interest payable upon the occurrence of an event of default under the CreditAgreement to 4% per annum (compared to 2% per annum for all other defaults) above the then applicable interestrate in the event we fail to make the Required Prepayment (as defined below).

• Providing that no quarterly amortization payments would be due under the terms of the Credit Agreement for thequarters ended March 31, 2015 and June 30, 2015 (previously amortization payments of $800,000 per quarter weredue for both such quarters).

• Providing that we are not required to meet certain debt and leverage covenants for certain periods of fiscal2015.

• Requiring that we raise at least $9.1 million by June 30, 2015 through the sale of equity, and that we are required topay such funds directly to the Lender as a mandatory pre-payment of the amounts outstanding under the CreditAgreement (the “Required Payment”), which required payment was paid in June 2015, as described below.

• Changing certain of the required prepayment terms of the Credit Agreement, which require us to prepay the amountsowed under the Credit Agreement in an amount equal to 100% of the extent total consolidated debt exceeds (x) totalconsolidated EBITDA (as calculated pursuant to the agreement) multiplied by (y) the maximum debt leverage ratiosdescribed in the Credit Agreement, provided that no prepayments in connection with such requirements are requiredto be made through December 31, 2015.

• Reducing the amount of allowable additional borrowings we can make under other debt agreements and facilities to$7 million in aggregate (including not more than $6 million under the MidCap Loan Agreement through December 31,2015).

• Changing certain fixed charge, leverage ratios and consolidated EBITDA calculations, definitions, and requirementsrelating to covenants under the Credit Agreement.

• Changing the required amount of cash on hand and available borrowings under the MidCap Loan Agreement, We,are required to have at least (a)$750,000 after the date of the Second Amendment and prior to June 30, 2015, (b)$1.5 million at any time after June 30, 2015 and prior to December 31, 2015, (c) $2 million at any time after December31, 2015 and prior to June 30, 2016, (d) $2.5 million at any time after June 30, 2016 and prior to December 31, 2016,and (e) $3 million at any time after December 31, 2016.

The Lender also waived all of the prior defaults which the Lender had provided the Company notice of previously (which were all ofthe known defaults that existed at the time of the parties’ entry into the Second Amendment) and the Company and its subsidiariesprovided a release in favor of the Lender and its representatives and assigns. We also agreed to pay the Agent a fee of $50,000 peryear (including $50,000 paid upon our entry into the Second Amendment) as an administration fee; and pay the Agent certainprepayment fees in the event we prepay amounts outstanding under the Credit Agreement prior to March 26, 2018, provided noprepayment fee is due in connection with the Required Payment or certain other mandatory prepayments required under the terms ofthe Credit Agreement, subject to certain exceptions.

As additional consideration for the Lender agreeing to the terms of the Second Amendment, we granted Goldman, Sachs & Co., anaffiliate of the Lender (such initial holder and its assigns, if any, the “Holder”) a warrant to purchase 1,766,874 shares of our commonstock which was evidenced by a Common Stock Purchase Warrant (the “Lender Warrant”). The Lender Warrant was to

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expire on March 26, 2022 and originally had an exercise price equal to the lower of (x) $3.39583 per share; and (y) the lowest priceper share at which we issue any common stock (or sets an exercise price for the purchase of common stock) between the date of ourentry into the Lender Warrant and June 30, 2015. The Lender Warrant was exercisable by the Holder at any time after September 1,2015, including pursuant to a cashless exercise. The Lender Warrant provided that in the event that, prior to June 30, 2015, weprepaid the amount owed under the Credit Agreement in an amount greater than $9.1 million (i.e., in an amount greater than theRequired Payment) then the number of shares of common stock issuable upon exercise of the Lender Warrant is reduced by the prorata amount by which the amount prepaid exceeds $9.1 million and is less than $15.1 million, provided that if prior to June 30, 2015we prepaid at least $6 million in addition to the Required Payment the Lender Warrant automatically terminated.

On June 18, 2015, the Company entered into the Third Amendment to Credit and Guaranty Agreement (the “Third Amendment”),which amended the Credit Agreement (defined above). The amendments to the Credit Agreement effected by the Third Amendmentinclude, but are not limited to:

• Extending the time period pursuant to which we are required to make certain post-closing deliverables pursuant to the termsof the Credit Agreement.

• Providing that we are not required to meet certain debt and leverage covenants for certain periods extending until March 31,2016 (previously we were required to meet such covenants beginning with the quarter ended December 31, 2015).

• Extending the date we are required to begin making required prepayments under the terms of the Credit Agreement, in anamount equal to 100% of the extent total consolidated debt exceeds (x) total consolidated EBITDA (as calculated pursuant tothe agreement) multiplied by (y) the maximum debt leverage ratios described in the Credit Agreement, until March 31, 2016(previously no payments were required to be made through December 31, 2015).

• Reducing certain required consolidated EBITDA targets pursuant to the terms of the Credit Agreement to be more favorableto the Company, including reducing such targets to $250,000, $1.5 million, $4.25 million, $7.25 million and $9.5 million for thequarters ended September 30, 2015, December 31, 2015, March 31, 2016, June 30, 2016 and September 30, 2016 (andeach quarter thereafter), respectively, compared to $3 million, $5.5 million, $8 million, $9 million and $10 million, respectively.

• Extending the date we are required to begin meeting various leverage ratios and consolidated EBITDA targets as set forth inthe Credit Agreement from December 31, 2015 and June 30, 2015, to March 31, 2016 and September 30, 2015, respectively.

As additional consideration for the Lender agreeing to the terms of the Third Amendment, we agreed to modify, pursuant to a FirstAmendment to Warrant, the terms of the Lender Warrant. Pursuant to the First Amendment to Warrant, we agreed to reduce theexercise price of the Lender Warrant to $2.778 per share (the 30 day volume weighted average price of our common stock as of thedate of our entry into the Third Amendment) from $3.395828553 per share, and that in the event we issue any preferred stock, thatthe lowest exercise price associated with any warrants or similar convertible securities issued in connection with such preferred stockoffering shall become the exercise price of the Lender Warrant; provided that, if the Company does not issue preferred stock on orprior to June 30, 2015, then the exercise price of the Lender Warrant would be reduced to the lowest closing price per share of ourcommon stock on any date between March 26, 2015 and June 30, 2015.

Effective June 29, 2015, we repaid $15.1 million of the amount owed to the Lender under the Credit, and as a result, the LenderWarrant and rights thereunder were canceled and terminated.

On May 2, 2014, in connection with the closing of the Omega Refining acquisition, the Company assumed two capital leases totaling$3,154,860. Payments of $2,703,989 were made at closing and the balance was $408,145 at June 30, 2015.

The Company financed insurance premiums through various financial institutions bearing interest rates from 4% to 4.52%. All suchpremium finance agreements have maturities of less than one year and have a balance of $898,224 at June 30, 2015.

Effective March 27, 2015, the Company, Vertex Operating and all of the Company’s other subsidiaries other than E-Source andGolden State, entered into a Loan and Security Agreement with MidCap Business Credit LLC (“MidCap” and the “MidCap LoanAgreement”). Pursuant to the MidCap Loan Agreement, MidCap agreed to loan us up to the lesser of (i) $7 million; and (ii) 85% of theamount of accounts receivable due to us which meet certain requirements set forth in the MidCap Loan Agreement (“QualifiedAccounts”), plus the lesser of (y) $3 million and (z) 50% of the cost or market value, whichever is lower, of our raw material and

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finished goods which have not yet been sold, subject to the terms and conditions of the MidCap Loan Agreement (“EligibleInventory”), minus any amount which MidCap may require from time to time in order to over secure amounts owed to MidCap underthe MidCap Loan Agreement, as long as no event of default has occurred or is continuing under the terms of the MidCap LoanAgreement. The requirement of MidCap to make loans under the MidCap Loan Agreement is subject to certain standard conditionsand requirements.

The MidCap Loan Agreement contains customary representations, warranties, covenants, and events of default for facilities of similarnature and size as the MidCap Loan Agreement, and requirements for the Company to indemnify MidCap for certain losses.

We also entered into a Revolving Note (the “MidCap Note”) to evidence amounts borrowed from MidCap from time to time under theMidCap Loan Agreement. Interest on the MidCap Note accrues at a fluctuating rate equal to the aggregate of: (x) the prime rate thenin effect, and (y) 1.75% per annum, or at such other rate mutually agreed on from time to time by the parties, based upon the greaterof (i) any balance owing under the MidCap Note at the close of each day; or (ii) a minimum assumed average daily loan balance of $3million. Interest is payable in arrears, on the first day of each month that amounts are outstanding under the MidCap Note. Thebalance on the revolving note was $1,815,795 at June 30, 2015.

On January 7, 2015, E-Source entered into a loan agreement with Texas Citizens Bank to consolidate various smaller debtobligations. The loan Agreement provides a term note in the amount of $2,201,372 that matures on January 7, 2020. Borrowings beara fixed interest rate of 5.5% per annum and interest will be calculated from the date of each advance until repayment in full ormaturity. The loan has 59 scheduled monthly payments of $45,147 which includes principal and interest. The loan is collateralized byall of the assets of E-Source. The balance on the term note was $2,045,500 at June 30, 2015.

The Company's outstanding debt facilities as of June 30, 2015 are summarized as follows:

Creditor Loan Type Origination Date Maturity Date Loan Amount Balance on June

30, 2015MidCap Business Credit,LLC Revolving Note March, 2015 March, 2017 $ 7,000,000 $ 1,815,795Goldman Sachs USA Term Loan May, 2014 May, 2019 40,000,000 24,000,000Pacific Western Bank Capital Lease September, 2012 August, 2017 520,219 408,145Texas Citizens Bank Term Note January, 2015 January, 2020 2,201,372 2,045,500

Various institutions Insurance premiumsfinanced Various < 1 year 1,789,481 898,224

$ 51,511,072 $ 29,167,664

Future contractual maturities of notes payable are summarized as follows:

Creditor 2015 2016 2017 2018 2019 ThereafterMidCap Business Credit, LLC $ 1,815,795 $ — $ — $ — $ — $ —Goldman Sachs USA 1,600,000 3,200,000 3,200,000 3,200,000 12,800,000 —Pacific Western Bank 88,044 186,947 133,154 — — —Texas Citizens Bank 71,394 442,600 468,225 495,013 523,333 44,935Various institutions 898,224 — — — — —

Totals $ 4,473,457 $ 3,829,547 $ 3,801,379 $ 3,695,013 $ 13,323,333 $ 44,935

NOTE 9. EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weightedaverage number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the sixmonths ended June 30, 2015 includes the weighted average of common shares outstanding. Diluted earnings per share reflect thepotential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrantsor convertible securities. The calculation of diluted earnings per share for the six months ended June 30, 2015

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does not include options to purchase 2,037,388 shares, warrants to purchase 215,201, Series B Preferred stock for 8,064,534 sharesand warrants to purchase 4,032,267 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 six months endedJune 30, 2015 and 2014:

Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014Basic Earnings per Share Numerator:

Net income available to common shareholders $ (445,195) $ 7,001,082 $(17,411,650) $ 7,863,247

Denominator:

Weighted-average shares outstanding 28,130,575 22,826,102 28,124,492 22,025,316

Basic earnings per share $ (0.02) $ 0.31 $ (0.62) $ 0.36

Diluted Earnings per Share Numerator:

Net income available to common shareholders $ (445,195) $ 7,001,082 $(17,411,650) $ 7,863,247

Denominator: Weighted-average shares outstanding 28,130,575 22,826,102 28,124,492 22,025,316Effect of dilutive securities

Stock options and warrants — 1,417,570 — 1,178,626Preferred stock — 603,784 — 675,558

Diluted weighted-average shares outstanding 28,130,575 24,847,456 28,124,492 23,879,500

Diluted earnings per share $ (0.02) $ 0.28 $ (0.62) $ 0.33

NOTE 10. 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 ofJune 30, 2015, there were 28,181,761 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 commonstock when, as and if declared by the Company's board of directors. No holders of any shares of the Company's common stock has apreemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject toredemption or convertible into other securities. Upon liquidation, dissolution or winding-up of the Company and after payment ofcreditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-sharebasis among the holders of the Company's common stock. Each share of the Company's common stock is entitled to onevote. Shares of the Company's common stock do not possess any cumulative voting rights.

During the six months ended June 30, 2015, a total of 17,476 shares of the Company's Series A Preferred Stock were converted into17,476 shares of our common stock on a one-for-one basis.

On April 5, 2014, the Company issued 56,180 shares of the Company's restricted common stock in connection with the inventory trueup stipulated in the Heartland purchase agreement (as described in greater detail in the Quarterly Report on form 10-Q which we filedwith the Securities and Exchange Commission on May 19, 2015).

During the three months ended March 31, 2015, the Company recognized contingently issuable warrants to purchase 1,766,874shares of our common stock in connection with the amendments to the Credit Agreement with Goldman Sachs Bank USA (see Note8). Management has determined that the warrants will more likely than not be canceled due to certain repayment provisions on orbefore June 30, 2015. Due to the down round feature of the warrant, the Company used the Black-Scholes model to value thesewarrants and have concluded that these are level 3 inputs. Management determined a discount factor on the grant date and on thebalance sheet date based on available projections of cash to be used to make the mandatory repayments which resulted in a fairvalue derivative liability for the warrants of $577,440 at March 31, 2015. Effective June 29, 2015, we repaid $15.1 million of theamount owed to the lender and as a result, the lender warrants and rights were canceled and terminated.

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Effective on June 24, 2015, the Compensation Committee of the Board of Directors (the “Committee”) granted Chris Carlson, ourChief Financial Officer, options to purchase 75,000 shares of our common stock with an exercise price of $3.15 per share, with a tenyear term, vesting at the rate of 1/4th of such options per year on the first four anniversaries of the grant, under our 2013 StockIncentive Plan.

NOTE 11. PREFERRED STOCK AND DETACHABLE WARRANTS

The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The totalnumber of designated shares of the Company’s Series A Convertible Preferred Stock is 5,000,000 (“Series A Preferred”). The totalnumber of designated shares of the Company’s Series B Preferred Stock is 10,000,000. As of June 30, 2015, there were 612,943shares of Series A Preferred Stock issued and outstanding and 8,064,534 shares of Series B Preferred Stock issued and outstanding.

Series B Preferred Stock

Dividends on our Series B Preferred Stock accrue at an annual rate of 6% of the original issue price of the preferred stock, subject toincrease under certain circumstances, and are payable on a quarterly basis. The dividends may be paid in cash or in shares ofregistered common stock, or some combination thereof, at the Company's discretion. If paid in registered common stock, the numberof shares payable will be calculated by dividing (a) the accrued dividend by (b) 90% of the arithmetic average of the volume weightedaverage price of the Company’s common stock for the 10 trading days immediately prior to the applicable date of determination.

In determining the earnings per share on common stock, the earnings will be reduced for the preferred stock dividends and theaccretion of the discounts on the Series B Preferred Stock related to the issuance costs, warrant value and the beneficial conversionfeature.

The Series B Preferred Stock accrues a dividend, payable quarterly in arrears (based on calendar quarters), in the amount of 6% perannum of the original issuance price of the Series B Preferred Stock ($3.10 per share or $25.0 million in aggregate).

The dividend is payable by the Company, at the Company’s election, in registered common stock of the Company (if available) orcash. In the event dividends are paid in registered common stock of the Company, the number of shares payable will be calculated bydividing (a) the accrued dividend by (b) 90% of the arithmetic average of the volume weighted average price (VWAP) of theCompany’s common stock for the 10 trading days immediately prior to the applicable date of determination (the “Dividend StockPayment Price”). Notwithstanding the foregoing, in no event may the Company pay dividends in common stock unless the applicableDividend Stock Payment Price is above $2.91. If the Company is prohibited from paying the dividend in cash (due to contractualsenior credit agreements or other restrictions) or is unable to pay the dividend in registered common stock, the dividend will be paidin kind in Series B Preferred Stock shares at $3.10 per share. The Series B Preferred Stock include a liquidation preference (in the amount of $3.10 per share) which is junior to the Company’spreviously outstanding shares of preferred stock, senior credit facilities and other debt holders as provided in further detail in thedesignation of the Series B Preferred Stock (the "Designation").

The Series B Preferred Stock (including accrued and unpaid dividends) is convertible into shares of the Company’s common stock atthe holder’s option at any time after closing at $3.10 per share (initially a one-for-one basis). If the Company’s common stock trades ator above $6.20 per share for a period of 20 consecutive trading days at any time following the earlier of (a) the effective date of aresale registration statement which we are required to file to register the resale of the shares of common stock underlying the SeriesB Preferred Stock and Warrants pursuant to the Purchase Agreement (described below), (which was declared effective on August 6,2015) or (b) December 24, 2015, the Company may at such time force conversion of the Series B Preferred Stock (including accruedand unpaid dividends) into common stock of the Company.

Voting Rights

The Series B Preferred Stock votes together with the common stock on an as-converted basis, provided that each holder’s votingrights are subject to and limited by the Beneficial Ownership Limitation described below.

The Company has the option to redeem the outstanding shares of Series B Preferred Stock at $3.10 per share, plus any accrued andunpaid dividends on such Series B Preferred Stock redeemed, at any time beginning on June 24, 2017, and the Company is requiredto redeem the Series B Preferred Stock at $3.10 per share, plus any accrued and unpaid dividends, on June 24, 2020.

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Notwithstanding either of the foregoing, the Series B Preferred Stock may not be redeemed unless and until amounts outstandingunder the Company’s senior credit facility have been paid in full.

The Series B Preferred Stock contains a provision prohibiting the conversion of such Series B Preferred Stock into common stock ofthe Company, if upon such conversion, the holder thereof would beneficially own more than 9.999% of the Company’s thenoutstanding common stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation does not apply to forcedconversions undertaken by the Company pursuant to the terms of the Designation (summarized above). In addition to the BeneficialOwnership Limitation, certain of the Investors also entered into agreements with us to limit their ability to effect conversions of SeriesB Preferred Stock (and exercise of Warrants (defined below)), to prohibit them contractually from converting (or exercising) suchapplicable security if upon such conversion (or exercise) they would beneficially own more than 4.999% of our outstanding commonstock.

Unit Offering

On June 24, 2015, we closed the transactions contemplated by the June 19, 2015 Unit Purchase Agreement (the “PurchaseAgreement”) we entered into with certain institutional investors (the “Investors”), pursuant to which the Company sold the Investors anaggregate of 8,064,534 units (the “Units”), each consisting of (i) one share of Series B Preferred Stock and (ii) one warrant topurchase one-half of a share of common stock of the Company (each a “Warrant” and collectively, the “Warrants”). The Units weresold at a price of $3.10 per Unit (the “Unit Price”) (a 6.1% premium to the closing bid price of the Company’s common stock on theNASDAQ Capital Market on the date the Purchase Agreement was entered into which was $2.91 per share (the “Closing Bid Price”)).The Warrants have an exercise price of $2.92 per share ($0.01 above the Closing Bid Price). Total gross proceeds from the offeringof the Units (the “Offering”) was $25.0 million.

The Placement Agent received a commission equal to 6.5% of the gross proceeds (less $4.0 million raised from certain investors inthe Offering for which they will receive no fee) from the Offering, for an aggregate commission of $1.365 million which was nettedagainst the proceeds.

The number of shares of common stock issuable upon the complete conversion of the Series B Preferred Stock (not including anydividends which, pursuant to the terms of the Series B Preferred Stock may be paid in shares of common stock of the Company) andcomplete exercise of the Warrants sold in the Offering (i.e., Warrants to purchase an aggregate of 4,032,267 shares of commonstock), would total 12,096,801 shares or 43.0% of our issued and outstanding shares of common stock immediately prior to our entryinto the Purchase Agreement.

We used the net proceeds from the Offering to repay amounts owed under the Credit Agreement in the amount of $15.1 million. In addition, under the Purchase Agreement, the Company has agreed to register the shares of common stock issuable uponconversion of the Series B Preferred Stock and upon exercise of the Warrants under the Securities Act of 1933, as amended, forresale by the Investors. The Company has committed to file a registration statement on Form S-1 by the 30th day following theclosing of the Offering (which filing date was met) and to cause the registration statement to become effective by the 90th dayfollowing the closing (or, in the event of a “full review” by the Securities and Exchange Commission, the 120th day following theclosing), which registration statement was declared effective by the Securities and Exchange Commission on August 6, 2015. ThePurchase Agreement provides for liquidated damages upon the occurrence of certain events, including, but not limited to, the failureby the Company to cause the registration statement to become effective by the deadlines set forth above. The amount of theliquidated damages is 1.0% of the aggregate subscription amount paid by an Investor for the Units affected by the event that are stillheld by the Investor upon the occurrence of the event, due on the date immediately following the event that caused such failure (orthe 30th day following such event if the event relates to the suspension of the registration statement as described in the PurchaseAgreement), and each 30 days thereafter, with such payments to be prorated on a daily basis during each 30 day period, subject to amaximum of an aggregate of 6% per annum. Under the Purchase Agreement, the Company has agreed to indemnify the Investors for liabilities arising out of or relating to (i) anyuntrue statement of a material fact contained in the registration statement, (ii) any inaccuracy in the representations and warranties ofthe Company contained in the Purchase Agreement or the failure of the Company to perform its obligations under the PurchaseAgreement and (iii) any failure by the Company to fulfill any undertaking included in the registration statement, subject to certainexceptions. The Investors, severally, and not jointly agreed to indemnify the Company against (i) any failure by such Investor tocomply with the covenants and agreements contained in the Purchase Agreement and (ii) any untrue statement of a material factcontained in the registration statement to the extent such untrue statement was made in reliance upon and in conformity with writteninformation furnished by or on behalf of that Investor specifically for use in preparation of the registration statement, subject to certainexceptions.

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The Company agreed pursuant to the Purchase Agreement, that until 60 days following effectiveness of the registration statementfiled, to register the shares of common stock underlying the Series B Preferred Stock and Warrants (the “Lock-Up Period”), to not offeror sell any common stock or securities convertible or exercisable into common stock, except pursuant to certain exceptions describedin the Purchase Agreement, and each of the Company’s officers and directors agreed to not sell or offer for sale any shares ofcommon stock until the end of the Lock-Up Period, subject to certain exceptions.

The warrants were valued using the dynamic Black Scholes Merton formula pricing model that computes the impact of share dilutionupon the exercise of the warrant shares at approximately $7,021,000. The Black-Scholes inputs used were: expected dividend rate of0%, expected volatility of 70%-100%, risk free interest rate of 1.59%, and expected term of 5.5 years. This valuation resulted in abeneficial conversion feature on the convertible preferred stock of approximately $5,737,810 This amount will be accreted over theterm as a deemed dividend. Fees in the amount of $1.4 million relating to the stock placement were netted against proceeds. Thewarrants are exercisable beginning on December 26, 2015, and expire December 24, 2020.

The following table represents the carrying amount of the Series B Preferred Stock at inception and as of June 30, 2015:

At Inception Amount

Face amount of Series B Preferred $ 25,000,000Less: warrant value 7,028,067Less: beneficial conversion feature 5,737,810Less: issuance costs and fees 1,442,448

Carrying amount at inception $ 10,791,675

At June 30, 2015 Amount

Face amount of Series B Preferred $ 25,000,000Less: un-accreted discount 14,208,325

Carrying amount at June 30, 2015 $ 10,791,675

In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-DistinguishingLiabilities from Equity as approved by shareholders, the convertible preferred shares are accounted for net outside of stockholders’equity at $10,791,675 with the warrants accounted for as liabilities at their fair value of $5,211,085 as of June 30, 2015. The value ofthe derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded as earnings. To derivean estimate of the fair value of these warrants, the Company utilized a dynamic Black Scholes Merton formula that computes theimpact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding,estimated stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of thedilution effect. In the event the convertible preferred shares are redeemed, any redemption price in excess of the carrying amount ofthe convertible preferred stock would be treated as a dividend.

The changes in liabilities measured using significant unobservable inputs for the year ended June 30, 2015 were as follows:

Level Three Roll-forward:

Level Three Roll-ForwardItem Level 3

Balance at December 31, 2014 $ —Warrants issued June 24, 2015 7,028,067Change in valuation of warrants (1,816,982)

Balance at June 30, 2015 $ 5,211,085

The warrants related to the Series B Preferred Stock were revalued at June 30, 2015 using the Dynamic Black Scholes model thatcomputes the impact of a possible change in control transaction upon the exercise of the warrant shares at approximately $5,211,085.

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The dynamic Black-Scholes inputs used were: expected dividend rate of 0%, expected volatility of 70%-100%, risk free interest rate of1.10%, and expected term of 4.9 years.

The Certificate of Designation contains customary anti-dilution protection for proportional adjustments (e.g. stock splits).

The beneficial conversion feature (BCF) relates to potential difference between the effective conversion price (measured based onproceeds allocated to the Series B Preferred Stock) and the fair value of the stock into which Preferred B Shares are currentlyconvertible (common stock).

If a conversion option embedded in a debt host instrument does not require separate accounting as a derivative instrument underASC 815, the convertible hybrid instrument must be evaluated under ASC 470-20 for the identification of a possible (BCF).

The BCF will be initially recognized as an offsetting reduction to Series B Preferred B Stock (debit), with the credit being recognizedin equity (additional paid-in capital).

The resulting debt issuance costs, debt discount, value allocated to warrants, and BCF should be accreted to the Series B PreferredStock to ensure that the Series B Preferred Stock balance is equal to its face value as of the redemption or conversion date, ifconversion is expected earlier.

The BCF was determined by calculating the intrinsic value of the conversion feature as follows:

Face amount of Series B Preferred Stock $ 25,000,000Less: allocated value of Warrants 7,028,067

Allocated value of Series B Preferred Stock $ 17,971,933Shares of Common stock to be converted 8,064,534Effective conversion price $ 2.23Market price $ 2.94Intrinsic value per share $ 0.7115

Intrinsic value of beneficial conversion feature $ 5,737,810

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NOTE 12. SEGMENT REPORTING

The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions. Segment information for thethree and six months ended June 30, 2015 and 2014 is as follows:

SIX MONTHS ENDED JUNE 30, 2015

Black Oil Refining &Marketing Recovery Total

Revenues $ 59,252,510 $ 19,714,009 $ 7,837,531 $ 86,804,050

Income (loss) from operations $ (10,487,316) $ 840,249 $ 520,232 $ (9,126,835)

SIX MONTHS ENDED JUNE 30, 2014


Revenues $ 72,449,922 $ 38,345,278 $ 8,634,080 $ 119,429,280

Income (loss) from operations $ 1,137,078 $ 1,538,784 $ (875,530) $ 1,800,332

THREE MONTHS ENDED JUNE 30, 2015

Black OilRefining &Marketing Recovery Total

Revenues $ 34,338,534 $ 11,447,889 $ 3,333,288 $ 49,119,711

Income (loss) from operations $ (2,511,824) $ 703,384 $ 90,410 $ (1,718,030)

THREE MONTHS ENDED JUNE 30, 2014


Revenues $ 48,878,522 $ 18,517,819 $ 4,683,281 $ 72,079,622

Income (loss) from operations $ 1,116,688 $ 768,209 $ (1,041,152) $ 843,745

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NOTE 13. CONTINGENT CONSIDERATION

As part of the consideration paid in connection with the acquisition of Vertex Holdings, L.P. in August 2012, if certain earning targetswere met, the Company had to pay the seller approximately $2,233,000 annually in 2013, 2014 and 2015. The earn-out targets werenot met for 2013 and the earn-out consideration was adjusted accordingly. In 2014, it was determined that the 2014 and 2015earnings targets would not be met and the contingent consideration was reduced by $2,861,000, which represented 100% of thediscounted cash flow for years two and three.

As part of the consideration paid in connection with the acquisition of certain assets from Omega Refining, LLC in May 2014, theCompany agreed to pay the seller additional earn-out consideration in the event that certain EBITDA targets were met (a) during anytwelve month period during the eighteen month period commencing on the first day of the first full calendar month following the May2, 2014 initial closing date (which targets begin at $8,000,000 of EBITDA during such twelve month period) of up to 470,498 shares ofcommon stock of the Company; and (b) during the calendar year ended December 31, 2015 (which targets begin at $9,000,000 ofEBITDA) of up to 770,498 shares of common stock of the Company, in each case subject to adjustment for certain capitalexpenditures. In 2014, the contingent consideration was evaluated by management and reduced by $2,165,000, which represents100% of the contingent liability related to the Omega Refining acquisition.

As part of the consideration paid in connection with the acquisition of 51% of E-Source, if certain targets were met, the Company hadto pay the seller approximately $260,000 annually in 2014, 2015, 2016 and 2017. The Company recorded contingent consideration of$748,000, which was the discounted cash flows of the earn-out payments. Of this amount, $136,662 was paid in 2014 and theremaining $611,338 was written off. The write off was triggered because certain terms of the contingent consideration agreementwere not met by the acquiree.

As part of the consideration paid for certain assets acquired from Warren Ohio Holdings Co., LLC. f/k/a Heartland Group Holdings,LLC (“Heartland”) in December 2014, the Company has agreed to pay the seller additional earn-out consideration of up to amaximum of $8,276,792, based on total EBITDA related to the operations acquired from Heartland during the twelve month periodbeginning on the first day of the first full calendar month commencing on or after the first anniversary of the closing (“ContingentPayments”). Any Contingent Payment due is payable 50% in cash and 50% in shares of the Company’s common stock. We arerequired to furnish Heartland, at such time as the financial results for each applicable earn-out period are finalized and released, butno later than one hundred twenty days following the earn-out period, a written statement of the Contingent Payment due, if any. In theevent a Contingent Payment is due, it is required to be satisfied within five business days, after the final determination of the amountof the Contingent Payment. Additionally, the amount of any Contingent Payment is reduced by two-thirds of the cumulative total ofrequired capital expenditures incurred at Heartland’s refining facility in Columbus, Ohio, which are paid or funded by Vertex OH afterthe closing, not to exceed $866,667, which capital expenditures are estimated to total $1.3 million in aggregate. The Companyrecorded contingent consideration of $6,069,000, which represents the fair value of the earn-out payment calculated at close. As ofJune 30, 2015, the contingent consideration was evaluated by management and it was determined that no adjustment wasnecessary.

NOTE 14. SUBSEQUENT EVENTS

On July 7, 2015, the Board of Directors granted our non-executive directors options to purchase an aggregate of 300,000 shares ofcommon stock at an exercise price of $2.08 per share (60,000 options per non-executive director), with a ten year term, vesting at therate of 1/4th of such options per year on the first four anniversaries of the grant, under our 2013 Stock Incentive Plan in considerationfor services rendered and to be rendered to the Company.

Employment Agreements

Effective on June 24, 2015, the Compensation Committee of the Board of Directors (the “Committee”) of the Company approved anincrease in the yearly base salary of (a) Benjamin P. Cowart, our Chief Executive Officer and President to $425,000 (compared to$267,500 prior to such increase); and (b) Chris Carlson, our Chief Financial Officer and Secretary to $240,000 (compared to $195,000prior to such increase)(collectively, the “Increases in Salary”). The Committee also set the total yearly target bonuses of Mr. Cowartand Mr. Carlson at $385,000 and $240,000, respectively. Notwithstanding the Increases in Salary, the Committee determined thatsuch increases would not go into effect for at least 90 days because of our lack of liquidity, after which time the Committee will re-examine our liquidity position and determine whether such Increases in Salary will become effective (the “90 Day Compensation Re-Examination”).

Effective on August 7, 2015, we entered into new employment agreements with Mr. Cowart and Mr. Carlson described in greaterdetail below:

Benjamin P. Cowart, Chief Executive Officer and President

On August 7, 2015, we entered into an Executive Employment Agreement with Benjamin P. Cowart, our Chief Executive Officer andPresident (Mr. Cowart’s prior employment agreement had expired on April 16, 2014; provided that the parties had agreed to continueoperating under the terms of the prior agreement until a new agreement was entered into). The agreement, which provides for Mr.Cowart to serve as our Chief Executive Officer, has a term extending through December 31, 2018, provided that the agreementautomatically extends for additional one year terms thereafter in the event neither party provides the other at least 60 days priornotice of their intention not to renew the terms of the agreement.

Pursuant to the terms of the agreement, Mr. Cowart’s annual compensation package includes (1) a base salary of $425,000 per year($267,500 per year subject to the terms of the 90 Day Compensation Re-Examination described above), subject to annual increases


as determined in the sole discretion of the Compensation Committee, and (2) a bonus payment to be determined in the solediscretion of the Compensation Committee in an annual targeted amount of not less than $385,000, subject to the compliance by Mr.Cowart with performance goals that may be established by the Compensation Committee from time to time, provided nogoals have been established to date, and that in the absence of performance goals, the amount of such bonus would be whollydetermined in the discretion of the Compensation Committee. Mr. Cowart is also paid an automobile allowance of $750 per monthduring the term of the agreement and is eligible to participate in our stock option plan and other benefit plans.

The agreement prohibits Mr. Cowart from competing against us during the term of the agreement and for a period of twelve monthsafter the termination of the agreement in any state and any other geographic area in which we or our subsidiaries provide RestrictedServices or Restricted Products, directly or indirectly, during the twelve months preceding the date of the termination of theagreement. “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation, transportation,manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling, demolition,decommission and marine salvage services and any other services that we or our subsidiaries have provided or are researching,developing, performing and/or providing at any time during the two years immediately preceding the date of termination, or which Mr.Cowart has obtained any trade secret or other confidential information about at any time during the two years immediately precedingthe date of termination of the agreement. “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil,aggregated feedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/orother hydrocarbons and any other product, that we or our subsidiaries have provided or are researching, developing, manufacturing,distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two years immediatelypreceding the date the agreement is terminated, or which Mr. Cowart obtained any trade secret or other confidential information inconnection with at any time during the two years immediately preceding the date of termination of the agreement.

We may terminate Mr. Cowart’s employment (a) for “cause” (which is defined to include, a material breach of the agreement byMr. Cowart, any act of misappropriation of funds or embezzlement by Mr. Cowart, Mr. Cowart committing any act of fraud, or Mr.Cowart being indicted of, or pleading guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or afelony under federal or applicable state law); (b) in the event Mr. Cowart suffers a physical or mental disability which renders himunable to perform his duties and obligations for either 90 consecutive days or 180 days in any 12-month period; (c) for any reasonwithout “cause”; or (d) upon expiration of the initial term of the agreement (or any renewal) upon notice as provided above. Theagreement also automatically terminates upon the death of Mr. Cowart.

Mr. Cowart may terminate his employment (a) for “good reason” (i.e., (a) if his position or duties are modified to such an extent thathis duties are no longer consistent with the position of CEO of the Company, (b) there has been a material breach by us of a materialterm of the agreement or Mr. Cowart reasonably believes that we are violating any law which would have a material adverse effect onour operations and such violation continues uncured thirty days after such breach and after notice thereof has been provided to us byMr. Cowart, or (c) Mr. Cowart’s compensation is reduced without his consent, or we fail to pay to Mr. Cowart any compensation dueto him upon five days written notice from Mr. Cowart informing us of such failure); provided, however, prior to any such termination byMr. Cowart for “good reason”, Mr. Cowart must first advise us in writing (within 15 days of the occurrence of such event) and provideus 15 days to cure (5 days in connection with the reduction of Mr. Cowart’s salary or the failure to pay amounts owed to him)); (b) forany reason without “good reason”; and (c) upon expiration of the initial term of the agreement (or any renewal) upon notice asprovided above.

In the event that Mr. Cowart’s employment is terminated for any reason (not including, however, a termination by us for “cause” or atermination as a result of Mr. Cowart’s death or disability) during the twelve month period following a Change of Control (a “Change ofControl Termination”) or in anticipation of a Change of Control, we are required to pay Mr. Cowart, within 60 days following the laterof (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment in alump sum in an amount equal to 3.0 times the sum of his current base salary and the amount of the last bonus payable to Mr. Cowart(the “Change of Control Payment”), which amount is due within 60 days of the later of (i) the date of such Change of ControlTermination; and (ii) the date of such Change of Control. If Mr. Cowart’s employment terminates due to a Change of ControlTermination within six (6) months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for allpurposes. In addition, in the event of a Change of Control, all of Mr. Cowart’s equity-based compensation immediately vests to Mr.Cowart and any outstanding stock options held by Mr. Cowart can be exercised by Mr. Cowart until the earlier of (A) one (1) year fromthe date of termination and (B) the latest date upon which such stock options would have expired by their original terms under anycircumstances, provided that if Mr. Cowart’s employment ends in anticipation of a Change of Control and such equity-basedcompensation awards or stock options have previously expired pursuant to their terms, the Company is required to pay Mr. Cowart alump sum payment, payable on the same date as the Change of Control Payment, equal to the black scholes value of the expiredand unexercised equity compensation awards and stock options held by Mr. Cowart on the date of termination, based on the value ofsuch awards had they been exercisable through the end of their stated term and had not previously expired. “Change of Control” forthe purposes of the agreement means: (a) any person obtaining beneficial ownership representing more than 50% of the total votingpower represented by our then outstanding voting securities without the approval of not fewer than two-thirds of our Board ofDirectors; (b) a merger or consolidation of us whether or not

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approved by our Board of Directors, other than a merger or consolidation that would result in our voting securities immediately priorthereto continuing to represent at least 50% of the total voting power outstanding immediately after such merger or consolidation, (c)our shareholders approving a plan of complete liquidation or an agreement for the sale or disposition by us of all or substantially all ofour assets, or (d) as a result of the election of members to our Board of Directors, a majority of the Board of Directors consists ofpersons who are not members of the Board of Directors on August 7, 2015, except in the event that such slate of directors isproposed by a committee of the Board of Directors; provided that if the definition of “Change of Control” in our Stock Incentive Plansor Equity Compensation Plans is more favorable than the definition above, then such definition shall be controlling.

If Mr. Cowart’s employment is terminated pursuant to his death, disability, the end of the initial term (or any renewal term), without“good reason” by Mr. Cowart, or by us for “cause”, Mr. Cowart is entitled to all salary accrued through the termination date and noother benefits other than as required under the terms of employee benefit plans in which Mr. Cowart was participating as of thetermination date. Additionally, any unvested stock options or equity compensation held by Mr. Cowart immediately terminate and areforfeited (unless otherwise provided in the applicable award) and any previously vested stock options (or if applicable equitycompensation) are subject to the terms and conditions set forth in the applicable Stock Incentive Plan or Equity Compensation Plan,or award agreement, as such may describe the rights and obligations upon termination of employment of Mr. Cowart.

If Mr. Cowart’s employment is terminated by Mr. Cowart for “good reason”, or by us without “cause”, (a) Mr. Cowart is entitled tocontinue to receive the salary due pursuant to the terms of the agreement at the rate in effect upon the termination date for twelve(12) months following the termination date, payable in accordance with our normal payroll practices and policies; (b) Mr. Cowart isentitled to the pro rata amount of any cash bonus which would be payable to Mr. Cowart had he remained employed for an additionaltwelve months following the termination date; and (c) provided Mr. Cowart elects to receive continued health insurance coveragethrough COBRA, we are required to pay Mr. Cowart’s monthly COBRA contributions for health insurance coverage, as may beamended from time to time (less an amount equal to the premium contribution paid by active Company employees, if any) for twelvemonths following the termination date; provided, however, that if at any time Mr. Cowart is covered by a substantially similar level ofhealth insurance through subsequent employment or otherwise such obligation ceases. Additionally, unvested benefits (whetherequity or cash benefits and bonuses) will vest immediately upon such termination and any outstanding stock options previouslygranted to Mr. Cowart will vest immediately upon such termination and will be exercisable until the earlier of (A) one year from thedate of termination and (B) the latest date upon which such stock options would have expired by their original terms under anycircumstances.

The agreement contains standard assignment of inventions, indemnification and confidentiality provisions. Further, Mr. Cowart issubject to non-solicitation covenants during the term of the agreement.

Although Mr. Cowart will be prohibited from competing with us while he is employed with us, he will only be prohibited fromcompeting for twelve months after his employment with us ends pursuant to the agreement, provided that Mr. Cowart is alsoprohibited from competing against us in connection with certain of our operations until August 17, 2017, pursuant to a prior Non-Competition and Non-Solicitation Agreement entered into with Mr. Cowart.

Chris Carlson, Chief Financial Officer and Secretary

On August 7, 2015, we entered into an Executive Employment Agreement with Chris Carlson, our Chief Financial Officer andSecretary (Mr. Carlson’s prior employment agreement had expired on April 1, 2015; provided that the parties had agreed to continueoperating under the terms of the prior agreement until a new agreement was entered into). The agreement, which provides for Mr.Carlson to serve as our Chief Financial Officer, has a term extending through December 31, 2018, provided that the agreementautomatically extends for additional one year terms thereafter in the event neither party provides the other at least 60 days priornotice of their intention not to renew the terms of the agreement.

Pursuant to the terms of the agreement, Mr. Carlson’s annual compensation package includes (1) a base salary of $240,000 per year($195,000 per year subject to the terms of the 90 Day Compensation Re-Examination described above), subject to annual increasesas determined in the sole discretion of the Compensation Committee, and (2) a bonus payment to be determined in the solediscretion of the Compensation Committee in an annual targeted amount of not less than $240,000, subject to the compliance by Mr.Carlson with performance goals that may be established by the Compensation Committee from time to time, provided no goals havebeen established to date, and that in the absence of performance goals, the amount of such bonus would be wholly determined in thediscretion of the Compensation Committee. Mr. Carlson is also paid an automobile allowance of $750 per month during the term ofthe agreement and is eligible to participate in our stock option plan and other benefit plans.

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The agreement prohibits Mr. Carlson from competing against us during the term of the agreement and for a period of twelve monthsafter the termination of the agreement in any state and any other geographic area in which we or our subsidiaries provide RestrictedServices or Restricted Products, directly or indirectly, during the twelve months preceding the date of the termination of theagreement. “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation, transportation,manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling, demolition,decommission and marine salvage services and any other services that we or our subsidiaries have provided or are researching,developing, performing and/or providing at any time during the two years immediately preceding the date of termination, or which Mr.Carlson has obtained any trade secret or other confidential information about at any time during the two years immediately precedingthe date of termination of the agreement. “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil,aggregated feedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/orother hydrocarbons and any other product, that we or our subsidiaries have provided or are researching, developing, manufacturing,distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two years immediatelypreceding the date the agreement is terminated, or which Mr. Carlson obtained any trade secret or other confidential information inconnection with at any time during the two years immediately preceding the date of termination of the agreement.

We may terminate Mr. Carlson’s employment (a) for “cause” (which is defined to include, a material breach of the agreement byMr. Carlson, any act of misappropriation of funds or embezzlement by Mr. Carlson, Mr. Carlson committing any act of fraud, or Mr.Carlson being indicted of, or pleading guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or afelony under federal or applicable state law); (b) in the event Mr. Carlson suffers a physical or mental disability which renders himunable to perform his duties and obligations for either 90 consecutive days or 180 days in any 12-month period; (c) for any reasonwithout “cause”; or (d) upon expiration of the initial term of the agreement (or any renewal) upon notice as provided above. Theagreement also automatically terminates upon the death of Mr. Carlson.

Mr. Carlson may terminate his employment (a) for “good reason” (i.e., (a) if his position or duties are modified to such an extent thathis duties are no longer consistent with the position of CFO of the Company, (b) there has been a material breach by us of a materialterm of the agreement or Mr. Carlson reasonably believes that we are violating any law which would have a material adverse effecton our operations and such violation continues uncured thirty days after such breach and after notice thereof has been provided to usby Mr. Carlson, or (c) Mr. Carlson’s compensation is reduced without his consent, or we fail to pay to Mr. Carlson any compensationdue to him upon five days written notice from Mr. Carlson informing us of such failure); provided, however, prior to any suchtermination by Mr. Carlson for “good reason”, Mr. Carlson must first advise us in writing (within 15 days of the occurrence of suchevent) and provide us 15 days to cure (5 days in connection with the reduction of Mr. Carlson’s salary or the failure to pay amountsowed to him)); (b) for any reason without “good reason”; and (c) upon expiration of the initial term of the agreement (or any renewal)upon notice as provided above.

In the event that Mr. Carlson’s employment is terminated for any reason (not including, however, a termination by us for “cause” or atermination as a result of Mr. Carlson’s death or disability) during the twelve month period following a Change of Control (a “Changeof Control Termination”) or in anticipation of a Change of Control, we are required to pay Mr. Carlson, within 60 days following thelater of (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment ina lump sum in an amount equal to 3.0 times the sum of his current base salary and the amount of the last bonus payable to Mr.Carlson (the “Change of Control Payment”), which amount is due within 60 days of the later of (i) the date of such Change of ControlTermination; and (ii) the date of such Change of Control. If Mr. Carlson’s employment terminates due to a Change of ControlTermination within six (6) months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for allpurposes. In addition, in the event of a Change of Control, all of Mr. Carlson’s equity-based compensation immediately vests to Mr.Carlson and any outstanding stock options held by Mr. Carlson can be exercised by Mr. Carlson until the earlier of (A) one (1) yearfrom the date of termination and (B) the latest date upon which such stock options would have expired by their original terms underany circumstances, provided that if Mr. Carlson’s employment ends in anticipation of a Change of Control and such equity-basedcompensation awards or stock options have previously expired pursuant to their terms, the Company is required to pay Mr. Carlson alump sum payment, payable on the same date as the Change of Control Payment, equal to the black scholes value of the expiredand unexercised equity compensation awards and stock options held by Mr. Carlson on the date of termination, based on the value ofsuch awards had they been exercisable through the end of their stated term and had not previously expired. “Change of Control” forthe purposes of the agreement means: (a) any person obtaining beneficial ownership representing more than 50% of the total votingpower represented by our then outstanding voting securities without the approval of not fewer than two-thirds of our Board ofDirectors; (b) a merger or consolidation of us whether or not approved by our Board of Directors, other than a merger or consolidationthat would result in our voting securities immediately prior thereto continuing to represent at least 50% of the total voting poweroutstanding immediately after such merger or consolidation, (c) our shareholders approving a plan of complete liquidation or anagreement for the sale or disposition by us of all or substantially all of our assets, or (d) as a result of the election of members to ourBoard of Directors, a majority of the Board

F-24


of Directors consists of persons who are not members of the Board of Directors on August 7, 2015, except in the event that such slateof directors is proposed by a committee of the Board of Directors; provided that if the definition of “Change of Control” in our StockIncentive Plans or Equity Compensation Plans is more favorable than the definition above, then such definition shall be controlling.

If Mr. Carlson’s employment is terminated pursuant to his death, disability, the end of the initial term (or any renewal term), without“good reason” by Mr. Carlson, or by us for “cause”, Mr. Carlson is entitled to all salary accrued through the termination date and noother benefits other than as required under the terms of employee benefit plans in which Mr. Carlson was participating as of thetermination date. Additionally, any unvested stock options or equity compensation held by Mr. Carlson immediately terminate and areforfeited (unless otherwise provided in the applicable award) and any previously vested stock options (or if applicable equitycompensation) are subject to the terms and conditions set forth in the applicable Stock Incentive Plan or Equity Compensation Plan,or award agreement, as such may describe the rights and obligations upon termination of employment of Mr. Carlson.

If Mr. Carlson’s employment is terminated by Mr. Carlson for “good reason”, or by us without “cause”, (a) Mr. Carlson is entitled tocontinue to receive the salary due pursuant to the terms of the agreement at the rate in effect upon the termination date for twelve(12) months following the termination date, payable in accordance with our normal payroll practices and policies; (b) Mr. Carlson isentitled to the pro rata amount of any cash bonus which would be payable to Mr. Carlson had he remained employed for an additionaltwelve months following the termination date; and (c) provided Mr. Carlson elects to receive continued health insurance coveragethrough COBRA, we are required to pay Mr. Carlson’s monthly COBRA contributions for health insurance coverage, as may beamended from time to time (less an amount equal to the premium contribution paid by active Company employees, if any) for twelvemonths following the termination date; provided, however, that if at any time Mr. Carlson is covered by a substantially similar level ofhealth insurance through subsequent employment or otherwise, such obligation ceases. Additionally, unvested benefits (whetherequity or cash benefits and bonuses) will vest immediately upon such termination and any outstanding stock options previouslygranted to Mr. Carlson will vest immediately upon such termination and will be exercisable until the earlier of (A) one year from thedate of termination and (B) the latest date upon which such stock options would have expired by their original terms under anycircumstances.

The agreement contains standard assignment of inventions, indemnification and confidentiality provisions. Further, Mr. Carlson issubject to non-solicitation covenants during the term of the agreement.

Although Mr. Carlson will be prohibited from competing with us while he is employed with us, he will only be prohibited fromcompeting for twelve months after his employment with us ends pursuant to the agreement, provided that Mr. Carlson is alsoprohibited from competing against us in connection with certain of our operations until August 17, 2017, pursuant to a prior Non-Competition and Non-Solicitation Agreement entered into with Mr. Carlson.

Aaron Oil Acquisition

Effective August 6, 2015, H&H Oil acquired a collection route consisting of collecting, shipping and selling used oil, oil filters,antifreeze and other related services in the state of Louisiana, but excluding industrial customers, maritime customers, off shorecustomers, dockside locations, industrial services, used absorbent services, wastewater generating customers andcollectors/transporters of crankcase used oil, petroleum fuel reclamation customers and crude oilproducers/processing/recovery/reclamation customers of Aaron Oil Company, Inc. (“Aaron Oil”). Included in the purchase werecertain trucks and other assets owned by Aaron Oil and certain contract rights. The President, Chief Executive Officer and owner ofAaron Oil is Dan Cowart, the brother of our Chief Executive Officer and largest stockholder, Benjamin P. Cowart. The acquisition pricepaid at closing was approximately $1 million, which included a reimbursement for certain prepaid contract rights. Aaron Oil alsoagreed to provide account servicing services to us for a period of sixty days following the closing at an agreed upon price per gallon ofoil serviced. Aaron Oil also agreed to a non-compete provision prohibiting Aaron Oil from competing against the Company in theLouisiana market for a period of two years from the closing.

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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, andSection 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by thefollowing 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 statementscontain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily beaccurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are basedon information available at the time the statements are made and involve known and unknown risks, uncertainties and other factorsthat may cause our results, levels of activity, performance or achievements to be materially different from the information expressedor implied by the forward-looking statements in this Report. These factors include:

• risks associated with our outstanding credit facilities, including amounts owed, restrictive covenants, security interests thereonand our ability to repay such facilities and amounts due thereon when due;

• the level of competition in our industry and our ability tocompete;

• our ability to respond to changes in ourindustry;

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

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

• our ability to scale ourbusiness;

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

• our ability to obtain and retain customers;

• our ability to produce our products at competitiverates;

• material weaknesses in our internal controls over financialreporting;

• our ability to execute our business strategy in a very competitiveenvironment;

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

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

• the impact of competitive services andproducts;

• our ability to integrate acquisitions;

• our ability to complete future acquisitions;

• our ability to maintaininsurance;

• potential future litigation, judgments andsettlements;

• rules and regulations making our operations more costly orrestrictive;

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

• economic downturns both in the United States andglobally;

• risk of increased regulation of our operations andproducts;

• negative publicity and public opposition to ouroperations;

• disruptions in the infrastructure that we and our partners relyon;

• an inability to identify attractive acquisition opportunities and successfully negotiate acquisitionterms;


• our ability to effectively integrate acquired assets, companies, employees orbusinesses;

• liabilities associated with acquired companies, assets orbusinesses;

• interruptions at ourfacilities;

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

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

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• our ability to acquire and construct newfacilities;

• certain events of default which have occurred under our debt facilities and previously beenwaived;

• prohibitions on borrowing and other covenants of our debtfacilities;

• our ability to effectively manage ourgrowth;

• repayment of and covenants in our debtfacilities;

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

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

You should read the matters described in “Risk Factors” below and disclosed in the Company’s Annual Report on Form 10-K/A, filedwith the Commission on April 15, 2015 and the other cautionary statements made in this Report as being applicable to all relatedforward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in thisReport will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-lookingstatements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, eventhough our situation may change in the future.

Please see the “Glossary of Selected Terms” incorporated by reference hereto as Exhibit 99.1, for a list of abbreviations anddefinitions 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 andgas industries in general from market research reports, analyst reports and other publicly available information. Although we believethat this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have notindependently 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 anAmended and Restated Agreement and Plan of Merger dated May 19, 2008, by and between Vertex Holdings, L.P. (formerly VertexEnergy, 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 ("MergerSubsidiary"), 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 Subsidiarycontinuing 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) eachoutstanding share of World Waste Series A preferred stock was cancelled and exchanged for 0.4062 shares of our Series A preferredstock; and (iii) each outstanding share of World Waste Series B preferred stock was cancelled and exchanged for 11.651 shares ofour Series A preferred stock. Additionally, as a result of the Merger, the common stock of World Waste was effectively reversed onefor ten (10) as a result of the exchange ratios set forth in the Merger, and unless otherwise noted, the impact of such effective reversestock split, created by the exchange ratio set forth above, is retroactively reflected throughout this Report.

Material Acquisitions

Effective as of August 31, 2012, we acquired 100% of the outstanding equity interests of Vertex Acquisition Sub, LLC (“AcquisitionSub”), a special purpose entity consisting of substantially all of the assets of Holdings and real-estate properties of B & S CowartFamily L.P. (“B&S LP” and the “Acquisition”), both of which entities were owned and operated by related parties. Prior to closing theAcquisition, 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 inHoldings’ wholly-owned operating subsidiaries, Cedar Marine Terminals, L.P. (“CMT”), Crossroad Carriers, L.P. (“Crossroad”), VertexRecovery, L.P. (“Vertex Recovery”) and H&H Oil, L.P. (“H&H Oil”, and collectively, the “Transferred Partnerships”), and B&S LPcontributed real estate associated with the operations of H&H Oil.

We paid the following consideration for 100% of the equity interests in Acquisition Sub (i) to Holdings, (a) $14.8 millionin 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 cashconsideration, representing the appraised value of certain real estate contributed by B&S LP to Acquisition Sub. Additionally, for eachof the three one-year periods following September 11, 2012, Holdings will be eligible to receive earn-out payments of $2.23 million,up to $6.7 million in the aggregate, contingent on the combined company achieving adjusted EBITDA targets of $10.75

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million, $12.0 million and $13.5 million, respectively, in those periods. The first and second earn-out targets for the one year periodsending September 11, 2013 and 2014, respectively, were not met and as such no earn-out payments were paid for such two periods.The Company has also determined that the 2015 target (for year three) will also not be met. As such, no earn-out payments will bedue or made pursuant to the terms of the Acquisition.

We had numerous relationships and related-party transactions with Holdings and its subsidiaries prior to the closing of theAcquisition, including the lease of a storage facility, the subletting of office space, and agreements to operate the Thermal ChemicalExtraction Process ("TCEP") (described below) facility and to transport and store feedstock and end products. The closing of theAcquisition eliminated these related-party transactions. The description of our operations below reflects the closing of theAcquisition, unless otherwise stated or the discussion requires otherwise.

E-Source

Effective October 1, 2013, Vertex acquired a 51% interest in E-Source Holdings, LLC (“E-Source”), a company that leases andoperates a facility located in Houston, Texas, and provides dismantling, demolition, decommission and marine salvage services atindustrial facilities throughout the Gulf Coast. E-Source also owns and operates a fleet of trucks and other vehicles used for shippingand handling equipment and scrap materials. The assets and operations of E-Source fall under our Recovery division.

The consideration paid for the acquisition of E-Source was approximately $900,000 and the right of one of the sellers (the “Earn-OutSeller”) to earn additional earn-out payments of up to 15% of E-Source’s net income before taxes, in the event certain calendar yearnet income thresholds are met, in calendar years 2014 through 2017, as well as a commission of 20% of the net income before taxesassociated with certain future planned projects of E-Source required to be completed prior to December 31, 2014, as long as suchapplicable seller remains an employee of E-Source during such applicable periods. Effective on March 14, 2014, we entered into anamendment to our acquisition agreement with the Earn-Out Seller, and mutually agreed that the lesser of (a) 20% and (b) $100,000,per calendar year of earn-out payments due the Earn-Out Seller, if any, would be payable in shares of our restricted common stock,based on the average of the five closing sales prices of the Company’s common stock on the first five trading days of each applicablecalendar year (each a “Valuation”) for which the earn-out consideration relates, provided that the parties mutually agreed to use avaluation of $3.2922 per share (the “2014 Valuation Price”) for any earn-out payments relating to the 2014 calendar year and furtheragreed that in no event would any future calendar year Valuation be less than the 2014 Valuation Price. A total of $136,662 of earn-out payments was made to the E-Source Seller in 2014 (all in cash), however, no additional payments are due in connection with theearn-out as E-Source's management has subsequently resigned and forfeited all remaining earn-out payments.

Effective January 1, 2014, the Company purchased an additional 19% ownership interest in E-Source. In consideration for theadditional interest, the Company paid $854,050 of which $200,000 was paid on April 11, 2014 and the remainder was paid monthly in$72,672 installments through December 31, 2014. The balance of $145,344 was paid on January 23, 2015. On September 4, 2014,the Company acquired the remaining 30% interest in E-Source, of which it had previously acquired 70%. In consideration for the 30%interest, the Company issued 207,743 shares of common stock, valued at approximately $1,790,745. As a result of the acquisitions,the Company owned 100% of E-Source as of September 4, 2014 and continued to own 100% of E-Source through the date of thisreport.

Omega Acquisition

On May 2, 2014, we completed the Initial Closing (defined below) contemplated under that certain Asset Purchase Agreemententered into on March 17, 2014, and amended by the First Amendment dated April 14, 2014, Second Amendment dated April 30,2014, Third Amendment dated May 2, 2014, and Fourth Amendment dated January 19, 2015 (as amended to date, the “OmegaPurchase Agreement”) by and among the Company, Vertex Refining LA, LLC and Vertex Refining NV, LLC (“Vertex RefiningNevada”), both wholly-owned subsidiaries of Vertex Energy Operating, LLC, our wholly-owned subsidiary (“Vertex Operating”),Louisiana LV OR LLC f/k/a Omega Refining, LLC (“Omega Refining”), Bango Refining NV, LLC (“Bango Refining”) and OmegaHoldings Company LLC (“Omega Holdings” and collectively with Omega Refining and Bango Refining, “Omega” or the “sellers”).

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

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The acquisition was to close in two separate closings, the first of which relating to the acquisition of Omega Refining (including theMarrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chasse, Louisiana) and ownership of Golden State, asdescribed above (the “Acquired Business”), closed on May 2, 2014 (the “Initial Closing”), and the second of which relating to theacquisition of Bango Refining and the Bango, Nevada plant, was planned to close thereafter, subject to certain closing conditionsbeing met prior to closing (the “Final Closing”).

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

The amount due at the Final Closing, in consideration for the acquisition of Bango Refining, was agreed to be the assumption ofcertain loans made pursuant to the Omega Secured Note (described below), the issuance of 1,500,000 shares of our common stockof which 650,000 shares (with an agreed value of $3.2301 per share or approximately $2.1 million) were to be held in escrow (the“Pledged Shares”) and used to satisfy indemnification claims and secure the repayment of the Omega Secured Note (defined below),and which amount was subject to adjustment in the event minimum inventory levels were not delivered at the Final Closing, and theassumption of certain capital lease obligations and other liabilities relating to contracts and leases of Bango Refining. A portion of thePledged Shares are to be released from escrow, subject to outstanding claims, on September 15, 2015, and the remainder were to bereleased on the 18 month anniversary of the Final Closing. Subject to certain negotiated exceptions for excluded liabilities, taxes andother fundamental items, the sellers’ indemnification obligations are capped at $5 million. Vertex's obligation to consummate the FinalClosing was subject to among other things, compliance with certain provisions of the credit agreements described herein and that theBango plant operated by Bango Refining be fully restored and operational, as well as the plant meeting certain used motor oilprocessing run rates and that there are no adverse claims or legal proceedings related to an accident that occurred at the Bangoplant in December 2013.

The required closing date of the Final Closing was extended by the parties until January 31, 2015, provided that such Final Closingfailed to occur by such date, and on February 25, 2015, we provided Omega Refining, Bango Refining, and Omega Holdings, formalnotice of the termination of the Company's rights to complete the Final Closing. Notwithstanding the above, neither party is relieved ofany of their obligations under the Omega Purchase Agreement in connection with the Initial Closing nor the transactionscontemplated thereby, including the Company's obligation to make contingent payments and their respective indemnificationobligations.

In connection with the Initial Closing, Omega Refining and Bango Refining provided Vertex Refining Nevada a Secured PromissoryNote (the “Omega Secured Note”) in the aggregate amount of $13,858,067, representing (a) a loan to Omega in the amount ofapproximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at the Initial Closing(which included consideration relating to the assets acquired at the Initial Closing and which were planned to be acquired at the FinalClosing) exceeded the value of assets acquired at the Initial Closing) (the “Purchase Price Loan”); (b) a $750,000 loan related to thedelivery of a certain amount of used motor oil inventory at the Initial Closing (the “First Inventory Loan”); (c) a $1,400,000 loan relatedto the delivery of a certain amount of used motor oil inventory planned to be delivered at the Final Closing (the “Second InventoryLoan” and along with the First Inventory Loan, the “Inventory Loans”); (d) a loan in a single advance of $3.15 million to satisfyaccounts payable and other working capital related obligations of Omega after the Initial Closing, provided an additional $1 million inloans were made in fiscal 2015, raising the amount of such working capital advances to $4.15 million (the “Draw Down Loan”) and (e)an additional loan of up to $1 million for capital expenditures, if mutually approved by us and Omega (the “Capital Expenditure Loan”).The Purchase Price Loan and the Draw Down Loan bear interest at the short-term federal rate as published by the Internal RevenueService from time to time (currently 0.33% per annum) prior to October 30, 2014, and thereafter at 9.5% per annum, payable monthlyin arrears and have a maturity date of March 31, 2015. The First Inventory Loan and the Draw Down Loan accrue interest at the rateof 9.5% per annum beginning on May 31, 2014, and were due and payable on March 31, 2015. Upon an event of default under any ofthe loans, the loans accrue interest at 18% per annum until paid in full. The Purchase Price Loan and the Draw Down Loan were dueand payable in full on March 31, 2015, and were not paid on such date and are currently in default.

The repayment of the Omega Secured Note is guaranteed by Omega Holdings pursuant to a Guaranty Agreement and secured by asecurity interest granted pursuant to the terms of the Omega Secured Note and a Leasehold Deed of Trust, Security Agreement,Assignment of Leases and Rents and Fixture Filing. Additionally, we have the right to set-off any amount due upon an event of defaultagainst certain of the Pledged Shares (if any) and the earn-out consideration described below (provided that we have determined thatno earn-out payments will be due), subject to the terms of a Pledge Agreement and the Omega Purchase Agreement.

The assets and operations acquired from Omega fall under our Black Oil division, as described below.

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Heartland Acquisition

On December 5, 2014 (the “Closing”), we closed the transactions contemplated by the October 21, 2014 Asset Purchase Agreementby and among the Company; Vertex Refining OH, LLC (“Vertex OH”), a wholly-owned subsidiary of Vertex Operating; VertexOperating and Warren Ohio Holdings Co., LLC. f/k/a Heartland Group Holdings, LLC (“Heartland”), as amended by the FirstAmendment to Purchase Agreement dated November 26, 2014 the Second Amendment to Purchase Agreement dated December 5,2014 and the Third Amendment to Purchase Agreement dated March 4, 2015 (the Asset Purchase Agreement as amended by theFirst Amendment, Second Amendment, and Third Amendment, the “Heartland Purchase Agreement”).

In connection with the Closing, we acquired substantially all of the assets of Heartland related to and used in an oil re-refinery and, inconnection with the collecting, aggregating and purchasing of used lubricating oils and the re-refining of such oils into processed oilsand other products for the distribution, supply and sale to end-customers, including raw materials, finished products and work-in-process, equipment and other fixed assets, customer lists and marketing information, the name ‘Heartland’ and other related tradenames, Heartland’s real property relating to its used oil refining facility located in Columbus, Ohio, used oil storage and transferfacilities located in Columbus, Zanesville and Norwalk, Ohio (provided that the acquisition of the Norwalk, Ohio location is subject tothe terms and conditions of the Second Amendment), and leases related to storage and transfer facilities located in Zanesville, Ohio,Mount Sterling, Kentucky, and Ravenswood, West Virginia (collectively, the “Heartland Assets”) and assumed certain liabilities ofHeartland associated with certain assumed and acquired agreements (collectively, the “Acquired Business”). The main assetsexcluded from the purchased assets pursuant to the Heartland Purchase Agreement were Heartland’s cash and cash equivalents,receivables, certain prepaid expenses, refunds and related claims, rights to certain tax refunds, and certain assets used in theoperations of Heartland which are used more than incidentally by Heartland’s majority equity owner (Warren Distribution, Inc.(“Warren”)) in connection with the operation of its other businesses and certain real property.

The purchase price paid in consideration for the Heartland Assets was the assumption of the assumed liabilities and an aggregate of2,257,467 shares of restricted common stock (the “Heartland Shares”), representing a total of 1,189,637 shares valued at $8,276,792,as agreed pursuant to the terms of the original Heartland Purchase Agreement, 303,957 shares which were due in consideration forthe purchase of various inventory of Heartland acquired by the Company at the closing in connection with the Inventory Purchase(described below), valued at $882,285, and a total of 763,873 shares due in consideration for the Reimbursement of OperatingLosses (described below). A total of 150,000 shares of restricted common stock issued at Closing are being held in escrow and willbe used to satisfy indemnification claims (the “Escrow Shares”). Pursuant to the Heartland Purchase Agreement, the parties agreed toa true up of the inventory of the Acquired Business sixty days after the Closing (February 3, 2015). Pursuant to the true up, anyadditional amount owed by the Company to Heartland for inventory at Closing (less amounts already paid for at Closing) was to bepaid in shares of the Company’s restricted common stock, based on the volume weighted average prices of the Company’s commonstock on the NASDAQ Capital Market on the ten (10) trading days immediately prior to Closing, which totaled $3.56. An aggregate ofan additional $200,000 was owed to Heartland in connection with the inventory true-up and as such, we issued Heartland anadditional 56,180 shares of restricted common stock ($200,000 divided by $3.56).

Pursuant to a Consulting Agreement previously entered into with Heartland in July 2014, Vertex Operating agreed to provideconsulting services to Heartland while the parties negotiated the definitive terms of the Heartland Purchase Agreement (the“Consulting Agreement”), and to reimburse Heartland for its operating losses (on a cash basis net of interest, depreciation, corporateoverhead expenses and insurance proceeds received), which totaled $2,716,561 as of closing (the “Reimbursement for OperatingLosses”).

Heartland also has the right pursuant to the terms of the Heartland Purchase Agreement to earn additional earn-out consideration ofup to a maximum of $8,276,792, based on total EBITDA related to the Heartland Business during the twelve month period beginningon January 1, 2016 (the "Earnout Period"), as follows (as applicable, the "Contingent Payment"):

EBITDA generated during Earnout Period Contingent Payment DueLess than $1,650,000 $0

At least $1,650,000 $4,138,396

More than $1,650,000 and less than $3,300,000 Pro-rated between $4,138,396 and $8,276,792

$3,300,000 or more $8,276,792

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Any Contingent Payment due is payable 50% in cash and 50% in shares of the Company’s common stock based on VWAPcommencing on the trading day immediately following the last day of the Earnout Period and ending on such tenth trading daythereafter. Additionally, the amount of any Contingent Payment is reduced by two-thirds of the cumulative total of required capitalexpenditures incurred at Heartland’s refining facility in Columbus, Ohio, which are paid or funded by Vertex OH after the Closing, notto exceed $866,667, which capital expenditures are estimated to total $1.3 million in aggregate.

Notwithstanding the above, the maximum number of shares of common stock to be issued pursuant to the Heartland PurchaseAgreement (including shares sold in connection with certain Subscription Agreements entered into with trusts beneficially owned byour Chief Executive Officer on or around the same date) cannot (i) exceed 19.9% of the outstanding shares of common stockoutstanding on October 21, 2014, (ii) exceed 19.9% of the combined voting power of the Company on October 21, 2014, or (iii)otherwise exceed such number of shares of common stock that would violate applicable listing rules of the NASDAQ Stock Market inthe event the Company’s stockholders do not approve the issuance of such shares (the “Share Cap”). In the event the number ofshares to be issued exceeds the Share Cap, then Vertex OH is required to instead pay any such additional consideration in cash orobtain the approval of the Company’s stockholders under applicable rules and requirements of the NASDAQ Capital Market for theadditional issuance of shares.

Additionally, we were required to file a registration statement within 135 days of the closing registering all of the shares of theCompany's common stock issued to Heartland as of such filing date and use commercially reasonable efforts to obtain effectivenessof the registration statement within 30 days of the filing date if the SEC did not review the registration statement or within 105 days ofthe filing date if the SEC did review the registration statement filing, provided that we were unable to meet such effectivenessdeadlines. Notwithstanding our failure to meet the required effectiveness deadlines, we have filed a registration statement to registerthe shares issued to Heartland to date, and to date Heartland has not asserted any damages against us for our failure to meet suchregistration deadlines. Pursuant to the Purchase Agreement, Heartland agreed to not sell more than 50,000 shares of the Company'scommon stock issued to it each week, if otherwise permitted pursuant to applicable law and regulation.

The assets and operations acquired from Heartland fall under our Black Oil division as described below.

Recent Events:

On April 27, 2015, we dismissed LBB & Associates Ltd., LLP and engaged Hein & Associates LLP as our independent registeredpublic accounting firm through and with the approval and recommendation of our Board of Directors and Audit Committee.

Churchill County, Nevada Lease

On April 30, 2015, Vertex Refining Nevada, entered into a Lease With Option For Membership Interest Purchase (the “Bango Lease”)with Bango Oil, LLC (“Bango Oil”). Pursuant to the Bango Lease, we, through Vertex Refining Nevada, agreed to lease a used oil re-refining plant located on approximately 40 acres in Churchill County, Nevada (the “Bango Plant”). The Bango Plant produces baselubricating oils and all of the raw and finish products into and out of the Bango Plant are transported by either rail car or tanker trucks.

The Bango Plant was previously leased by Bango Refining, a subsidiary of Omega Holdings; however, the lease was terminated byBango Oil and we were able to enter into the Bango Lease directly with Bango Oil instead of having to acquire the rights to the BangoPlant pursuant to the prior terms of the Omega Purchase Agreement (described above), pursuant to which we were originally requiredto deliver 1.5 million shares to Omega and to forgive amounts due under the Omega Secured Note. Bango Refining ceased operatingthe Bango Plant on April 30, 2015. As a result of its lease with Bango Oil, Vertex Refining Nevada has the right as of May 1, 2015 tooperate the Bango Plant and is in the process of obtaining required operating permits.

The Bango Lease contains usual and customary covenants, representations, events of default and indemnification requirements for acommercial lease agreement of similar size and scope as the Bango Lease. The term of the Bango Lease continues until August 10,2025, provided that as long as no event of default under the Bango Lease exists, we have the right to terminate the Bango Lease atany time, beginning six months after the start of the lease with twelve months prior notice to Bango Oil, provided further that Bango Oilcan terminate the Bango Lease with thirty days prior notice to us during the twelve month notice period (i.e., after we have previouslyprovided the twelve month notice of our intent to terminate the Bango Lease). Notwithstanding the above, we also have the right,during the first six months of the lease, to terminate the Bango Lease with five days written notice to Bango Oil in the event certainmaterial improvements or equipment at the Bango Plant are physically removed by creditors of Omega, or such creditors obtain apreliminary injunction preventing the use of a material portion of such improvements or equipment, and in either case it interferes withour use of the plant.

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No rent is due under the Bango Lease until January 1, 2016, at which time rent in the amount of $244,000 per month is due for theremainder of the term of the lease. We also have the option of paying rent which is due during 2016 in shares of our restrictedcommon stock. Specifically, we have the right to issue shares of restricted common stock to Bango Oil equal to 110% of the rentalpayment due, based on the volume weighted average price (VWAP) of our common stock during the ten day period preceding thefirst of each applicable month, provided that if on the six month anniversary of the issuance of any stock issued in consideration forrent due, the value of the stock issued is less than 110% of the rental payment due, we are required to pay Bango Oil the differencein cash or issue Bango Oil additional shares of common stock equal to the difference in value. In addition to monthly rent, we arerequired to pay all taxes assessed on the property under the Bango Lease.

The Bango Lease also includes a purchase option, whereby, if no event of default exists on the Bango Lease, we have the option atany time during the term of the lease to purchase all of the equity interests of Bango Oil (the “Purchase Option”), effectively acquiringownership of the Bango Plant. The initial consideration due to Bango Oil in connection with the Purchase Option is $8.5 million,provided that if the Purchase Option is not exercised by us prior to August 31, 2015, the amount due increases by $125,000 permonth until July 1, 2016, and $3,000 per month thereafter, up to a maximum of $13 million, assuming we make timely rentalpayments under the lease (in the event we fail to timely make any rental payment due, the monthly increase in the purchase price forsuch applicable month increases by an additional $122,000). We also continue to maintain a first priority security interest in certain personal property of Omega used at the plant pursuant to ourprior agreements with Omega (which property we lease pursuant to the Personal Property Leases described below). In the event weobtain title to such property which secures the repayment of the Omega Secured Note through a foreclosure, we agreed to transfercertain assets which constitute fixtures to Bango Oil upon the termination of the Bango Lease, unless such termination is due to usexercising our rights under the Purchase Option. Notwithstanding the above, Vertex Refining Nevada entered into a PersonalProperty Lease with Omega Refining and Bango Refining, both related parties of Omega on April 30, 2015 (the “Personal PropertyLease”), whereby Vertex Refining Nevada agreed to lease all machinery, equipment and other tangible personal property located atthe Bango Plant from Omega Refining and Bango Refining, for $220,000 per month, provided that until the Omega Secured Note ispaid in full, Vertex Refining Nevada is able to accrue such payments and set them off against the amount due under the OmegaSecured Note. The Personal Property Lease terminates after 60 days unless Vertex Refining Nevada provides notice of its intent torenew for an additional 30 days. It is anticipated that Vertex Refining Nevada will acquire the leased personal property from OmegaRefining and Bango Refining at the termination of the Personal Property Lease pursuant to Article 9 of the Uniform Commercial Code,with such acquisition occurring through an offset of a portion of the amount due Vertex Refining under the Omega Secured Note.

Also on April 30, 2015, Vertex Refining Nevada and Vertex Operating, entered into a Shared Services Agreement whereby VertexOperating agreed to operate and provide support services at the Bango Plant for $80,000 per month through May 2, 2019.

In addition to the Bango Lease for the Bango Plant, Vertex Refining Nevada also entered into two Lease and Purchase Agreements(the “Equipment Leases”). The Equipment Leases provide the use of a rail facility and related equipment and a pre-fabricated metalbuilding located at the plant. The Equipment Leases expires on December 31, 2016, subject to certain rights Vertex Refining Nevadahas to terminate the leases earlier. The monthly rental costs for the leases are $16,300 and $3,800 per month, respectively, providedno rent is due for fiscal 2015. We also have the right pursuant to the Equipment Leases to pay the rent due under the EquipmentLeases in shares of our restricted common stock, equal in value to 110% of the applicable rental payment due, based on the VWAPof our common stock during the ten day period preceding the first of each applicable month, provided that if on the six monthanniversary of the issuance of any stock in lieu of cash payments, the value of the stock issued (based on the then 10 day VWAP) isless than 110% of the rental payment due, we are required to pay the lessor(s) the difference in cash or issue the lessor(s) additionalshares of common stock equal to the difference in value. We also have the right under the Equipment Leases to acquire theapplicable property/equipment subject to each Equipment Lease at any time prior to the expiration of the leases for $914,000 and$400,000, respectively, provided such amounts are discounted to $776,900 and $340,000, respectively, if the applicable purchaseoption is exercised prior to August 31, 2015. Finally, we have the right pursuant to the agreements to pay the purchase priceassociated with the purchase option in restricted common stock, equal in value to 110% of the amount due, based on the VWAP ofour common stock during the ten day period preceding the purchase date, provided that if on the six month anniversary of theissuance of any stock in lieu of a cash payment, the value of the stock issued (based on the then 10 day VWAP) is less than 110% ofthe purchase price, we are required to pay the lessor(s) the difference in cash or issue the lessor(s) additional shares of commonstock equal to the difference in value.

Our senior lender, Goldman Sachs Bank USA (“Goldman”), approved the entry by Vertex Refining Nevada into the Bango Lease andEquipment Leases, and also waived various events of default which had previously occurred under our senior credit facility withGoldman relating to various deliverables which we failed to make to Goldman as required pursuant to the terms of the credit facilityand the fact that our auditor provided a ‘going concern’ opinion in our December 31, 2014 audited financial statements.

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Each of the lessors under the Bango Lease and Equipment Leases also entered into an Acknowledgement and ConfirmationAgreement with us, whereby they make various representations regarding their financial suitability to receive shares of our commonstock, the restricted nature of the shares they may receive in lieu of cash consideration under the leases, and their status as anaccredited investor, and agreed to not sell our stock short during the term of the leases which they are party to, and we agreed to notissue such investors securities representing more than 9.99% of our outstanding common stock. All of the parties also agreed that theaggregate shares of common stock issuable pursuant to all of the leases would not (i) exceed 19.9% of the outstanding shares of ourcommon stock on April 30, 2015, (ii) exceed 19.9% of the combined voting power of the then outstanding voting securities of ourcommon stock on April 30, 2015, or (iii) otherwise exceed such number of shares of common stock that would violate applicablelisting rules of the NASDAQ Stock Market in the event our stockholders do not approve the issuance of the shares (collectively, the“Share Cap”).

Unit Offering

On June 24, 2015, we closed the transactions contemplated by the June 19, 2015 Unit Purchase Agreement (the “PurchaseAgreement”) we entered into with certain institutional investors (the “Investors”), pursuant to which the Company sold the Investors anaggregate of 8,064,534 units (the “Units”), each consisting of (i) one share of Series B Preferred Stock (described below) and (ii) onewarrant to purchase one-half of a share of common stock of the Company (each a “Warrant” and collectively, the “Warrants”). TheUnits were sold at a price of $3.10 per Unit (the “Unit Price”) (a 6.1% premium to the closing bid price of the Company’s commonstock on the NASDAQ Capital Market on the date the Purchase Agreement was entered into which was $2.91 per share (the“Closing Bid Price”)). The Warrants have an exercise price of $2.92 per share ($0.01 above the Closing Bid Price). Total grossproceeds from the offering of the Units (the “Offering”) were $25.0 million.

Craig-Hallum Capital Group LLC (the “Placement Agent”) acted as exclusive placement agent in connection with the Offering. ThePlacement Agent received a commission equal to 6.5% of the gross proceeds (less $4.0 million raised from certain investors in theOffering for which they will receive no fee) from the Offering, for an aggregate commission of $1.365 million.

The number of shares of common stock issuable upon the complete conversion of the Series B Preferred Stock (not including anydividends which, pursuant to the terms of the Series B Preferred Stock may be paid in shares of common stock of the Company) andcomplete exercise of the Warrants sold in the Offering (i.e., Warrants to purchase an aggregate of 4,032,267 shares of commonstock), would total 12,096,801 shares or 43.0% of our issued and outstanding shares of common stock immediately prior to our entryinto the Purchase Agreement.

We used the net proceeds from the Offering to repay amounts owed under our senior credit facility with Goldman in the amount of$15.1 million and plan to use the remaining proceeds for general corporate and working capital purposes. Pursuant to the terms of theCommon Stock Purchase Warrant dated March 26, 2015 (as amended and modified to date the “Lender Warrant”) which wepreviously granted to Goldman, Sachs & Co., an affiliate of Goldman (the “Holder”), which provided the Holder the right to purchaseup to 1,766,874 shares of our common stock (as described in greater detail in the Current Reports on Form 8-K which we filed withthe Securities and Exchange Commission on March 31, 2015 and June 19, 2015), such Lender Warrant and rights thereunder werecancelled and terminated in connection with our payment of the $15.1 million to Goldman as described above. In addition, under the Purchase Agreement, the Company has agreed to register the shares of common stock issuable uponconversion of the Series B Preferred Stock and upon exercise of the Warrants under the Securities Act of 1933, as amended, forresale by the Investors. The Company has committed to file a registration statement on Form S-1 by the 30th day following theclosing of the Offering and to cause the registration statement to become effective by the 90th day following the closing (or, in theevent of a “full review” by the Securities and Exchange Commission, the 120th day following the closing), which registration statementwas declared effective by the Securities and Exchange Commission on August 6, 2015. The Purchase Agreement provides forliquidated damages upon the occurrence of certain events, including, but not limited to, the failure by the Company to cause theregistration statement to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of theaggregate subscription amount paid by an Investor for the Units affected by the event that are still held by the Investor upon theoccurrence of the event, due on the date immediately following the event that caused such failure (or the 30th day following suchevent if the event relates to the suspension of the registration statement as described in the Purchase Agreement), and each 30 daysthereafter, with such payments to be prorated on a daily basis during each 30 day period, subject to a maximum of an aggregate of6% per annum. Under the Purchase Agreement, the Company has agreed to indemnify the Investors for liabilities arising out of or relating to (i) anyuntrue statement of a material fact contained in the registration statement, (ii) any inaccuracy in the representations and warranties ofthe Company contained in the Purchase Agreement or the failure of the Company to perform its obligations under the PurchaseAgreement and (iii) any failure by the Company to fulfill any undertaking included in the registration statement, subject to certainexceptions. The Investors, severally, and not jointly agreed to indemnify the Company against (i) any failure by

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such Investor to comply with the covenants and agreements contained in the Purchase Agreement and (ii) any untrue statement of amaterial fact contained in the registration statement to the extent such untrue statement was made in reliance upon and in conformitywith written information furnished by or on behalf of that Investor specifically for use in preparation of the registration statement,subject to certain exceptions.

The Company agreed pursuant to the Purchase Agreement, that until 60 days following effectiveness of the registration statementfiled to register the shares of common stock underlying the Series B Preferred Stock and Warrants (the “Lock-Up Period”), to not offeror sell any common stock or securities convertible or exercisable into common stock, except pursuant to certain exceptions describedin the Purchase Agreement, and each of the Company’s officers and directors agreed to not sell or offer for sale any shares ofcommon stock until the end of the Lock-Up Period, subject to certain exceptions.

Series B Preferred Stock

On June 23, 2015, we filed with the Secretary of State of Nevada, an Amended and Restated Certificate of Designation of VertexEnergy, Inc. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series B Preferred Stock (the“Designation” and the “Series B Preferred Stock”), which Designation filing became effective on the same date.

The Series B Preferred Stock accrues a dividend, payable quarterly in arrears (based on calendar quarters), in the amount of 6% perannum of the original issuance price of the Series B Preferred Stock ($3.10 per share or $25.0 million in aggregate).

The dividend is payable by the Company, at the Company’s election, in registered common stock of the Company (if available) orcash. In the event dividends are paid in registered common stock of the Company, the number of shares payable will be calculated bydividing (a) the accrued dividend by (b) 90% of the arithmetic average of the volume weighted average price (VWAP) of theCompany’s common stock for the 10 trading days immediately prior to the applicable date of determination (the “Dividend StockPayment Price”). Notwithstanding the foregoing, in no event may the Company pay dividends in common stock unless the applicableDividend Stock Payment Price is above $2.91. If the Company is prohibited from paying the dividend in cash (due to contractualsenior credit agreements or other restrictions) or is unable to pay the dividend in registered common stock, the dividend will be paidin kind in Series B Preferred Stock shares at $3.10 per share. The Series B Preferred Stock includes a liquidation preference (in the amount of $3.10 per share) which is junior to the Company’spreviously outstanding shares of preferred stock, senior credit facilities and other debt holders as provided in further detail in theDesignation.

The Series B Preferred Stock (including accrued and unpaid dividends) is convertible into shares of the Company’s common stock atthe holder’s option at any time after closing at $3.10 per share (initially a one-for-one basis). If the Company’s common stock trades ator above $6.20 per share for a period of 20 consecutive trading days at any time following the earlier of (a) the effective date of aresale registration statement which we are required to file to register the resale of the shares of common stock underlying the SeriesB Preferred Stock and Warrants pursuant to the Purchase Agreement (described above), or (b) December 24, 2015, the Companymay at such time force conversion of the Series B Preferred Stock (including accrued and unpaid dividends) into common stock of theCompany.

The Series B Preferred Stock votes together with the common stock on an as-converted basis, provided that each holder’s votingrights are subject to and limited by the Beneficial Ownership Limitation described below.

The Company has the option to redeem the outstanding shares of Series B Preferred Stock at $3.10 per share, plus any accrued andunpaid dividends on such Series B Preferred Stock redeemed, at any time beginning on June 24, 2017, and the Company is requiredto redeem the Series B Preferred Stock at $3.10 per share, plus any accrued and unpaid dividends, on June 24, 2020.Notwithstanding either of the foregoing, the Series B Preferred Stock may not be redeemed unless and until amounts outstandingunder the Company’s senior credit facility have been paid in full.

The Series B Preferred Stock contains a provision prohibiting the conversion of such Series B Preferred Stock into common stock ofthe Company, if upon such conversion, the holder thereof would beneficially own more than 9.999% of the Company’s thenoutstanding common stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation does not apply to forcedconversions undertaken by the Company pursuant to the terms of the Designation (summarized above). In addition to the BeneficialOwnership Limitation, certain of the Investors also entered into agreements with us to limit their ability to effect conversions of SeriesB Preferred Stock (and exercise of Warrants (defined below)), to prohibit them contractually from converting (or exercising) suchapplicable security if upon such conversion (or exercise) they would beneficially own more than 4.999% of our outstanding commonstock.

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Description of Business Activities:

We are an environmental services company that recycles industrial waste streams and off-specification commercial chemicalproducts. Our primary focus is recycling used motor oil and other petroleum by-products. We are engaged in operations across theentire petroleum recycling value chain including collection, aggregation, transportation, storage, refinement, and sales of aggregatedfeedstock and re-refined products to end users. We operate in three divisions- the Black Oil, Refining and Marketing and Recoverydivisions. Our Black Oil division collects and purchases used motor oil directly from third-party generators, aggregates used motor oilfrom an established network of local and regional collectors, and sells used motor oil to our customers for use as a feedstock orreplacement fuel for industrial burners. Our Refining and Marketing division aggregates and manages the re-refinement of used motoroil and other petroleum by-products and sells the re-refined products to end customers. Our Recovery division is a generatorsolutions company for the proper recovery and management of hydrocarbon streams. We operate a refining facility that uses ourproprietary TCEP technology and we also utilize third-party processing facilities.

We recently acquired a 100% interest in E-Source (as described above), a company that leases and operates a facility located inHouston, Texas, and provides dismantling, demolition, decommission and marine salvage services at industrial facilities throughoutthe Gulf Coast. E-Source also owns and operates a fleet of trucks and other vehicles used for shipping and handling equipment andscrap materials. We also recently acquired Omega's Marrero, Louisiana re-refinery and Myrtle Grove complex in Belle Chasse,Louisiana and ownership of Golden State, as described above. The Marrero, Louisiana facility re-refines used motor oil and alsoproduces vacuum gas oil. Golden State operates a strategic blending and storage facility located in Bakersfield, California. We alsorecently closed a lease in Churchill County, Nevada which has a used oil re-refining plant located on approximately 40 acres inChurchill County, Nevada, the Bango Plant produces base lubricating oils.

Black Oil Division Our Black Oil division is engaged in operations across the entire used motor oil recycling value chain including collection,aggregation, transportation, storage, refinement, and sales of aggregated feedstock and re-refined products to end users. We collectand 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 18 collection vehicles, which routinely visitgenerators to collect and purchase used motor oil. We also aggregate used oil from a diverse network of approximately 50 supplierswho 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 15 transportation trucksand more than 95 aboveground storage tanks with over 5.5 million gallons of storage capacity. These assets are used by both theBlack Oil division and the Refining and Marketing division. In addition, we also utilize third parties for the transportation and storage ofused oil feedstocks. Typically, we sell used oil to our customers in bulk to ensure efficient delivery by truck, rail, or barge. In manycases, we have contractual purchase and sale agreements with our suppliers and customers, respectively. We believe thesecontracts 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 acquireused oil and the revenues received from the sale and delivery of used oil. We also use our proprietary TCEP technology to re-refineused oil into marine fuel cutterstock and a higher-value feedstock for further processing. In addition, at our Marrero facility weproduce a Vacuum Gas Oil (VGO) product that is sold to refineries as well as to the marine fuels market. At our Columbus, Ohiofacility (Heartland Petroleum) we produce a base oil product that is sold to lubricant packagers and distributors. Refining and Marketing Division Our Refining and Marketing division is engaged in the aggregation of feedstock, re-refining it into higher value end products, andselling these products to our customers, as well as related transportation and storage activities. We aggregate a diverse mix offeedstocks including used motor oil, petroleum distillates, transmix and other off-specification chemical products. These feedstockstreams are purchased from pipeline operators, refineries, chemical processing facilities and third-party providers, and arealso transferred from our Black Oil division. We have a toll-based processing agreement in place with KMTEX, Ltd. (“KMTEX”) to re-refine feedstock streams, under our direction, into various end products that we specify. KMTEX uses industry standard processingtechnologies to re-refine our feedstocks into pygas, gasoline blendstock and marine fuel cutterstock. We sell all of our re-refinedproducts directly to end-customers or to processing facilities for further refinement.

Recovery Division

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

We currently provide our services in 13 states, primarily in the Gulf Coast and Central Midwest regions of the United States. For therolling twelve month period ending June 30, 2015, we aggregated approximately 132 million gallons of used motor oil and otherpetroleum by-product feedstocks and managed the re-refining of approximately 82 million gallons of used motor oil with ourproprietary TCEP process, VGO and base oil processes.

Biomass Renewable Energy

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

Thermal Chemical Extraction Process

We own the intellectual property for our patented TCEP technology. TCEP is a technology which utilizes thermal and chemicaldynamics to extract impurities from used oil which increases the value of the feedstock. We currently sell the TCEP final product asfuel oil cutterstock. We intend to continue to develop the TCEP technology and design with the goal of producing additional re-refinedproducts including lubricating base oil.

TCEP differs from conventional re-refining technologies, such as vacuum distillation and hydrotreatment, by relying more heavily onchemical processes to remove impurities rather than temperature and pressure. Therefore, the capital requirements to build a TCEPplant are typically much less than a traditional re-refinery because large feed heaters, vacuum distillation columns, and ahydrotreating 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 ortransportation fuel blendstocks.

We currently estimate the cost to construct a new, fully-functional, commercial facility using our TCEP technology, with annualprocessing capacity of between 25 and 50 million gallons at another location would be approximately $10 to $15 million, which couldfluctuate based on throughput capacity. The facility infrastructure would require additional capitalized expenditures which woulddepend on the location and site specifics of the facility.

Strategy and Plan of Operations

The principal elements of our strategy include:

Pursue Strategic Acquisitions and Partnerships

We plan to grow market share by consolidating feedstock supply through partnering with or acquiring collection and aggregationassets. Our executive team has a proven ability to evaluate resource potential and identify acquisition targets, funding permitting. Theacquisitions and/or partnerships could increase our revenue and provide better control over the quality and quantity of feedstockavailable for resale and/or upgrading as well as providing additional locations for the implementation of TCEP. We also intend todiversify our revenue by acquiring complementary recycling service businesses, refining assets and technologies, and other verticallyintegrated businesses or assets. We believe we can realize synergies on acquisitions by leveraging our customer and vendorrelationships, infrastructure, and personnel, and by eliminating duplicative overhead costs.

Expand Feedstock Supply Volume

We intend to expand our feedstock supply volume by growing our collection and aggregation operations. We plan to increase thevolume 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 newor existing territories. We intend to increase the volume of feedstock we aggregate from third-party collectors by expanding ourexisting relationships and developing new vendor relationships. We believe that our ability to acquire large

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feedstock volumes will help to cultivate new vendor relationships because collectors often prefer to work with a single, reliablecustomer 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 theseaccounts. In some cases, we may also seek to serve as our customers’ primary or exclusive supplier. We also believe that as weincrease our supply of feedstock and re-refined products we will have the opportunity to secure larger customer accounts that requirea 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, includingassets or technologies which complement TCEP. Currently, we are using TCEP to re-refine used oil feedstock into cutter stock foruse in the marine fuel market. We believe that continued improvements to our TCEP technology and investments in additionaltechnologies will enable us to upgrade feedstock into higher value end products, such as fuels and lubricating base oil, whichcommand higher market prices than the current re-refined products we produce. In addition to TCEP, at our Marrero, Louisianafacility we are producing a vacuum gas oil (VGO) through our re-refinery.

Expand TCEP Re-Refining Capacity

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

RESULTS OF OPERATIONS

Description of Material Financial Line Items:

Revenues We generate revenues from three existing operating divisions as follows: BLACK OIL - Revenues for our Black Oil division are comprised primarily of product sales from our re-refineries and also feedstocksales (used motor oil) which are purchased from generators of used motor oil such as oil change shops and garages, as well as anetwork of local and regional suppliers. Volumes are consolidated for efficient delivery and then sold to third-party re-refiners and fueloil blenders for the utility fuel export market. In addition, through used oil re-refining, we re-refine used oil into different commodityproducts. The Houston, Texas TCEP facility finished product is then sold by barge as a fuel oil cutterstock. Through the operations atour Marrero, Louisiana facility, we produce a Vacuum Gas Oil (VGO) product from used oil re-refining which is then sold via barge tocrude refineries to be utilized as an intermediate feedstock in the refining process. The Marrero facility’s product is also sold as a lowsulfur fuel oil blend in the marine fuel markets. Through the operations at our Columbus, Ohio facility we produce a base oil finishedproduct which is then sold via truck or rail car to end users for blending, packaging and marketing of lubricants.

REFINING AND MARKETING - The Refining and Marketing division generates revenues relating to the sales of finishedproducts. The Refining and Marketing division gathers hydrocarbon streams in the form of petroleum distillates, transmix and otherchemical products that have become off-specification during the transportation or refining process. These feedstock streams arepurchased 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 andfuel oil cutterstock), which are sold to major oil companies or to large petroleum trading and blending companies. The end productsare delivered by barge and truck to customers.

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RECOVERY - The Recovery division is a generator solutions company for the proper recovery and management of hydrocarbonstreams. This division also provides dismantling, demolition, decommission and marine salvage services at industrial facilities. Weown and operate a fleet of trucks and other vehicles used for shipping and handling equipment and scrap materials. Our revenues are affected by changes in various commodity prices including crude oil, natural gas, #6 oil and metals. Cost of Revenues BLACK OIL - Cost of revenues for our Black Oil division are comprised primarily of feedstock purchases from a network of providers.Other cost of revenues include processing costs, transportation costs, purchasing and receiving costs, analytical assessments,brokerage fees and commissions, and surveying and storage costs. REFINING AND MARKETING - The Refining and Marketing division incurs cost of revenues relating to the purchase of feedstock,purchasing and receiving costs, and inspection and processing of the feedstock into gasoline blendstock, pygas and fuel oil cutter bya third party. Cost of revenues also includes broker’s fees, inspection and transportation costs.

RECOVERY - The Recovery division incurs cost of revenues relating to the purchase of hydrocarbon products, purchasing andreceiving costs, inspection, demolition and transporting of metals and other salvage and materials. Cost of revenues also includesbroker’s fees, inspection and transportation costs.

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

Depreciation and Amortization Expenses

Our depreciation and amortization expenses are primarily related to the property, plant and equipment and intangible assets acquiredin connection with the Holdings, E Source, Omega and Heartland acquisitions.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2015 COMPARED TO THE THREE MONTHS ENDEDJUNE 30, 2014 Set forth below are our results of operations for the three months ended June 30, 2015 as compared to the same period in 2014.

Three Months Ended June 30,

2015 2014 $ Change % Change

Revenues $ 49,119,711 $ 72,079,622 $ (22,959,911) (32)%Cost of Revenues 43,635,177 63,844,569 (20,209,392) (32)%

Gross Profit 5,484,534 8,235,053 (2,750,519) (33)%Selling, general and administrative expenses 5,641,250 4,363,617 1,277,633 29 %Depreciation and amortization 1,561,314 1,068,273 493,041 46 %Acquisition related expenses — 1,959,418 (1,959,418) (100)%

Income (loss) from operations (1,718,030) 843,745 (2,561,775) (304)%

Provision for doubtful accounts — — — — %Other Income (loss) 10 7 3 43 %Gain on change in value of derivative liability 1,816,982 — 1,816,982 100 %Bargain purchase gain related to Omega acquisition — 6,481,051 (6,481,051) (100)%Other expense 12,818 (10,866) 23,684 100 %Interest Expense (556,975) (657,235) 100,260 15 %

Total other income (expense) 1,272,835 5,812,957 (4,540,122) (78)%

Income (loss) before income taxes (445,195) 6,656,702 (7,101,897) (107)%Income tax (expense) benefit — — — — %

Net income (loss) $ (445,195) $ 6,656,702 $ (7,101,897) (107)%

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Each of our segments’ gross profit (loss) during the three months ended June 30, 2015 and 2014 was as follows:

Three Months Ended

June 30,

Black Oil Segment 2015 2014 $ Change % Change

Total revenue $ 34,338,534 $ 48,878,522 $ (14,539,988) (30)%Total cost of revenue 30,912,204 42,973,852 (12,061,648) (28)%

Gross profit (loss) 3,426,330 5,904,670 (2,478,340) (42)%Selling general and administrative expense 5,938,154 4,787,982 1,150,172 24 %

Income (loss) from operations $ (2,511,824) $ 1,116,688 $ (3,628,512) (325)%

Refining Segment


Gross profit 1,491,118 1,891,227 (400,109) (21)%Selling general and administrative expense 787,734 1,123,018 (335,284) (30)%

Income from operations $ 703,384 $ 768,209 $ (64,825) (8)%

Recovery Segment


Gross profit 567,086 439,156 127,930 29 %Selling general and administrative expense 476,676 1,480,308 (1,003,632) (68)%

Income (loss) from operations $ 90,410 $ (1,041,152) $ 1,131,562 109 %

The following schedule separates revenues and gross profit contributed by our recently acquired business entities and operations,Omega Refining, E-Source and Heartland, during the three month period ending June 30, 2015. The isolated figures are presented indollars and as a percentage of total consolidated revenue.

Three Months Ended June 30, 2015 Consolidated Results Omega Refining % Contributed by Omega Refining

Total Revenue $ 49,119,711 $ 16,743,462 34%Gross Profit 5,484,534 341,979 6%

Consolidated Results E-Source % Contributed by E-Source


Consolidated Results Heartland % Contributed by Heartland

Total Revenue $ 49,119,711 $ 6,336,149 13%Gross Profit 5,484,534 1,305,045 24%

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

Total revenues decreased by 32% for the three months ended June 30, 2015 compared to the same period in 2014, due primarily tolower commodity prices during the three months ended June 30, 2015 compared to the same period in 2014. Total volume increased19% largely as a result of the additions of the Marrero, Louisiana facility in May 2014, which produces a VGO finished

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product as well as the Heartland facility in Columbus, Ohio in December 2014, which produces a base oil finished product. Grossprofit decreased by 33% for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. Prices ofour finished products continue to be impacted across the industry by the lower commodity prices. Additionally, our per barrel margindecreased 44% relative to the three months ended June 30, 2014. This decrease was a result of increased operational costs relatedto the Marrero and Heartland facilities in addition to decreased margins in our feedstock and finished product values during the threemonths ended June 30, 2015, compared to the same period during 2014. In addition volumes were lower than our targets at ourMarrero facility related to working capital challenges and constraints during much of the period. The working capital challenges duringthe period impacted our ability to purchase spot barges of product which help supplement the daily delivery of railcars we receive.The 32% decrease in cost of revenues for the three months ended June 30, 2015 compared to the three months ended June 30,2014 is mainly a result of the overall decrease in commodity prices which has an impact on the prices we pay for feedstock.

Our Black Oil division's volume increased approximately 10% during the three months ended June 30, 2015 compared to the sameperiod in 2014. This increase was due to the increased amount of volume managed through our Marrero and Heartland facilitieswhich produces a VGO finished product and base oil respectively. Volumes collected through our H&H Oil and Heartland collectionfacilities increased 53% during the three months ended June 30, 2015 compared to the same period in 2014. Our focus continues tobe on growing our own volumes of collected oil and displacing third party oil processed in our facilities.

Overall volumes of product sold increased 19% for the second quarter of 2015 versus the second quarter of 2014. This is important forour business as it illustrates our reach into the market and expansion of overall market share.

We experienced a 28% decrease in the volume of our TCEP refined product during the three months ended June 30, 2015,compared to the same period in 2014. This decrease was a result of strategic decisions that were made during the first quarter not toproduce our TCEP finished product and to ship the feedstock we would have otherwise used at our TCEP facility to our Marrerofacility due to market pricing impacts on the margins of the product produced in the Houston market vs. the Marrero, Louisianamarket. During the second quarter of 2015 we slowly brought production back on-line at our TCEP operation; however we continue tosend some of the product we previously processed at the TCEP facility to our Marrero facility. In order to keep the volumes up andmove lower priced feedstock through the Marrero facility. In addition, commodity prices decreased approximately 45% for the threemonths ended June 30, 2015, compared to the same period in 2014. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%)for the three months ended June 30, 2015 decreased $40.94 per barrel from a three month average of $91.86 for the three monthsended June 30, 2014 to $50.91 per barrel for the three months ended June 30, 2015.

Our TCEP technology generated revenues of $9,328,599 during the three months ended June 30, 2015 with cost of revenues of$7,891,407, producing a gross profit of $1,437,152. The per barrel margin for our TCEP product decreased 53% as compared to thesame period during 2014. This decrease was largely a result of the decrease in TCEP volume during the quarter as described above,which resulted in the continued carrying cost for the operation with very low throughput, as well as a lower priced commodity marketwhich has put additional pressure on our margins, due to the way we calculate purchases on a percentage discount basis at thisfacility. Volumes of produced product using TCEP tend to vary significantly from quarter-to-quarter based on opportunistic purchasesof products and production availability and timing at the facility we operate.

Overall volume for the Refining and Marketing division increased 15% during the three months ended June 30, 2015 as compared tothe same period in 2014. This division experienced an increase in production of 38% for its gasoline blendstock for the three monthsended June 30, 2015, compared to the same period in 2014. Our fuel oil cutter volumes decreased 35% for the three months endedJune 30, 2015, compared to the same period in 2014. Our pygas volumes increased 61% for the three months ended June 30, 2015as compared to the same period in 2014.

Our Recovery division includes the business operations of Vertex Recovery as well as the recently acquired business of E-Source (ofwhich we own a 100% interest). Revenues for this division decreased 29% mostly as a result of decreased commodity prices as wellas project work during the period at our E-Source division for the three months ended June 30, 2015, compared to the prior period.Gross profit for the recovery division increased 29% for the three months ended June 30, 2015, compared to the same period in2014. Our volumes increased 225% for the three months ended June 30, 2015 as compared to the same period in 2014. This divisionthrough E-Source periodically participates in project work that is not ongoing thus we expect to see fluctuations in revenue and grossprofit from this division from period to period.

Overall gross profit decreased 33% and our margin per barrel decreased approximately 44% for the three months ended June 30,2015, compared to the same period in 2014. This decrease was largely a result of lower commodity prices across the industry alongwith the decrease in overall business production at each of our facilities compared to what we planned for.

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The following table sets forth the high and low spot prices during the first three and six months of 2015 for our key benchmarks.

2015 Benchmark High Date Low DateU.S. Gulfcoast No. 2 Waterborne (dollars pergallon) $ 1.91 May 6 $ 1.59 April 8

U.S. Gulfcoast Unleaded 87 Waterborne (dollarsper gallon) $ 2.16 June 11 $ 1.72 April 8

U.S. Gulfcoast Residual Fuel No. 6 3% (dollarsper barrel) $ 54.73 May 6 $ 43.19 April 2

NYMEX Crude oil (Dollars per barrel) $ 61.43 June 10 $ 49.14 April 2Reported in Platt's US Marketscan (Gulf Coast)

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

2014 Benchmark High Date Low DateU.S. Gulfcoast No. 2 Waterborne (dollars pergallon) $ 3.00 March 3 $ 2.73 February 4

U.S. Gulfcoast Unleaded 87 Waterborne (dollarsper gallon) $ 3.08 June 20 $ 2.54 January 3

U.S. Gulfcoast Residual Fuel No. 6 3% (dollarsper barrel) $ 94.94 June 24 $ 87.09 January 13

NYMEX Crude oil (Dollars per barrel) $ 107.26 June 20 $ 91.66 January 9Reported in Platt's US Marketscan (Gulf Coast)

We saw a significant decrease during the first six months of 2015 in each of the benchmark commodities we track compared to thesame period in 2014.

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 ofproducts produced. The various petroleum products produced are typically a function of crude oil indices and are quoted on multipleexchanges such as the New York Mercantile Exchange ("NYMEX"). These prices are determined by a global market and can beinfluenced by many factors, including but not limited to supply/demand, weather, politics, and global/regional inventory levels. Assuch, we cannot provide any assurances regarding results of operations for any future periods, as numerous factors outside of ourcontrol affect the prices paid for raw materials and the prices (for the most part keyed to the NYMEX) that can be charged for suchproducts. Additionally, for the near term, results of operations will be subject to further uncertainty, as the global markets andexchanges, including the NYMEX, continue to experience volatility.

As our competitors bring new technologies to the marketplace, which will likely enable them to obtain higher values for the finishedproducts created through their technologies from purchased black oil feedstock, we anticipate that they will be able to pay more forfeedstock due to the additional value received from their finished product (i.e., as their margins increase, they are able to increase theprices they are willing to pay for feedstock). If we are not able to continue to refine and improve our technologies and gain efficienciesin the TCEP technology, our VGO technology through our Marrero facility, and our base oil technology at Heartland we could benegatively impacted by the ability of our competitors to bring new processes to market which compete with our processes, as well astheir 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 couldbe worth less and if our competitors are willing to pay more for feedstock than we are, they could drive up prices, which would causeour revenues to decrease (as described above, our revenues track the spread between the prices we purchase feedstock for and theprices we can sell finished product at), and cause our cost of sales to increase, respectively. Additionally, if we are forced to pay morefor feedstock, our cash flows will be negatively impacted and our margins will decrease.

We had total operating expenses of $7,202,564 for the three months ended June 30, 2015, which included $0 of acquisition relatedexpenses, compared to $7,391,308 of total operating for the prior year’s period (including $1,959,418 of acquisition relatedexpenses), a decrease of $188,744 or 3% from the prior period. This decrease is primarily due to the reduction of acquisition

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related costs, offset by an increase of $493,041 in depreciation and amortization and an increase of $1,277,633 in selling, generaland administrative expense.

We had a loss from operations of $1,718,030 for the three months ended June 30, 2015, compared to income from operations of$843,745 for the three months ended June 30, 2014, a decrease of $2,561,775 or 304% from the prior year’s period. The decreasewas mainly due to market and operational conditions as well as the additional selling general and administrative expenses associatedwith new product lines, and acquired operations. We have implemented an inventory management and hedging solution that webelieve will mitigate some of the exposure the Company has historically had to sharp declines in oil and commodity prices movingforward.

We had a provision for doubtful accounts of $2,650,000 for the three months ended June 30, 2015, compared to no provision fordoubtful accounts for the three months ended June 30, 2014. The provision for doubtful accounts was related to amounts owed toOmega under the Omega Secured Note including $1,696,452 which was unsecured, and which the collection of which is doubtful,and $2,650,000 which is collateralized by insurance proceeds expected to be collected in 2015, due to revised insurance proceedexpectations.

We also had interest expense of $556,975 for the three months ended June 30, 2015, compared to interest expense of $657,235 forthe three months ended June 30, 2014, an increase in interest expense of $100,260 or 15% from the prior period mainly due to thedebt facilities with Goldman Sachs and Midcap as described below.

We had $1,816,982 of gain on change in value of derivative liability for the three months ended June 30,2015, in connection with abeneficial conversion feature on certain warrants granted in June 2015, as described in greater detail in Note 11 to the unauditedfinancial statements included herein under "Part 1"-"Item 1. Financial Statements".

Contributing to other income for the six months ended June 30, 2014 was $6,481,051, relating to a one-time non-cash bargainpurchase benefit from the purchase price of the Omega assets.

We had net loss of $445,195 for the three months ended June 30, 2015, compared to net income of $6,656,702 for the three monthsended June 30, 2014, a decrease in net income of $7,101,897 or 107% from the prior period for the reasons described above.

During the three months ended June 30, 2015, the processing costs for our Refining and Marketing division located at KMTEX were$1,279,124. In addition, we have provided the results of operations for this segment of our business below during the same threemonth period.

Three Months Ended June 30, 2015 Refining and MarketingRevenues $ 11,447,889 Income (loss) from operations $ 703,384

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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2015 COMPARED TO THE SIX MONTHS ENDED JUNE30, 2014

Set forth below are our results of operations for the six months ended June 30, 2015 as compared to the same period in 2014.


2015 2014 $ Change % Change

Revenues $ 86,804,050 $ 119,429,280 $ (32,625,230) (27)%Cost of Revenues 81,643,633 106,188,202 (24,544,569) (23)%

Gross Profit 5,160,417 13,241,078 (8,080,661) (61)%Selling, general and administrative expenses 11,011,278 7,079,966 3,931,312 56 %Depreciation and amortization 3,118,296 1,800,950 1,317,346 73 %Acquisition related expenses 157,678 2,559,830 (2,402,152) (94)%

Income (loss) from operations (9,126,835) 1,800,332 (10,927,167) (607)%

Provision for doubtful accounts (2,650,000) — (2,650,000) (100)%Other Income (loss) 18 377 (359) (95)%Bargain purchase gain related to Omega acquisition — 6,481,051 (6,481,051) (100)%Other expense (57,660) (10,866) (46,794) 431 %Gain on change in value of derivative liability 1,816,982 — 1,816,982 100 %Interest Expense (2,088,155) (733,046) (1,355,109) 185 %

Total other income (expense) (2,978,815) 5,737,516 (8,716,331) (152)%

Income (loss) before income taxes (12,105,650) 7,537,848 (19,643,498) (261)%Income tax (expense) benefit (5,306,000) — (5,306,000) (100)%

Net income (loss) $ (17,411,650) $ 7,537,848 $ (24,949,498) (331)%

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Each of our segments’ gross profit (loss) during the six months ended June 30, 2015 and 2014 was as follows:


Black Oil Segment 2015 2014 $ Change % Change


Gross profit (loss) 1,199,182 8,248,974 (7,049,792) (85)%Selling general and administrative expense 11,686,498 7,111,896 4,574,602 64 %

Income (loss) from operations $ (10,487,316) $ 1,137,078 $ (11,624,394) (1,022)%

Refining Segment


Gross profit 2,451,836 3,466,795 (1,014,959) (29)%Selling general and administrative expense 1,611,587 1,928,011 (316,424) (16)%

Income from operations $ 840,249 $ 1,538,784 $ (698,535) (45)%

Recovery Segment

Total revenue $ 7,837,531 $ 8,634,080 $ (796,549) (9)%Total cost of revenue 6,328,132 7,108,771 (780,639) (11)%

Gross profit 1,509,399 1,525,309 (15,910) (1)%Selling general and administrative expense 989,167 2,400,839 (1,411,672) (59)%

Income (loss) from operations $ 520,232 $ (875,530) $ 1,395,762 159 %

The following schedule separates revenues and gross profit contributed by our recently acquired business entities and operations,Omega Refining, E-Source and Heartland, during the six month period ending June 30, 2015. The isolated figures are presented indollars and as a percentage of total consolidated revenue.

Six Months Ended June 30, 2015 Consolidated Results Omega Refining % Contributed by Omega Refining

Total Revenue $ 86,804,050 $ 31,800,294 37%Gross Profit (loss) 5,160,417 (1,655,165) (32)%

Consolidated Results E-Source % Contributed by E-Source


Consolidated Results Heartland % Contributed by Heartland

Total Revenue $ 86,804,050 $ 11,371,289 13%Gross Profit 5,160,417 1,288,296 25%

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

Total revenues decreased by 27% for the six months ended June 30, 2015 compared to the same period in 2014, due primarily to thelower commodity prices during the six months ended June 30, 2015 compared to the same period in 2014. Total volume increased24% largely as a result of the recent addition of the Marrero, Louisiana facility in May 2014, which produces a VGO

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finished product as well as the Heartland facility in Columbus, Ohio in December 2014, which produces a base oil finished product.Gross profit decreased by 61% for the six months ended June 30, 2015 compared to the six months ended June 30, 2014. Prices ofour finished products were impacted across the industry by the sharp decline in energy prices that occurred during the last quarter of2014 and the first three months of 2015. Additionally, our per barrel margin decreased 69% relative to the six months ended June 30,2014. This decrease was a result of increased operational costs related to the Marrero and Heartland facilities in addition todecreased margins in our feedstock and finished product values during the six months ended June 30, 2015, compared to the sameperiod during 2014. In addition volumes were lower than our targets at our Marrero and Heartland facility related to working capitalchallenges during the period, which were exacerbated by colder temperatures and inclement weather in the Ohio region that added tothese challenges. The excessive cold temperatures experienced during the first quarter of the year extended the time our facilitieswere down during one of our turn-arounds. The working capital challenges during the period impacted our ability to purchase spotbarges of finished product which help supplement the rail deliveries we receive on a daily basis. The 23% decrease in cost ofrevenues for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 is mainly a result of the overalldecrease in commodity prices which has an impact on the prices we pay for feedstock.

Our Black Oil division's volume increased approximately 31% during the six months ended June 30, 2015 compared to the sameperiod in 2014. This increase was due to the increased amount of volume managed through our Marrero and Heartland facilitieswhich produce a VGO finished product and base oil respectively. Volumes collected through our H&H Oil and Heartland collectionfacilities increased 59% during the six months ended June 30, 2015 compared to the same period in 2014. One of our key initiativescontinues to be a focus on growing our own volumes of collected material and displacing the third party oil processed in our facilities.

Overall volumes of product sold increased 24% for the six months ended June 30, 2015 versus the same period in 2014. This isimportant for our business as it illustrates our reach into the market and expansion of overall market share.

We experienced a 51% decrease in the volume of our TCEP refined product during the six months ended June 30, 2015, comparedto the same period in 2014. This decrease was a result of strategic decisions we made not to produce our TCEP finished productduring January and February 2015 and to ship the feedstock we would have otherwise used at our TCEP facility to our Marrero facilitydue to market pricing impacts on the margins of the product produced in the Houston market vs. the Marrero, Louisiana market. Themargins on the VGO product produced at our Marrero facility tend to be greater than those produced at our TCEP facility, and due tothe sharp decline in prices we were not able to adjust our feedstock purchases at our TCEP facility to keep up with the change inmarket conditions. In addition, commodity prices decreased approximately 47% for the six months ended June 30, 2015, compared tothe same period in 2014. The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%) for the six months ended June 30, 2015decreased $42.96 per barrel from a six month average of $90.57 for the six months ended June 30, 2014 to $47.61 per barrel for thesix months ended June 30, 2015.

Our TCEP technology generated revenues of $11,585,930 during the six months ended June 30, 2015 with cost of revenues of$10,471,299, producing a gross profit of $1,114,631. The per barrel margin for our TCEP product decreased 65% as compared to thesame period during 2014. This decrease was largely a result of the decrease in TCEP volume during the quarter as described above,which resulted in the continued carrying cost for the operation with very low throughput.

Overall volume for the Refining and Marketing division decreased 5% during the six months ended June 30, 2015 as compared to thesame period in 2014. This division experienced a decrease in production of 10% for its gasoline blendstock for the six months endedJune 30, 2015, compared to the same period in 2014. Our fuel oil cutter volumes decreased 33% for the six months ended June 30,2015, compared to the same period in 2014. Our pygas volumes increased 58% for the six months ended June 30, 2015 ascompared to the same period in 2014. These decreases were a result of decisions not to purchase or process certain non-profitablefeedstock streams under the current market conditions.

Our Recovery division includes the business operations of Vertex Recovery as well as the recently acquired business of E-Source (ofwhich we own a 100% interest). Revenues for this division decreased 9% mostly as a result of lower commodity prices and thedecline of project based work related to our E-Source business during the six months ended June 30, 2015, compared to the sameperiod in 2014. We did experience increased volumes of petroleum products acquired during the six months ended June 30, 2015 inour Recovery business. This division through E-Source periodically participates in project work that is not ongoing thus we expect tosee fluctuations in revenue and gross profit from this division from period to period.

Overall gross profit decreased 61% and our margin per barrel decreased approximately 69% for the six months ended June 30, 2015,compared to the same period in 2014. This decrease was largely a result of lower volumes than expected at each facility along withthe decrease in overall business production at each of our facilities compared to what we planed for.

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We had selling, general, and administrative expenses of $14,129,574 for the six months ended June 30, 2015, which does not include$157,678 of acquisition related expenses, compared to $8,880,916 of total operating expenses for the prior year’s period (which doesnot include $2,559,830 of acquisition related expenses), an increase of $5,248,658 or 59% from the prior period (not includingacquisition related expenses). This increase is primarily due to the additional selling, general and administrative expenses generatedby new business lines, specifically those business lines acquired from Omega Refining, Heartland and the E-Source acquisition, aswell as increased sales expenses associated with our expansion into new West Coast markets.

We had a loss from operations of $9,126,835 for the six months ended June 30, 2015, compared to income from operations of$1,800,332 for the six months ended June 30, 2014, a decrease of $10,927,167 or 607% from the prior year’s period. The decreasewas mainly due to market and operational conditions which resulted in a decrease in revenue as described above as well as theadditional selling general and administrative expenses associated with new product lines, and acquired operations.

We had a provision for doubtful accounts of $2,650,000 for the six months ended June 30, 2015, compared to no provision fordoubtful accounts for the six months ended June 30, 2014. The provision for doubtful accounts was related to amounts owed toOmega under the Omega Secured Note including $1,696,452 which was unsecured, and which the collection of which is doubtful,and $2,650,000 which is collateralized by insurance proceeds expected to be collected in 2015, due to revised insurance proceedexpectations.

We also had interest expense of $2,088,155 for the six months ended June 30, 2015, compared to interest expense of $733,046 forthe six months ended June 30, 2014, an increase in interest expense of $1,355,109 or 185% from the prior period mainly due to thedebt facilities with Goldman Sachs and Midcap as described below. We had total other expense of $57,660 for the six months endedJune 30, 2015, related to the disposal of assets compared to total other expense of $10,866 for the six months ended June 30, 2014,also due to the disposal of assets.

We had $1,816,982 of gain on change in value of derivative liability for the six months ended June 30, 2015, in connection with abeneficial conversion feature on certain warrants granted in June 2015, as described in greater detail in Note 11 to the unauditedfinancial statements included herein under "Part 1"-"Item 1 Financial Statements".

Contributing to other income for the sixth months ended June 30, 2015 was $6,481,051, relating to a one-time non-cash bargainpurchase benefit from the purchase price of the Omega assets.

We had an income tax expense of $5,306,000 for the six months ended June 30, 2015, compared to no income tax expense for thesix months ended June 30, 2014. For tax reporting purposes, we have net operating losses (“NOLs”) of approximately $48.1 millionas of June 30, 2015 that are available to reduce future taxable income. In determining the carrying value of our net deferred tax asset,the Company considered all negative and positive evidence. The Company has incurred a cumulative pre-tax loss of $14.7 millionover a three year period ended June 30, 2015. As a result, we determined that a full valuation allowance for our deferred tax assets atJune 30, 2015 of $5,306,000 was appropriate.

We had net loss of $17,411,650 for the six months ended June 30, 2015, compared to net income of $7,537,848 for the six monthsended June 30, 2014, a decrease in net income of $24,949,498 or 331% from the prior period for the reasons described above.

During the six months ended June 30, 2015, the processing costs for our Refining and Marketing division located at KMTEX were$2,294,159. In addition, we have provided the results of operations for this segment of our business below during the same threemonth period.

Six Months Ended June 30, 2015 Refining and MarketingRevenues $ 19,714,009 Income (loss) from operations $ 840,249

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Set forth below, we have disclosed a quarter-by-quarter summary of our statements of operations and statements of operations bysegment information for the first two quarters of fiscal 2015 and for fiscal year 2014, by quarter.

Fiscal 2015 Fiscal 2014

Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter

Revenues $ 49,119,711 $ 37,684,339 $ 62,572,071 $ 76,903,516 $ 72,079,622 $ 47,349,658 Cost of Revenues 43,635,177 38,008,456 67,049,736 73,761,171 63,844,569 42,343,633

Gross Profit (loss) 5,484,534 (324,117) (4,477,665) 3,142,345 8,235,053 5,006,025

Reduction of contingent liability — — (3,371,836) (1,876,752) — — Selling, general and administrativeexpenses 5,641,250 5,370,028 7,783,149 4,706,104 4,363,617 2,716,349 Depreciation and amortization 1,561,314 1,556,982 1,296,450 1,180,443 1,068,273 732,677 Acquisition related expenses — 157,678 994,603 259,235 1,959,418 600,412

Total selling, general and administrativeexpenses 7,202,564 7,084,688 6,702,366 4,269,030 7,391,308 4,049,438

Income (loss) from operations (1,718,030) (7,408,805) (11,180,031) (1,126,685) 843,745 956,587 Other income (expense) Provision for doubtful accounts — (2,650,000) — — — —

Other income 10 8 223,255 109,980 7 370

Gain on bargain purchase — — 375,000 92,635 6,481,051 —

Other expense 12,818 (70,478) — — (10,866) — Gain on change in value of derivativeliability 1,816,982 — — — — —

Interest expense (556,975) (1,531,180) (956,319) (947,325) (657,235) (75,811)

Total other income (expense) 1,272,835 (4,251,650) (358,064) (744,710) 5,812,957 (75,441)

Income (loss) before income taxes (445,195) (11,660,455) (11,538,095) (1,871,395) 6,656,702 881,146 Income tax benefit (expense) — (5,306,000) 57,975 (57,975) — —

Net income (loss) $ (445,195) $ (16,966,455) $ (11,480,120) $ (1,929,370) $ 6,656,702 $ 881,146 Net income (loss) attributable to non-controlling interest — — — — 344,380 (18,981) Net income (loss) attributable to VertexEnergy, Inc. $ (445,195) $ (16,966,455) $ (11,480,120) $ (1,929,370) $ 7,001,082 $ 862,165 The below graph charts our total quarterly revenue over time from January 1, 2013 to June 30, 2015:

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Fiscal 2015 Fiscal 2014

Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter

Black Oil

Revenues $ 34,338,534 $ 24,913,976 $ 46,028,775 $ 52,434,252 $ 48,878,522 $ 23,571,400

Cost of revenues 30,912,204 27,141,124 48,709,354 50,846,953 42,973,852 21,227,096

Gross profit $ 3,426,330 $ (1,824,562) $ (2,680,579) $ 1,587,299 $ 5,904,670 $ 2,344,304

Refining & Marketing

Revenues $ 11,447,889 $ 8,266,120 $ 14,694,971 $ 19,655,674 $ 18,517,819 $ 19,827,459

Cost of revenues 9,956,771 7,305,402 15,570,210 18,680,731 16,626,592 18,251,891

Gross profit (loss) $ 1,491,118 $ 906,718 $ (875,239) $ 974,943 $ 1,891,227 $ 1,575,568

Recovery

Revenues $ 3,333,288 $ 4,504,243 $ 1,848,325 $ 4,813,590 $ 4,683,281 $ 3,950,799

Cost of revenues 2,766,202 3,561,930 2,770,172 4,233,487 4,244,125 2,864,646

Gross profit (loss) $ 567,086 $ 942,313 $ (921,847) $ 580,103 $ 439,156 $ 1,086,153

Liquidity and Capital Resources The success of our current business operations has become dependent on repairs, and maintenance to our facilities and our ability tomake routine capital expenditures. We also must maintain relationships with feedstock suppliers and end-product customers, andoperate with efficient management of overhead costs. Through these relationships, we have historically been able to achieve volumediscounts in the procurement of our feedstock, thereby increasing the margins of our segments’ operations. The resulting operatingcash flow is crucial to the viability and growth of our existing business lines.

We had total assets of $120,230,689 as of June 30, 2015 compared to $133,822,231 at December 31, 2014. The decrease wasmainly due to a decrease of $3,532,326 in inventory, a decrease of $299,533 in cash and cash equivalents, a $5,306,000 netdecrease in deferred federal income tax, a $779,285 decrease in costs in excess of billings, an increase of $1,981,429 indepreciation, as well as a $872,010 reduction in intangible assets, a $249,008 reduction in financing costs, and a $2,150,0000decrease in current portion of notes receivable offset by a $3,096,566 increase in accounts receivable, net. Total current assets as ofJune 30, 2015 of $31,642,656 consisted of cash and cash equivalents of $5,717,543, accounts receivable, net, of $13,033,513, notesreceivable of

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$1,000,000, relating to the Omega Secured Note described below, inventory of $9,088,290, and prepaid expenses of $2,803,310.Non-current assets consisted of fixed assets, net, of $55,292,400, these consist of property, plant and equipment related to ourvarious processing facilities, note receivable - related party of $8,308,000, relating to the Omega Secured Note described below, netintangible assets of $17,640,950, which primarily represents the value of the Company's TCEP patent and certain other patentsacquired from Omega Refining, and $4,922,353 of goodwill (booked in connection with the acquisition of Holdings and E-Source),deferred financing costs of $1,942,880, and other assets of $481,450. Our cash, accounts receivable, inventory and accounts payablefluctuate and are somewhat tied to one another based on the timing of our inventory cycle and sales.

We had total current liabilities of $28,280,478 as of June 30, 2015 compared to $63,076,685 at December 31, 2014. This decreasewas largely due to a reduction and reclassification in the current portion of long-term debt in the amount of $35,748,753, due to apaydown requirement during the first half of the year the entire amount of our debt with Goldman Sachs (as described below) wasaccounted for as current debt as of December 31, 2014. We made a payment in the amount of $15,100,000 towards this outstandingdebt during the second quarter of 2015 which reduced the amount owed and resulted in a significant portion of the prior current debtbeing moved to long-term debt. This was offset set by a $1,815,795 increase in revolving note in connection with amounts borrowedfrom MidCap as described below. As of June 30, 2015, accounts payable totaled $21,143,784 and we had capital lease liabilities ofwhich the current portion outstanding at June 30, 2015 was $408,145. In addition, we had $4,387,831 of current liabilities associatedwith long-term debt of which $289,607 is related to E-Source and $4,098,224 is related to the Goldman Sachs credit facility (asdescribed above) and our prior credit facility with Bank of America (BOA). Also as described below we had $1,815,795 owed toMidCap.

We had total liabilities of $62,116,456 as of June 30, 2015, including current liabilities of $28,280,478 and long-term liabilities of$22,555,893 of long-term debt, which included $1,755,893 related to E-Source debt, $5,211,085 of derivative liability, described ingreater detail in Note 11 to the unaudited financial statements included herein under "Part 1"-"Item 1 Financial Statements", and$6,069,000 of contingent consideration relating to the remaining potential earn-out payments associated with the acquisition ofHeartland in December 2014.

We had positive working capital of $3,362,178 as of June 30, 2015, compared to negative working capital of $29,327,453 as ofDecember 31, 2014. The increase in working capital from December 31, 2014 to June 30, 2015 is due to an increase in accountsreceivable as of June 30, 2015, a decrease in accounts payable, the reclassification of certain current debt to long-term debt asdescribed above, off-set by the increase in the balance of the revolving note. Our future operating cash flows will vary based on a number of factors, many of which are beyond our control, including commodityprices, the cost of recovered oil, and the ability to turn our inventory. Other factors that have affected and are expected to continue toaffect earnings and cash flow are transportation, processing, and storage costs. Over the long term, our operating cash flows will alsobe impacted by our ability to effectively manage our administrative and operating costs. Additionally, we may incur future capitalexpenditures related to new TCEP facilities.

On May 2, 2014, in connection with the closing of the Omega Refining acquisition, the Company assumed two capital leases totaling$3,154,860. Payments of $2,592,144 were made and the balance was $408,145 at June 30, 2015.

The Company has notes payable to various financial institutions, bearing interest at rates ranging from 5.5% to 6.35%, maturingJanuary 7, 2020. The balance of the notes payable is $2,045,500 at June 30, 2015.

The Company financed insurance premiums through various financial institutions bearing interest rates from 4% to 4.52%. All suchpremium finance agreements have maturities of less than one year and have a balance of $898,224 at June 30, 2015.

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The Company's outstanding debt facilities as of June 30, 2015 are summarized as follows:

Creditor Loan Type Origination Date Maturity Date Loan Amount Balance on June

30, 2015MidCap Business Credit,LLC Revolving Note March, 2015 March, 2017 $ 7,000,000 $ 1,815,795Goldman Sachs USA Term Loan May, 2014 May, 2019 40,000,000 24,000,000Pacific Western Bank Capital Lease September, 2012 August, 2017 520,219 408,145Texas Citizens Bank Term Note January, 2015 January, 2020 2,201,372 2,045,500

Various institutions Insurance premiumsfinanced Various < 1 year 1,789,481 898,224

$ 51,511,072 $ 29,167,664

Future contractual maturities of notes payable are summarized as follows:

Creditor 2015 2016 2017 2018 2019 ThereafterMidCap Business Credit, LLC $ 1,815,795 $ — $ — $ — $ — $ —Goldman Sachs USA 1,600,000 3,200,000 3,200,000 3,200,000 12,800,000 —Pacific Western Bank 88,044 186,947 133,154 — — —Texas Citizens Bank 71,394 442,600 468,225 495,013 523,333 44,935Various institutions 898,224 — — — — —

Totals $ 4,473,457 $ 3,829,547 $ 3,801,379 $ 3,695,013 $ 13,323,333 $ 44,935

The Company has various leases for office facilities and vehicles which are classified as operating leases, and which expire atvarious times through 2032. Total rent expense for the six months ended June 30, 2015 and 2014 is summarized as follows:

Six Months Ended June 30, 2015 2014Office leases $ 344,734 $ 142,402Plant Leases 2,356,800 —Vehicle leases 200,138 106,257

$ 2,901,672 $ 248,659

Minimum future lease commitments as of June 30, 2015 are summarized as follows:

Office

Facilities Vehicles Plant Leases Totals2015 $ 270,110 $ 212,513 $ 1,998,000 $ 2,480,6232016 453,154 454,301 6,924,000 7,831,4552017 414,932 175,216 6,574,000 7,164,1482018 312,466 57,710 4,060,000 4,430,1762019 300,000 — 2,928,000 3,228,000thereafter 4,175,000 — 14,640,000 18,815,000

$ 5,925,662 $ 899,740 $ 37,124,000 $ 43,949,402

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In addition to the above, we are required to redeem any non-converted shares of Series B Preferred Stock, which remain outstandingon December 24, 2020, at the rate of $3.10 per share (or $25 million in aggregate as of the date of this filing subject to the terms ofour senior loan documents, which funds we may not have, or which may not be available on favorable terms, if at all.

Credit and Guaranty Agreement

Effective May 2, 2014, we and our then newly formed subsidiary, Vertex Operating, as well as certain of our other direct and indirectsubsidiaries as guarantors, entered into a Credit and Guaranty Agreement with Goldman Sachs Specialty Lending Holdings, Inc.(“Lender”) and Goldman Sachs Bank USA, as Administrative Agent and Collateral Agent for Lender (“Agent”) , which wassubsequently amended by a First Amendment to Credit and Guaranty Agreement (the “First Amendment”) dated December 5, 2014,a Second Amendment to Credit and Guaranty Agreement dated March 26, 2015 (the “Second Amendment”, as described in greaterdetail in the Current Report on Form 8-K filed by the Company on March 31, 2015) and a Third Amendment to Credit and GuarantyAgreement dated June 18, 2015 (as described in greater detail in the Form 8-K filed by the Company on June 19, 2015 (the “ThirdAmendment” and the Credit and Guaranty Agreement as amended to date, the “Credit Agreement”). The discussion of the CreditAgreement below takes into account the amendments affected by the First Amendment, Second Amendment and Third Amendment.

Pursuant to the Credit Agreement, the Lender loaned us $40 million (the “Credit Agreement Loan”), which was evidenced by a TermLoan Note. Pursuant to the Credit Agreement, the Company has the option (subject to certain provisions of the Credit Agreementwhich provides for the Lender to have the option) to select whether loans made under the Credit Agreement bear interest at (a) thegreater of (i) the prime rate in effect, (ii) the weighted average of the rates on overnight Federal funds transactions with members ofthe Federal Reserve System plus ½ of 1%, (iii) the sum of (A) the Adjusted LIBOR Rate (defined below) and (B) 1%, and (iv) 4.5%per annum; or (b) the greater of (i) 1.50% and (ii) the applicable ICE Benchmark Administration Limited interest rate, divided by (x)one minus, (y) the maximum rate at which reserves (including, without limitation, any basic marginal, special, supplemental,emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency liabilities” (as such term isdefined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System orother applicable banking regulator (the “Adjusted LIBOR Rate”), in each case subject to the terms and conditions of the CreditAgreement, and in each case plus between 5.5% and 9.5% per annum (7.5% per annum prior to our entry into the SecondAmendment)(as provided in the Credit Agreement, based on several factors, including the Company’s total leverage ratio). Intereston the Credit Agreement is payable monthly in arrears, provided that upon any event of default the interest rate increases to 2% perannum in excess of the applicable interest rate then in effect (4% in the event the Required Payment defined below is not timelymade). The amount owed under the Credit Agreement is due and payable on May 2, 2019.

Amortizing principal payments are due on the Credit Agreement Loan in the amount of $300,000 per fiscal quarter for June 30, 2014,September 30, 2014 and December 31, 2014, and $800,000 per fiscal quarter on September 30, 2015, thereafter through maturity(no amortization payments are due on March 31, 2015 or June 30, 2015, pursuant to the terms of the Second Amendment orSeptember 30, 2015, pursuant to the terms of the Third Amendment). Additionally, in the event (a) we receive any sale proceeds fromthe sale of assets or insurance proceeds (each as described in greater detail in the Credit Agreement), in excess of $250,000, we arerequired to pay such sale proceeds, less certain deductions, as a prepayment of the Credit Agreement Loan, unless we decide toreinvest such proceeds in long-term production assets as described in the Credit Agreement; (b) we sell equity securities (subject tocertain exceptions), we are required to use 100% of the proceeds from such sales to repay the Credit Agreement Loan, subject tocertain exemptions, including up to $5 million to be used for working capital, permitted acquisitions, working capital of Vertex RefiningNevada and funds (which are required to total at least $10 million) which we were able to raise prior to June 30, 2014 (subject to theterms of the Credit Agreement) through the sale of securities; (c) we issue debt, we are required to prepay the Credit Agreement Loanin an amount equal to 100% of such funds received; (d) we have cash flow which exceeds certain pre-negotiated limits, we arerequired to use between 50% and 75% of such additional cash flow to repay the Credit Agreement Loan; (e) we receive tax refunds inexcess of $100,000 in any year, we are required to use such funds to prepay the Credit Agreement Loan; (f) our total debt exceedscertain maximum debt ratios set forth in the Credit Agreement, we are required to immediately repay the Credit Agreement Loan in anamount equal to such excess debt; or (g) we receive any funds under the Omega Purchase Agreement, we are required to prepaythe Credit Agreement Loan in an amount equal to such received funds, subject in each case to the terms and conditions of the CreditAgreement. We also have the right to make voluntary repayments of the Credit Agreement Loan in the minimum amount of $500,000(and in multiples of $100,000) from time to time.

Except with respect to certain accounts, certain finished goods inventory and certain other reserves described in the Amended BOACredit Agreement prior to March 26, 2015, and the MidCap Loan Agreement (described below) subsequent to March 26, 2015, theamount owed pursuant to the Credit Agreement is secured by a first priority security interest in all of our assets and all of the assetsand securities of our direct and indirect subsidiaries and is also guaranteed by our subsidiaries pursuant to the terms of the CreditAgreement, a Pledge and Security Agreement and Mortgage (providing a security interest over certain of our real

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property assets). The Credit Agreement contains customary representations, warranties, covenants for facilities of similar nature andsize as the Credit Agreement, and requirements for the Company to indemnify the Lender and the Agent for certain losses.

The Credit Agreement also includes various covenants (positive and negative) binding the Company, including, requiring that theCompany provide the Agent with certain reports, provide the Agent notice of material corporate events and forecasts, limiting theamount of indebtedness the Company may incur (for example, the Company’s total indebtedness could not exceed between$30,000,000-$32,000,000 at any time prior to our entry into the Second Amendment to the Credit Agreement on March 26, 2015 (the“Second Amendment”), and cannot exceed $7 million (including not more than $6 million under the MidCap Credit Agreementthrough December 31, 2015), subject to certain exemptions set forth in greater detail in the Credit Agreement), and requiring us tomaintain certain financial ratios, relating to consolidated EBITDA (which for the purposes of the Credit Agreement, never take intoaccount the results of operations of Vertex Refining OH, LLC (“Vertex OH”)) and debt leverage including maintaining a ratio ofquarterly consolidated EBITDA (as calculated and adjusted in the Credit Agreement) to certain fixed charges (quarterly on acumulative basis), for each applicable period of between 0.90:1.00 and 1.25:1.00 (depending on the applicable period); maintaining aratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for the applicable period(depending on the terms of the Credit Agreement such calculation is made for the prior 12 month period, the prior six month period orprior nine month period), for each quarter through maturity of between 4:00:1.00 and 2.5:1.00 (depending on the applicable period);maintaining consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for each applicable period (as provided in theCredit Agreement), of between $4.25 million and $11.5 million between the original date of the Credit Agreement and December 31,2014, and between $250,000 and $9.5 million thereafter through the maturity date of the Credit Agreement (depending on theapplicable quarter); maintaining at all times liquid cash on hand and available borrowings under other applicable credit agreements ofat least $3 million through the date of the Second Amendment and of at least $750,000 after the date of the Second Amendment priorto June 30, 2015, $1.5 million at any time after June 30, 2015 and prior to December 31, 2015, $2 million at any time after December31, 2015 and prior to June 30, 2016, and $2.5 million at any time after June 30, 2016 and prior to December 31, 2016, and $3 millionat any time after December 31, 2016; and requiring Vertex OH to maintain not less than $500,000 in cash at all times. The CreditAgreement also provides that the Company is not authorized to make any “earn-out” payment under the Heartland PurchaseAgreement, if an event of default exists under the Credit Agreement or if such payment would create an event of default under theCredit Agreement. Additionally, pursuant to the Second Amendment, we were required to raise at least $9.1 million by June 30, 2015,through the sale of equity, and pay such funds to the Lender as a mandatory pre-payment of the amounts due under the CreditAgreement (the “Required Payment”). The Credit Agreement also includes customary events of default for facilities of a similar natureand size as the Credit Agreement.

We also agreed to (a) pay the Agent a fee of $50,000 per year (including $50,000 paid upon our entry into the Second Amendment)as an administration fee pursuant to a fee letter with the Lender; and (b) agreed to pay the Agent certain prepayment fees in theevent we prepay amounts owed under the Credit Agreement prior to March 26, 2018, provided no prepayment fee is due inconnection with the Required Payment or certain other mandatory prepayments required under the terms of the Credit Agreement,subject to certain exceptions.

The proceeds from the Credit Agreement were used to pay the amounts due at the Initial Closing of the Omega purchase (describedabove), pay certain Omega capital leases and other obligations of Omega, and to pay expenses associated with the Initial Closing ofthe Omega acquisition. The Credit Agreement had a balance of $24,000,000 as of June 30, 2015.

As additional consideration for the Lender agreeing to the terms of the Second Amendment, we granted Goldman, Sachs & Co., anaffiliate of the Lender (such initial holder and its assigns, if any, the “Holder”) a warrant to purchase 1,766,874 shares of our commonstock which was evidenced by a Common Stock Purchase Warrant (the “Lender Warrant”). The Lender Warrant was to expire onMarch 26, 2022 and originally had an exercise price equal to the lower of (x) $3.39583 per share; and (y) the lowest price per share atwhich we issue any common stock (or set an exercise price for the purchase of common stock) between the date of our entry into theLender Warrant and June 30, 2015. The Lender Warrant was exercisable by the Holder at any time after September 1, 2015,including pursuant to a cashless exercise. The Lender Warrant provided that in the event that, prior to June 30, 2015, we prepaid theamount owed under the Credit Agreement in an amount greater than $9.1 million (i.e., in an amount greater than the RequiredPayment) then the number of shares of common stock issuable upon exercise of the Lender Warrant is reduced by the pro rataamount by which the amount prepaid exceeds $9.1 million and is less than $15.1 million, provided that if prior to June 30, 2015 weprepaid at least $6 million in addition to the Required Payment the Lender Warrant automatically terminated.

As additional consideration for the Lender agreeing to the terms of the Third Amendment, we agreed to modify, pursuant to a FirstAmendment to Warrant, the terms of the Lender Warrant. Pursuant to the First Amendment to Warrant, we agreed to reduce theexercise price of the Lender Warrant to $2.778 per share (the 30 day volume weighted average price of our common stock as of thedate of our entry into the Third Amendment) from $3.395828553 per share, and that in the event we issued any preferred stock, thatthe lowest exercise price associated with any warrants or similar convertible securities issued in connection with such preferred

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stock offering would become the exercise price of the Lender Warrant; provided that, if the Company did not issue preferred stock onor prior to June 30, 2015, then the exercise price of the Lender Warrant would be reduced to the lowest closing price per share of ourcommon stock on any date between March 26, 2015 and June 30, 2015.

Effective June 29, 2015, we repaid $15.1 million of the amount owed to the Lender under the Credit Agreement, and as a result, theLender Warrant and rights thereunder were cancelled and terminated.

MidCap Loan Agreement

Effective March 27, 2015, the Company, Vertex Operating and all of the Company’s other subsidiaries other than E-Source andGolden State, entered into a Loan and Security Agreement with MidCap Business Credit LLC (“MidCap” and the “MidCap LoanAgreement”). Pursuant to the MidCap Loan Agreement, MidCap agreed to loan us up to the lesser of (i) $7 million; and (ii) 85% of theamount of accounts receivable due to us which meet certain requirements set forth in the MidCap Loan Agreement (“QualifiedAccounts”), plus the lesser of (y) $3 million and (z) 50% of the cost or market value, whichever is lower, of our raw material andfinished goods which have not yet been sold, subject to the terms and conditions of the MidCap Loan Agreement (“EligibleInventory”), minus any amount which MidCap may require from time to time in order to over secure amounts owed to MidCap underthe MidCap Loan Agreement, as long as no event of default has occurred or is continuing under the terms of the MidCap LoanAgreement. The requirement of MidCap to make loans under the MidCap Loan Agreement is subject to certain standard conditionsand requirements. Notwithstanding the above, the parties agreed that until such time as (i) we raise funds sufficient to pay theRequired Payment (defined above), or (ii) we enter into an amendment with the Lender to remove the requirement that we make theRequired Payment, the advance rate against Qualified Accounts is reduced to 53% (compared to 85% after such date) and theadvance rate against Eligible Inventory is reduced to 31% (compared to 50% after such date). Additionally, the advance rate againstQualified Accounts is reduced by 1% for each percentage point by which the following calculation, expressed as a percentage,exceeds 3%: (a) actual bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items, divided by (b) grosssales (excluding non-recurring items), for any applicable period as determined by MidCap. The MidCap Loan had a balance of$1,815,795 on June 30, 2015.

We are required to make immediate pre-payments of outstanding principal owed under the MidCap Note in the amount certainthresholds are exceeded as set forth in the MidCap Loan Agreement. We are also required to provide MidCap certain monthly reportsand accountings. We agreed to pay MidCap certain fees in connection with the MidCap Loan Agreement including (a) a non-refundable fee equal to 0.75% of the $7 million credit limit ($52,500), which was due upon our entry into the MidCap LoanAgreement, and is due on each anniversary thereafter; (b) reimbursement for MidCap’s audit fees incurred from time to time; acollateral monitoring charge of 0.20% of the greater of the average outstanding balance of the MidCap Note (as defined below) at theend of each month or $3 million; (c) a fee equal to 0.75% of the difference between the credit limit of $7 million and the greater of (i)the amount actually borrowed, and (ii) $3 million, as calculated in the MidCap Loan Agreement, payable monthly in arrears andadded to the balance of the MidCap Note; and (d) a one-time placement fee equal to 0.50% of the $7 million credit limit which we paidupon our entry into the MidCap Loan Agreement.

The MidCap Loan Agreement contains customary representations, warranties, covenants for facilities of similar nature and size asthe MidCap Loan Agreement, and requirements for the Company to indemnify MidCap for certain losses. The Credit Agreement alsoincludes various covenants (positive and negative), binding the Company and its subsidiaries, including not permitting the availabilityfor loans under the MidCap Loan Agreement to ever be less than 10% of the credit limit ($700,000); prohibiting us from creating lienson any collateral pledged under the MidCap Loan Agreement, subject to certain exceptions; and prohibiting us from paying anydividends on capital stock, advancing any money to any person, guarantying any debt, creating any indebtedness, and entering intoany transactions with affiliates on terms more favorable than those of an arms-length third party transaction. The MidCap LoanAgreement also includes customary events of default for facilities of a similar nature and size as the MidCap Loan Agreement.

The MidCap Loan Agreement continues in effect until the second anniversary of the parties’ entry into the Agreement, subject to theright of the parties, subject to mutual agreement, to extend such rights and agreement, provided that we have the right to terminatethe MidCap Loan Agreement at any time with 60 days prior written notice. In the event we desire to terminate the MidCap LoanAgreement we are required to pay MidCap a termination fee of $70,000, subject to certain exceptions in the MidCap LoanAgreement. We also have the right to terminate the agreement without providing 60 days’ prior notice as long as we pay MidCap theequivalent amount of interest which would have been due (as calculated in the MidCap Loan Agreement) for such 60 day period,along with the $70,000 termination fee. In the event the MidCap Loan Agreement is terminated by MidCap upon the occurrence of anevent of default, we are required to pay MidCap a fee of $70,000 upon such termination. We also entered into a Revolving Note (the“MidCap Note”) to evidence amounts borrowed from MidCap from time to time under the MidCap Loan Agreement. Interest on theMidCap Note accrues at a fluctuating rate equal to the aggregate of: (x) the prime rate then effect, and (y) 1.75% per annum, or atsuch other rate mutually agreed on from time to time by the parties, based upon the greater of (i)

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any balance owing under the MidCap Note at the close of each day; or (ii) a minimum assumed average daily loan balance of $3million. Interest is payable in arrears, on the first day of each month that amounts are outstanding under the MidCap Note.

We and each of our subsidiaries subject to the MidCap Loan Agreement are jointly and severally liable for the repayment of amountsowed under the MidCap Note. Pursuant to the MidCap Loan Agreement, we granted MidCap a security interest in substantially all ofour assets and provided MidCap junior mortgages on all real estate which we own, subject to the first priority mortgages of theLender. Finally, MidCap and the Lender entered into an Intercreditor Agreement, which governs which of the lenders have first andsecond priority security interests over our assets which are pledged as collateral in order to secure repayment of the amounts owedpursuant to the Credit Agreement and MidCap Loan Agreement.

Compliance with Covenants and Fulfillment of Conditions:

On June 18, 2015, the Company entered into the Third Amendment to Credit and Guaranty Agreement (the "Third Amendment"),which amended the Credit Agreement (defined above). The amendments to the Credit Agreement effected by the Third Amendmentinclude, but are not limited to:

• Extending the time period pursuant to which we are required to make certain post-closing deliverables pursuant tothe terms of the Credit Agreement.

• Providing that we are not required to meet certain debt and leverage covenants for certain periods extending untilMarch 31, 2016 (previously we were required to meet such covenants beginning with the quarter ended December 31, 2015).

• Extending the date we are required to begin making required prepayments under the terms of the CreditAgreement, in an amount equal to 100% of the extent total consolidated debt exceeds (x) total consolidated EBITDA (ascalculated pursuant to the agreement) multiplied by (y) the maximum debt leverage ratios described in the Credit Agreement,until March 31, 2016 (previously no payments were required to be made through December 31, 2015).

• Reducing certain required consolidated EBITDA targets pursuant to the terms of the Credit Agreement to be morefavorable to the Company, including reducing such targets t $250,000, $1.5 million, $4.24 million, $7.25 million and $9.5million for the quarters ended September 31, 2015, December 31, 2015, March 31, 2016, June 30, 2016 and September 30,2016 (and each quarter thereafter), respectively, compared to $3 million, $5.5 million, $8 million, $9 million and $10 million,respectively.

• Extending the date we are required to begin meeting various leverage ratios and consolidated EBITDA targets asset forth in the Credit Agreement from December 31, 2015 and June 30, 2015, to March 31, 2016 and September 30,2015, respectively.

Effective June 29, 2015, we repaid $15.1 million of the amount owed to the Lender under the Credit Agreement, and as aresult, the Lender Warrant, described above, and rights thereunder were canceled and terminated.

Omega Secured Note

In connection with the Initial Closing of the Omega Purchase Agreement (described above under “Part I” - “Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” - “ Material Acquisitions” - “Omega Acquisition”), OmegaRefining and Bango Refining provided Vertex Refining Nevada a Secured Promissory Note (the “Omega Secured Note”) in theaggregate amount of $13,858,067, which had a balance of $13,858,067 as of June 30, 2015, representing (a) a loan to Omega in theamount of approximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at theInitial Closing (which included consideration relating to the assets acquired at the Initial Closing and which were planned to beacquired at the Final Closing) exceeded the value of assets acquired at the Initial Closing) (the “Purchase Price Loan”); (b) a $750,000loan related to the delivery of a certain amount of used motor oil inventory at the Initial Closing (the “First Inventory Loan”); (c) a$1,400,000 loan related to the delivery of a certain amount of used motor oil inventory which was planned to be acquired at the FinalClosing (the “Second Inventory Loan” and along with the First Inventory Loan, the “Inventory Loans”); (d) advances totaling $4.15million to satisfy accounts payable and other working capital related obligations of Omega after the Initial Closing (the “Draw DownLoans”); and (e) an additional loan of $1 million for capital expenditures (the “Capital Expenditure Loan”).

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The Purchase Price Loan and the Draw Down Loans accrued interest at the short-term federal rate as published by the InternalRevenue Service from time to time (approximately 0.33% per annum as of the Initial Closing) prior to October 30, 2014, and thereafterat 9.5% per annum, payable monthly in arrears and have a maturity date of March 31, 2015. The First Inventory Loan and the DrawDown Loans accrue interest at the rate of 9.5% per annum beginning on May 31, 2014, were due and payable on March 31, 2015,and were not paid on such date and are currently in default.

The repayment of the Secured Note is guaranteed by Omega Holdings pursuant to a Guaranty Agreement and secured by a securityinterest granted pursuant to the terms of the Secured Note and a Leasehold Deed of Trust, Security Agreement, Assignment ofLeases and Rents and Fixture Filing. Additionally, we have the right to set-off any amount due upon an event of default under theSecured Note against certain of the shares pledged by Omega in connection with the Initial Closing and the earnout considerationdue to Omega (provided that we have determined that no earn-out consideration will be due to Omega), subject to the terms of theAsset Purchase Agreement.

It is anticipated that Vertex Refining Nevada will acquire certain personal property leased from Omega Refining and Bango Refiningunder a Personal Property Lease at the termination of the Personal Property Lease pursuant to Article 9 of the Uniform CommercialCode, with such acquisition occurring through an offset of a portion of the amount due Vertex Refining Nevada under the OmegaSecured Note.

Omega Secured Note had an outstanding balance of $13,858,067 as of June 30, 2015, provided that based on our management’sassessment, the Company recognized an allowance for doubtful accounts of $4,346,452 related to amounts owed to the Company byOmega under the Omega Secured Note during the three months ended March 31, 2015.

Texas Citizens Bank Loan Agreement

On January 7, 2015, E-Source entered into a loan agreement with Texas Citizens Bank to consolidate various smaller debtobligations. The loan Agreement provides a term note in the amount of $2,045,500 that matures on January 7, 2020. Borrowings beara fixed interest rate of 5.5% per annum and interest is calculated from the date of each advance until repayment in full or maturity.The loan has 59 scheduled monthly payments of $45,147 which includes principal and interest. The loan is collateralized by all of theassets of E-Source. The loan contains customary representations, warranties, and covenants for facilities of similar nature and size. Unit Offering

As described above under “Part I” - “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”- “Recent Events” - “Unit Offering”, we closed the Offering of Units on June 24, 2015 and raised a gross amount of $25 million and anet of $23.6 million, after commissions and before our expenses, of which $15.1 million was immediately used to pay down amountsowed to our Lender under the Credit Agreement.

Need for additional funding

Our re-refining business will require significant capital to design and construct any new facilities. The facility infrastructure would bean additional capitalized expenditure to these proposed process costs and would depend on the location and site specifics of thefacility.

Management believes that the amount remaining from our June 2015 Unit Offering (described above) and the amount available underour MidCap Loan Agreement, in addition to projected earnings, will provide sufficient liquidity to fund our operations for theforeseeable future, although we may seek additional financing to fund acquisitions or other developments in the future and to repayamounts owed to our senior creditor. We may raise funds in the future through the sale of common stock, preferred stock, debt, orconvertible debt, which may include the grant of warrants. We may also seek to obtain sufficient funding to completely refinance theGoldman and/or MidCap debt subsequent to the date of this filing which may take any or all of the forms described above.

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

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In addition to the above, we may also seek to acquire additional businesses or assets (similar to our recent acquisitions fromHeartland, Omega and Aaron Oil (as described below under “Item 5. Other Information” - “Aaron Oil Acquisition”), and our acquisitionof E-Source. Finally, in the event we deem such transaction in our best interest, we may enter into a business combination or similartransaction in the future.

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

(1) actual or anticipated variations in our results ofoperations;

(2) the market for, and volatility in, the market for oil andgas;

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

(4) 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 thatare unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political andmarket conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price ofour common stock. Additionally, at present, we have a limited number of shares in our public float, and as a result, there could beextreme fluctuations in the price of our common stock.

We believe that our stock prices (bid, ask and closing prices) may not relate to the actual value of our company, and may not reflectthe actual value of our common stock. Shareholders and potential investors in our common stock should exercise caution beforemaking an investment in our common stock, and should not rely on the publicly quoted or traded stock prices in determining ourcommon stock value, but should instead determine the value of our common stock based on the information contained in our publicreports, industry information, and those business valuation methods commonly used to value private companies.

Cash flows for the six months ended June 30, 2015 compared to the six months ended June 30, 2014

Six Months Ended June 30, 2015 2014Beginning cash and cash equivalents $ 6,017,076 $ 2,678,628

Net cash provided by (used in): Operating activities (7,605,437) 3,631,402Investing activities (1,691,740) (31,399,981)Financing activities 8,997,644 44,741,782

Net increase (decrease) in cash and cash equivalents (299,533) 16,973,203

Ending cash and cash equivalents $ 5,717,543 $ 19,651,831

Net cash used in operating activities was $7,605,437 for the six months ended June 30, 2015 as compared to $3,631,402 of net cashprovided by operating activities during the corresponding period in 2014. Our primary sources of liquidity are cash flows from ouroperations and the availability to borrow funds under our Credit Agreement, notes payable, and MidCap Loan Agreement. Theprimary reasons for the decrease in cash provided by operating activities for the six month period ended June 30, 2015 are related tothe net loss of $17,411,650 (compared to net income of $7,537,848 in the prior period), an increase in accounts receivable of$3,096,566 and an increase in prepaid expenses of $327,343. These cash outflows were partially offset by favorable adjustments fordepreciation and amortization expenses of $3,118,296, a decrease in inventory of $3,532,326 costs in excess of billings of $779,285,$61,713 of deferred revenue, $2,650,000 of allowance for doubtful accounts, and a decrease in accounts payable of $640,352 anddeferred federal income tax of $5,306,000 for the six month period ended June 30, 2015.

Investing activities used cash of $1,691,740 for the six months ended June 30, 2015 as compared to having used $31,399,981 ofcash during the corresponding period in 2014. Investing activities for the six months ended June 30, 2015 were primarily comprisedof $1,196,240 invested in fixed assets, offset by $4,500 of proceeds from the sale of assets.

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Financing activities provided cash of $8,997,644 for the six months ended June 30, 2015 as compared to $44,741,782 of cash duringthe corresponding period in 2014. Financing activities for the six months ended June 30, 2015 are comprised of proceeds from thesale of stock of $23,557,552 as part of our June 2015 Unit offering as described above, which was significantly offset by payments onnotes payable in the amount of $16,375,703 (which represents amounts paid to our Lender under the Credit Agreement), amountsreceived from the MidCap Loan Agreement of $1,815,795 which were partially offset by payments made on notes receivable of$500,000.

Critical Accounting Policies and Use of Estimates Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires managementto make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Managementregularly evaluates its estimates and judgments, including those related to revenue recognition, goodwill, intangible assets, long-livedassets valuation, legal matters, derivative liabilities, valuation of warrants and beneficial conversion feature on preferred shares.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-livedassets. It requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the useand eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amountby 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, goodsare delivered, sales price is determinable, and collection is reasonably assured. Revenue is recognized upon delivery by truck andrailcar of feedstock to its re-refining customers and upon product leaving the Company's terminal facilities and third party processingfacility via barge. Revenue is also recognized as recovered scrap materials are sold and projects are completed.

Stock Based Compensation We account for share-based expense and activity in accordance with FASB ASC Topic 718, which establishes accounting for equityinstruments exchanged for services. Under this provision, share-based compensation costs are measured at the grant date, basedon the calculated fair value of the award, and are recognized as an expense over the employee’s requisite service period, generallythe 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 arerecognized as an expense over the service period, generally the vesting period of the equity grant. We estimate the fair value of stockoptions using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include theexercise price of the award, expected option term, expected volatility of the stock over the option’s expected term, risk-free interestrate over the option’s expected term, and the expected annual dividend yield. We believe that the valuation technique and approachutilized to develop the underlying assumptions are appropriate in calculating the fair values of the stock options granted. Basic and Diluted Income/ Loss per Share Basic and diluted income/loss per share has been calculated based on the weighted average number of shares of common stockoutstanding during the period. Income Taxes We account for income taxes in accordance with the FASB ASC Topic 740. We record a valuation allowance against net deferred taxassets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not berealized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and whentemporary differences become deductible. We consider, among other available information, uncertainties surrounding therecoverability of deferred tax assets, scheduled reversals of deferred tax liabilities, projected future taxable income, and other mattersin making this assessment.

Derivative Liabilities

The Company, in accordance with ACS 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, convertible preferred shares are accounted for net, outside of shareholder's equity and warrants are

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accounted for as liabilities at their fair value during periods where they can be net cash settled in case of a change in controltransaction.

The warrants are accounted for as a liability at their fair value at each reporting period. The value of the derivative warrant liability willbe re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value ofthese warrants, a binomial model is utilized that computes the impact of a possible change in control transaction upon the exercise ofthe warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price and volatilityassumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Preferred Stock Classification

FASB establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of bothliabilities and equity. A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is requiredto occur only upon liquidation or termination of the reporting entity.

A financial instrument issued in the form of shares is mandatorily redeemable if it embodies an unconditional obligation requiring theissuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event certain tooccur. A financial instrument that embodies a conditional obligation to redeem the instrument by transferring assets upon an event notcertain to occur becomes mandatorily redeemable-and, therefore, becomes a liability-if that event occurs, the condition is resolved, orthe event becomes certain to occur.

The Series B Preferred Stock is required to be redeemed by the Company on the fifth anniversary of the issuance of the Series BPreferred Stock if the redemption would not be subject to then existing restrictions under the Company's senior credit agreement thatprohibits redemption. SEC reporting requirements provide that any possible redemption outside of the control of the Companyrequires the preferred stock to the classified outside of permanent equity.

Business Combinations

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

Market Risk

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate risks primarily through borrowings under various bank facilities. Interest on these facilities is basedupon variable interest rates using LIBOR or Prime as the base rate.

We are exposed to market risks related to the volatility of crude oil and refined oil products. Our financial results can besignificantly affected by changes in these prices which are driven by global economic and market conditions. We attempt to mitigatemuch of the risk associated with the volatility of relevant commodity prices by using our knowledge of the market to obtain feedstockat attractive costs, by efficiently managing the logistics associated with our products, by turning our inventory over quickly, and byselling our products into markets where we believe we can achieve the greatest value. We believe that the current downward trend innatural gas prices coupled with increasing crude oil prices provides an attractive margin opportunity for our TCEP finished product.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonableassurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to theSecurities

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Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the rulesand forms of the Commission and that such information is accumulated and communicated to our management, including our ChiefExecutive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.

Management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of theend of the period covered by this report. As of June 30, 2015, based on the evaluation of these disclosure controls and procedures,and in light of the material weaknesses found in our internal controls over financial reporting as of December 31, 2014 (as describedin greater detail in our annual report on Form 10-K for the year ended December 31, 2014), our CEO and CFO have concluded thatour disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosedin our reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, isrecorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and thatsuch information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timelydecisions regarding required disclosures.

In light of the material weaknesses described above, we have performed additional analysis and other post-quarter procedures toensure our consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly,management has concluded that the financial statements fairly present in all material respects our financial condition, results ofoperations and cash flows as at, and for, the periods presented in this report.

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 controlenvironment. There were no changes in our internal control over financial reporting that occurred during the period covered by thisQuarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control overfinancial reporting.

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PART II – OTHER INFORMATION Item 1. Legal Proceedings

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

We and Vertex Refining LA, LLC, the wholly-owned subsidiary of Vertex Operating, our wholly-owned subsidiary, were named asdefendants, along with Plaquemines Holdings, L.L.C. (“Plaquemines”), in a lawsuit filed in the United States District Court For theEastern District of Louisiana (Civil Action No. 15-1198) on June 11, 2015 by CHS Inc. (“CHS”). The lawsuit is in connection with ourplanned construction of a barge dock on property leased by Vertex Refining LA from Plaquemines in Myrtle Grove, Louisiana. Thesuit seeks certain declaratory and injunctive relief related to the planned location and construction of the barge dock, including that alocation proposed by CHS is proper, the prior location proposed by us is no longer valid, and that we be enjoined from constructing abarge dock for any purpose other than servicing a used oil refinery or other qualifying plan. We intend to vigorously defend ourselvesand oppose the relief sought in the complaint, provided that at this stage of the litigation, the Company has no basis of determiningwhether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.

Vertex Refining LA, LLC, the wholly-owned subsidiary of Vertex Operating, our wholly-owned subsidiary, was named as a defendantin a lawsuit filed in the Twenty-Fourth Judicial District For the Parish of Jefferson Louisiana on January 6, 2015. Pursuant to thelawsuit, Stacy Davis, Becky Vallee and James A. Block (the “Plaintiffs”) made certain allegations against Vertex Refining LA, LLC,Omega Refining and the manager of the Marrero, Louisiana facility (the “Defendants”). The claims are structured as class actionsrelating to certain operations performed at our newly acquired re-refinery located in Marrero, Louisiana, including the allegedemission of noxious and harmful substances. The Plaintiffs allege they are part of a valid class due to the fact that they live and worknear the facility. The lawsuit relates to alleged actions and inactions related to the facility between 2012 to present and includesallegations relating to violations of various Louisiana statutes, allegations relating to the misrepresentation of information to theLouisiana Department of Environmental Quality, allegations relating to violations of hourly permitted emission limits, and allegedfailure to report an un-permitted point-source. The suit seeks damages for physical and emotional injuries, pain and suffering,medical expenses and deprivation of the use and enjoyment of Plaintiffs’ homes. The Plaintiffs further allege that there are estimatedto be over 1,000 class members to the suit, provided that the proposed class is yet to be certified. We intend to vigorously defendourselves against the allegations made in the complaint, provided that at this stage of the litigation, the Company has no basis ofdetermining whether there is any likelihood of material loss associated with the claims and/or the potential outcome of the litigation.

On or around April 29, 2015, we, Vertex Refining Nevada, Bango Oil (our landlord under a lease relating to our Churchill, Nevadafacility (the “Bango Plant”), described in greater detail above under “Part I” - “Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” - “Recent Events” - “Churchill County, Nevada Lease”, Bango Refining, OmegaHoldings, and various other parties, were sued by Republic Bank, Inc. (“Republic”), in the Tenth Judicial District Court in and forChurchill County, Nevada (Case No. 15-10DC0502). Pursuant to the lawsuit, Republic, made various claims against the nameddefendants including, (i) alleging a default on certain lease obligations which Republic and Bango Refining were party to, relating toleased equipment used at the Bango Plant; (ii) alleging the liability of certain guarantors of the equipment lease including OmegaHoldings in connection with the amounts alleged due under the equipment lease; (iii) requesting confirmation of Republic’s securityinterest in the equipment; (iv) alleging a breach of contract in connection with the lease agreement (including the allegation that webreached various contracts with Republic in connection with the Omega acquisition and our failure to complete the final closingthereunder); and (v) alleging unjust enrichment against us in connection with the use of the lease equipment subject to the leaseagreement. Pursuant to the lawsuit, Republic is asking for damages of approximately $2.9 million, plus interest and fees, adeclaratory judgment against Bango Oil confirming that Republic’s security interest in the equipment is perfected and senior to thesecurity interest of Bango Oil, and joint and several liability against all defendants (including us) for the damages alleged due(including in connection with the breach of contract and unjust enrichment claims). We have not yet responded to the claims made byRepublic however, we intend to vigorously defend ourselves against the allegations made in the complaint, provided that at this stageof the litigation, the Company has no basis of determining whether there is any likelihood of material loss associated with the claimsand/or the potential outcome of the litigation.

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., made certain allegations against E-Source, and Motiva. The claims include Breach of Contract andQuantum Meruit actions relating to asbestos abatement and remediation operations performed for defendants' at Motiva's facility inPort Arthur, Jefferson County, Texas. The plaintiff alleges it is due monies earned. Defendants have denied any amounts due plaintiff.The suit seeks damages of approximately $864,000, along with pre-judgment and post-judgment interest, the fair

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value of certain property alleged to be converted by defendants and reimbursement of legal fees.. We intend to vigorously defendourselves against the allegations made in the complaint. The Company has no basis of determining whether there is any likelihood ofmaterial loss associated with the claims and/or the potential and/or the outcome of the litigation.

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/A forthe year ended December 31, 2014, filed with the Commission on April 15, 2015, except as provided below and investors shouldreview the risks provided below and in the Form 10-K/A, prior to making an investment in the Company.

GENERAL RISKS RELATING TO OUR BUSINESS AND INDUSTRY

We will need to raise additional capital to meet the requirements of the terms and conditions of our Credit Agreement and tofund future acquisitions and our ability to obtain the necessary funding is uncertain.

We will need to raise additional funding to meet the requirements of the terms and conditions of our Credit Agreement. Additionally,we may need to raise additional funds through public or private debt or equity financing or through other various means to fund ourobligations, or acquire assets and businesses in the future. In such a case, adequate funds may not be available when needed ormay not be available on favorable terms. If we need to raise additional funds in the future, by issuing equity securities, dilution toexisting stockholders will result, and such securities may have rights, preferences and privileges senior to those of our commonstock. If funding is insufficient at any time in the future and we are unable to generate sufficient revenue from new businessarrangements, to complete planned acquisitions or operations, our results of operations and the value of our securities could beadversely affected. Future funding may not be available on favorable terms, if at all.

We may not be able to generate sufficient cash flow to meet our debt service and other obligations due to events beyondour control.

Our ability to generate cash flows from operations, to make scheduled payments on or refinance our indebtedness and to fundworking capital needs and planned capital expenditures will depend on our future financial performance and our ability to generatecash in the future. Our future financial performance will be affected by a range of economic, financial, competitive, business and otherfactors that we cannot control, such as general economic, legislative, regulatory and financial conditions in our industry, the economygenerally, the price of oil and other risks described in our other reports filed with the SEC. A significant reduction in operating cashflows resulting from changes in economic, legislative or regulatory conditions, increased competition or other events beyond ourcontrol could increase the need for additional or alternative sources of liquidity and could have a material adverse effect on ourbusiness, financial condition, results of operations, prospects and our ability to service our debt and other obligations. If we areunable to service our indebtedness or to fund our other liquidity needs, we may be forced to adopt an alternative strategy that mayinclude actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness,seeking additional capital, or any combination of the foregoing. If we raise additional debt, it would increase our interest expense,leverage and our operating and financial costs. We cannot assure you that any of these alternative strategies could be affected onsatisfactory terms, if at all, or that they would yield sufficient funds to make required payments on our indebtedness or to fund ourother liquidity needs. Reducing or delaying capital expenditures or selling assets could delay future cash flows. In addition, the termsof existing or future debt agreements may restrict us from adopting any of these alternatives. We cannot assure you that our businesswill generate sufficient cash flows from operations or that future borrowings will be available in an amount sufficient to enable us topay our indebtedness or to fund our other liquidity needs.

If for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of theagreements governing our indebtedness, which would allow our creditors at that time to declare all outstanding indebtedness to bedue and payable. This would likely in turn trigger cross-acceleration or cross-default rights between our applicable debt agreements.Under these circumstances, our lenders could compel us to apply all of our available cash to repay our borrowings. In addition, thelenders under our credit facilities or other secured indebtedness could seek to foreclose on our assets that are their collateral. If theamounts outstanding under our indebtedness were to be accelerated, or were the subject of foreclosure actions, our assets may notbe sufficient to repay in full the money owed to the lenders or to our other debt holders.

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We are currently owed a significant amount of money from Omega Holdings Company, LLC and related entities, whichamount is in default, and we may be unable to collect on the full amount of such note.

The Omega Secured Note had an outstanding balance of $13,858,067 as of March 31, 2015. not including a $4.3 million allowancefor doubtful accounts in connection with such note (described below). The Omega Secured Note represents (a) a loan to Omega inthe amount of approximately $7.56 million (representing the agreed upon value of the amount by which the consideration paid at theinitial closing of the Omega acquisition (which included consideration relating to the assets acquired at the initial closing and whichwere planned to be acquired at the final closing, which has since been terminated by the parties) exceeded the value of assetsacquired at the initial closing) (the “Purchase Price Loan”); (b) a $750,000 loan related to the delivery of a certain amount of usedmotor oil inventory at the initial closing (the “First Inventory Loan”); (c) a $1,400,000 loan related to the delivery of a certain amount ofused motor oil inventory which was planned to be acquired at the final closing, which the parties have agreed will now not occur (the“Second Inventory Loan” and along with the First Inventory Loan, the “Inventory Loans”); (d) advances totaling $4.15 million to satisfyaccounts payable and other working capital related obligations of Omega after the initial closing (the “Draw Down Loans”); and (e) anadditional loan of $1 million for capital expenditures (the “Capital Expenditure Loan”).

The Purchase Price Loan and the Draw Down Loans accrued interest at the short-term federal rate as published by the InternalRevenue Service from time to time (approximately 0.33% per annum as of the initial closing) prior to October 30, 2014, and thereafterat 9.5% per annum, payable monthly in arrears and had a maturity date of March 31, 2015. The First Inventory Loan and the DrawDown Loans accrued interest at the rate of 9.5% per annum beginning on May 31, 2014, and were due and payable on March 31,2015. None of the amounts due under the Omega Secured Note were paid when due on March 31, 2015, and such amounts arecurrently in default. Upon an event of default under any of the loans, the loans accrue interest at 18% per annum until paid in full, andsuch note is currently accruing 18% per annum.

Based on our management’s assessment, the Company recognized an allowance for doubtful accounts of $4,346,452 related toamounts owed to the Company by Omega under the Omega Secured Note during the three months ended March 31, 2015.

The repayment of the Secured Note is guaranteed by Omega pursuant to a Guaranty Agreement and secured by a security interestgranted pursuant to the terms of the Secured Note and a Leasehold Deed of Trust, Security Agreement, Assignment of Leases andRents and Fixture Filing. Additionally, we have the right to set-off any amount due upon an event of default under the Omega SecuredNote against certain of the shares pledged by Omega in connection with the initial closing and the earn-out consideration due toOmega (provided that we have determined that no earn-out consideration will be due to Omega), subject to the terms of an AssetPurchase Agreement entered into with Omega.

In the event Omega does not have sufficient cash on hand to repay the Omega Secured Note, we may be forced to attempt toenforce our security interests over Omega’s assets in an attempt to satisfy such note. Such actions could take significant time andresources, and we may ultimately not be able to receive the full value of the amounts owed to us pursuant to the terms of the OmegaSecured Note. In the event we do not receive the full amounts owed pursuant to the Omega Secured Note, it could have a materialadverse effect on our cash flows, debt covenants and negatively impact the amount of cash we have on hand and the amount ofadditional funding we are required to raise moving forward. Additionally, the value of our securities may decline in value upon suchevent.

We have substantial indebtedness which could adversely affect our financial flexibility and our competitive position. Ourdebt agreements have previously been declared in default, and our future failure to comply with financial covenants in ourdebt agreements could result in such debt agreements again being declared in default.

We have a significant amount of outstanding indebtedness. As of June 30, 2015, we owed approximately $21.1 million in accountspayable. As of June 30, 2015, we owed $24,000,000 under the Credit Agreement. The amount owed under the Credit Agreement isdue and payable on May 2, 2019 and we were previously in default of the provisions of the Credit Agreement, which were waived byour lender in connection with our entry into an amendment to the Credit Agreement. Effective March 27, 2015, we, Vertex Operatingand all of our other subsidiaries other than E-Source and Golden State, entered into the MidCap Loan Agreement. Pursuant to theMidCap Loan Agreement, MidCap agreed to loan us up to the lesser of (i) $7 million; and (ii) 85% of the amount of accountsreceivable due to us which meet certain requirements set forth in the MidCap Loan Agreement (“Qualified Accounts”), plus the lesserof (y) $3 million and (z) 50% of the cost or market value, whichever is lower, of our raw material and finished goods which have not yetbeen sold, subject to the terms and conditions of the MidCap Loan Agreement (“Eligible Inventory”), minus any amount which MidCapmay require from time to time in order to over secure amounts owed to MidCap under the MidCap Loan Agreement, as long as noevent of default has occurred or is continuing under the terms of the MidCap Loan Agreement. The requirement of MidCap to makeloans under the MidCap Loan Agreement is subject to certain standard conditions and requirements. A total of $1.4 million has beendrawn under the MidCap Loan Agreement to date.

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Our substantial indebtedness could have important consequences and significant effects on our business. For example, it could:• increase our vulnerability to adverse changes in general economic, industry and competitive

conditions;• require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby

reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;• restrict us from taking advantage of business

opportunities;• make it more difficult to satisfy our financial

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

and• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements,

execution of our business strategy or other general corporate purposes on satisfactory terms or at all. We may need to raise additional funding in the future to repay or refinance the Credit Agreement and MidCap Loan Agreement andour accounts payable, and as such may need to seek additional debt or equity financing. Such additional financing may not beavailable on favorable terms, if at all. If debt financing is available and obtained, our interest expense may increase and we may besubject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it may result in ourshareholders experiencing significant dilution. If such financing is unavailable, we may be forced to curtail our operations, which maycause the value of our securities to decline in value and/or become worthless. Furthermore, the fact that our credit agreements havepreviously been declared in default may negatively affect the perception of the Company and our ability to pay our debts as theybecome due in the future and could result in the price of our securities declining in value or being valued at lower levels thancompanies with similar histories of defaults. The covenants in our credit and loan agreements restrict our ability to operate our business and might lead to a defaultunder our credit agreements. Our debt agreements limit, among other things, our ability to:

• incur or guarantee additionalindebtedness;

• create liens;• make payments to junior

creditors;• make

investments;• sell material assets• affect fundamental changes in our

structure;• make certain acquisitions;• sell interests in our

subsidiaries;• consolidate or merge with or into other companies or transfer all or substantially all of our assets;

and• engage in transactions with

affiliates. The Credit Agreement also includes various covenants (positive and negative) binding the Company, including, requiring that theCompany provide the Agent with certain reports, provide the Agent notice of material corporate events and forecasts, limiting theamount of indebtedness the Company may incur (for example, the Company’s total indebtedness could not exceed between$30,000,000-$32,000,000 at any time prior to our entry into the Second Amendment to the Credit Agreement on March 26, 2015 (the“Second Amendment”), and cannot exceed $7 million (including not more than $6 million under the MidCap Credit Agreementthrough December 31, 2015), subject to certain exemptions set forth in greater detail in the Credit Agreement), and requiring us tomaintain certain financial ratios, relating to consolidated EBITDA (which for the purposes of the Credit Agreement, never take intoaccount the results of operations of Vertex Refining OH, LLC (“Vertex OH”)) and debt leverage including maintaining a ratio ofquarterly consolidated EBITDA (as calculated and adjusted in the Credit Agreement) to certain fixed charges (quarterly on acumulative basis), for each applicable period of between 0.90:1.00 and 1.25:1.00 (depending on the applicable period); maintaining aratio of consolidated debt to consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for the applicable period(depending on the terms of the Credit Agreement such calculation is made for the prior 12 month period, the prior six month period orprior nine month period), for each quarter through maturity of between 4:00:1.00 and 2.5:1.00 (depending on the applicable period);maintaining consolidated EBITDA (as calculated and adjusted in the Credit Agreement), for each applicable period (as provided in theCredit Agreement), of between $4.25 million and $11.5 million between the original date of the Credit Agreement and December 31,2014, and between $250,000 and $9.5 million thereafter through the maturity date of the Credit Agreement (depending on theapplicable quarter); maintaining at all times liquid cash on hand and available borrowings under other applicable credit agreements ofat least $3 million through the date of the Second Amendment and of at least $750,000 after the date of the Second Amendment priorto June 30, 2015, $1.5 million at any time after June 30, 2015 and prior to December 31, 2015, $2 million at any time after December31, 2015 and prior to June 30, 2016, and $2.5 million at any time after June 30, 2016 and prior to December 31, 2016, and $3 millionat any time after December 31, 2016; and requiring Vertex OH to maintain not less than $500,000 in cash at all times. The CreditAgreement also provides that the Company is not authorized to make any “earn-out”

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payment under the Heartland Purchase Agreement, if an event of default exists under the Credit Agreement or if such payment wouldcreate an event of default under the Credit Agreement.

The MidCap Loan Agreement contains customary representations, warranties, covenants for facilities of similar nature and size asthe MidCap Loan Agreement, and requirements for the Company to indemnify MidCap for certain losses. The Credit Agreement alsoincludes various covenants (positive and negative), binding the Company and its subsidiaries, including not permitting the availabilityfor loans under the MidCap Loan Agreement to ever be less than 10% of the credit limit ($700,000); prohibiting us from creating lienson any collateral pledged under the MidCap Loan Agreement, subject to certain exceptions; and prohibiting us from paying anydividends on capital stock, advancing any money to any person, guarantying any debt, creating any indebtedness, and entering intoany transactions with affiliates on terms more favorable than those of an arms-length third party transaction.

As a result of these covenants and limitations, we may not be able to respond to changes in business and economic conditions andto obtain additional financing, if needed, and we may be prevented from engaging in transactions that might otherwise be beneficialto us. Our credit and loan agreements require, and our future credit facilities and loan agreements may require, us to maintain certainfinancial ratios and satisfy certain other financial condition tests. Our ability to meet these financial ratios and tests can be affected byevents beyond our control, and we may not be able to meet those tests. The breach of any of these covenants could result in adefault under our credit agreements or future credit facilities. Upon the occurrence of an event of default, the lenders could elect todeclare all amounts outstanding under such credit agreements, including accrued interest or other obligations, to be immediately dueand payable. If amounts outstanding under such credit agreements were to be accelerated, our assets might not be sufficient torepay in full that indebtedness and our other indebtedness.

Our credit agreements and loan agreements also contain cross-default and cross-acceleration provisions. Under these provisions, adefault or acceleration under one instrument governing our debt may constitute a default under our other debt instruments thatcontain cross-default and cross-acceleration provisions, which could result in the related debt and the debt issued under such otherinstruments becoming immediately due and payable. In such event, we would need to raise funds from alternative sources, whichfunds might not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default could require us to sellassets and otherwise curtail operations to pay our creditors. The proceeds of such a sale of assets, or curtailment of operations,might not enable us to pay all of our liabilities.

We face significant penalties and damages in the event the registration statement we were required to file to register sharesunderlying the Series B Preferred Stock and Warrants sold in the Unit Offering is not declared effective within required timelimits or such registration statement is subsequently suspended or terminated.

Under the Purchase Agreement, the Company has agreed to register the shares of common stock issuable upon conversion of theSeries B Preferred Stock and upon exercise of the Warrants under the Securities Act, for resale by the Investors. The Company hascommitted to file a registration statement on Form S-1 by the 30th day following the closing of the Offering (July 24, 2015), and tocause the registration statement to become effective by the 90th day following the closing (September 22, 2015) (or, in the event of a“full review” by the Securities and Exchange Commission, the 120th day following the closing (October 22, 2015)). The PurchaseAgreement provides for liquidated damages upon the occurrence of certain events, including, but not limited to, the failure by theCompany to cause the registration statement to become effective by the deadlines set forth above. The amount of the liquidateddamages is 1.0% of the aggregate subscription amount paid by an Investor for the Units affected by the event that are still held by theInvestor upon the occurrence of the event, due on the date immediately following the event that caused such failure (or the 30th dayfollowing such event if the event relates to the suspension of the registration statement as described in the Purchase Agreement),and each 30 days thereafter, with such payments to be prorated on a daily basis during each 30 day period, subject to a maximum ofan aggregate of 6% per year. If we fail to pay any liquidated damages in full within seven days after the date payable, we arerequired to pay interest thereon at a rate of 12% per annum until paid in full. In the event the registration statement is not declaredeffective within the required time limits set forth above, or such registration statement is subsequently suspended or terminated, or weotherwise fail to meet certain requirements set forth in the Purchase Agreement, we could be required to pay significant penaltieswhich could adversely affect our cash flow and cause the value of our securities to decline in value.

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RISKS RELATED TO OUR SECURITIES

Our Chief Executive Officer, Benjamin P. Cowart, has significant voting control over us, including the appointment ofDirectors and may have interests that differ from other shareholders. Mr. Cowart, as a significant shareholder, may,therefore, take actions that are not in the interest of other shareholders.

Benjamin P. Cowart, our Chairman, President and Chief Executive Officer, beneficially owns approximately 28.5% of our commonstock (not including shares issuable upon exercise of options and warrants held by Mr. Cowart) and 22.8% of our total voting stock,and as such, Mr. Cowart exercises significant control in determining the outcome of corporate transactions or other matters, includingthe election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent orcause a change in control. The interests of Mr. Cowart may differ from the interests of the other stockholders and thus result incorporate decisions that are adverse to other shareholders. Should conflicts of interest arise, Mr. Cowart may not act in the bestinterests of our other shareholders and conflicts of interest may not be resolved in a manner favorable to our other shareholders.

We have established preferred stock which can be designated by the Board of Directors without shareholder approval andhave established Series A Preferred Stock and Series B Preferred Stock, which gives the holders a liquidation preferenceand the ability to convert such shares into our common stock.

We have 50,000,000 shares of preferred stock authorized, which includes 5,000,000 shares of designated Series A Preferred Stock ofwhich approximately 0.6 million shares are issued and outstanding as of the date of this report, and 10,000,000 designated shares ofSeries B Preferred Stock, of which 8,064,534 shares are issued and outstanding as of the date of this report. The Series A PreferredStock has a liquidation preference of $1.49 per share. The Series B Preferred Stock has a liquidation preference of $3.10 per share,payable only after amounts owed to our senior creditor are satisfied. As a result, if we were to dissolve, liquidate or sell our assets, theholders of our Series A Preferred Stock would have the right to receive up to the first approximately $1 million in proceeds from anysuch transaction and holders of our Series B Preferred Stock would have the right to receive up to $25 million after the payment ofamounts owed to certain other of our creditors, but before any amount is paid to the holders of our common stock. The payment ofthe liquidation preferences could result in common stock shareholders not receiving any consideration if we were to liquidate,dissolve or wind up, either voluntarily or involuntarily. Additionally, the existence of the liquidation preference may reduce the value ofour common stock, make it harder for us to sell shares of common stock in offerings in the future, or prevent or delay a change ofcontrol. Furthermore, the conversion of Series A Preferred Stock and Series B Preferred Stock into common stock (each of whichconvert on a one-for-one basis (subject to adjustments for stock splits and recapitalizations)) may cause substantial dilution to ourcommon shareholders. Additionally, because our Board of Directors is entitled to designate the powers and preferences of thepreferred stock without a vote of our shareholders, subject to NASDAQ rules and regulations, our shareholders will have no controlover what designations and preferences our future preferred stock, if any, will have.

In addition to the above, we are required to redeem any non-converted shares of Series B Preferred Stock, which remain outstandingon December 24, 2020, at the rate of $3.10 per share (or $25 million in aggregate as of the date of this filing), subject to the terms ofour senior loan documents, which funds we may not have, or which may not be available on favorable terms, if at all.

There may be future sales of our common stock, which could adversely affect the market price of our common stock anddilute shareholders ownership of common stock.

The exercise of any options granted to executive officers and other employees under our equity compensation plans, and otherissuances of our common stock could have an adverse effect on the market price of the shares of our common stock. We are notrestricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, orthat represent the right to receive shares of common stock, provided that we are subject to the requirements of the Nasdaq CapitalMarket (which generally require shareholder approval for any transactions which would result in the issuance of more than 20% ofour then outstanding shares of common stock or voting rights representing over 20% of our then outstanding shares of stock) and arerestricted for a period of six months from the effective date of the registration statement we are required to file pursuant to thePurchase Agreement from issuing securities, subject to certain exceptions, subject to the terms of the Purchase Agreement. Sales ofa substantial number of shares of our common stock in the public market or the perception that such sales might occur couldmaterially adversely affect the market price of the shares of our common stock. Because our decision to issue securities in any futureoffering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing ornature of our future offerings. Additionally, the sale of all or a significant portion of the shares of common stock, the resale of which isbeing registered pursuant to the registration statement required by the Purchase Agreement may cause the value of our commonstock to decline in value.

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The issuance and sale of common stock upon exercise of the Warrants may cause substantial dilution to existingstockholders and may also depress the market price of our common stock.

The Warrants have an exercise price of $2.92 per share. The Warrants are exercisable beginning 185 days after the date of theclosing of the Offering and have a term of 5.5 years. The Warrants contain a cashless exercise provision in connection with anyshares that are not then registered by the Company. Although the Warrants may not be exercised by the holders thereof if suchexercise would cause such holder to own more than 9.999% of our outstanding common stock, this restriction does not prevent suchholder from exercising some of the Warrants, selling those shares, and then exercising the rest of the Warrants, while still stayingbelow the 9.999% limit. In this way, the holders of the Warrants could sell more than this limit while never actually holding moreshares than this limit allows. If the holders of the Warrants choose to do this, it will cause substantial dilution to the then holders of ourcommon stock.

If exercises of the Warrants and sales of such shares issuable upon exercise thereof take place, the price of our common stock maydecline. In addition, the common stock issuable upon exercise of the Warrants may represent overhang that may also adversely affectthe market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market thanthere is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares whichshareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannotabsorb shares sold by the Warrant holders, then the value of our common stock will likely decrease.

RISKS RELATED TO OUR SERIES B PREFERRED STOCK

The issuance of common stock upon conversion of the Series B Preferred Stock will cause immediate and substantialdilution to existing shareholders.

The Series B Preferred Stock (including accrued and unpaid dividends) is convertible into shares of the Company’s common stock atany time at $3.10 per share (initially a one-for-one basis). If the Company’s common stock trades at or above $6.20 per share for aperiod of 20 consecutive trading days at any time following the earlier of (a) the effective date of a resale registration statement whichwe are required to file to register the resale of the shares of common stock underlying the Series B Preferred Stock and Warrantspursuant to the Purchase Agreement, or (b) December 24, 2015, the Company may at such time force conversion of the Series BPreferred Stock (including accrued and unpaid dividends) into common stock of the Company.

The issuance of common stock upon conversion of the Series B Preferred Stock will result in immediate and substantial dilution to theinterests of other stockholders since the holders of the Series B Preferred Stock may ultimately receive and sell the full amount ofshares issuable in connection with the conversion of such Series B Preferred Stock. Although the Series B Preferred Stock may notbe converted by holder if such conversion would cause the holder to own more than 9.999% of our outstanding common stock, thisrestriction does not prevent such holder from converting some of its holdings, selling those shares, and then converting the rest of itsholdings, while still staying below the 9.999% limit. In this way, the holders of the Series B Preferred Stock could sell more than thislimit while never actually holding more shares than this limit allows. If the holders of the Series B Preferred Stock choose to do this, itwill cause substantial dilution to the then holders of our common stock.

Our outstanding Series B Preferred Stock accrues a cash dividend.

Our Series B Preferred Stock accrues a dividend, payable quarterly in arrears (based on calendar quarters), in the amount of 6% perannum of the original issuance price of the Series B Preferred Stock ($3.10 per share or $25.0 million in aggregate). The dividend ispayable by the Company, at the Company’s election, in registered common stock of the Company (if available) or cash, provided thatany cash dividend payment is subject to us previously having repaid all amounts owed to our senior lender. In the event dividends arepaid in registered common stock of the Company, the number of shares payable will be calculated by dividing (a) the accrueddividend by (b) 90% of the arithmetic average of the volume weighted average price (VWAP) of the Company’s common stock for the10 trading days immediately prior to the applicable date of determination (the “Dividend Stock Payment Price”). Notwithstanding theforegoing, in no event may the Company pay dividends in common stock unless the applicable Dividend Stock Payment Price isabove $2.91. If the Company is prohibited from paying the dividend in cash (due to contractual senior credit agreements or otherrestrictions) or is unable to pay the dividend in registered common stock, the dividend will be paid in-kind in Series B Preferred Stockshares at $3.10 per share.

We may not have sufficient available cash to pay the dividends as they accrue. The payment of the dividends, or our failure to timelypay the dividends when due, could reduce our available cash on hand, have a material adverse effect on our results of operationsand cause the value of our stock to decline in value. Additionally, the issuance of shares of common stock or additional shares ofSeries B Preferred Stock in lieu of cash dividends (and the subsequent conversion of such Series B Preferred Stock into

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common stock pursuant to the terms of such Series B Preferred Stock) could cause substantial dilution to the then holders of ourcommon stock.

We may be required to issue additional shares of Series B Preferred Stock upon the occurrence of certain events.

As described above, in the event we do not have available cash to pay the dividends which accrue on the Series B Preferred Stock incash, we are prohibited from paying such dividends in cash, and we do not have sufficient registered shares of common stockavailable to allow for the payment of such dividends in common stock, we are required to pay such dividends in-kind in Series BPreferred Stock shares at $3.10 per share, which will also include a $3.10 per share liquidation preference and the right to convertinto common stock on a one-for-one basis.

The issuance and sale of common stock upon conversion of the Series B Preferred Stock may depress the market price ofour common stock.

If conversions of the Series B Preferred Stock and sales of such converted shares take place, the price of our common stock maydecline. In addition, the common stock issuable upon conversion of the Series B Preferred Stock may represent overhang that mayalso adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock inthe market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additionalshares which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our commonstock cannot absorb converted shares sold by the Series B Preferred Stock holders, then the value of our common stock will likelydecrease.

Any non-converted shares of Series B Preferred Stock are required to be redeemed by us on June 24, 2020. We are required toredeem any non-converted shares of Series B Preferred Stock, which remain outstanding on December 24, 2020, at the rate of $3.10per share (or $25 million in aggregate as of the date of this filing), subject to the terms of our senior loan documents, which funds wemay or may not have, or which may not be available on favorable terms, if at all.

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

As described above under “Part I” - “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”- “Recent Events” - “Churchill County, Nevada Lease”, we have the option of paying the rent due during fiscal 2016 under the BangoLease and Equipment Leases in shares of our restricted common stock subject to the terms of such agreements as described above,and provided that the aggregate number of shares issuable is subject to the Share Cap described above. We claim an exemption fromregistration in connection with our entry into the Bango Lease and Equipment Leases and plan to claim an exemption fromregistration for the issuance of shares of common stock in connection with such Bango Lease and Equipment Leases, in the event wechoose to pay rent by way of the issuance of shares of our restricted common stock, pursuant to Section 4(a)(2) and/or Rule 506 ofRegulation D of the Securities Act of 1933, as amended (the “Securities Act”), since the foregoing did not and will not involve a publicoffering, the recipients are “accredited investors”, the recipients acquired and will acquire the securities for investment only and notwith a view towards, or for resale in connection with, the public sale or distribution thereof, and the securities were offered without anygeneral solicitation by us or our representatives.

On June 24, 2015, we closed the transactions contemplated by the June 19, 2015 Unit Purchase Agreement entered into with certaininstitutional Investors, pursuant to which we sold the Investors an aggregate of 8,064,534 Units, each consisting of (i) one share ofSeries B Preferred Stock and (ii) one warrant to purchase one-half of a share of common stock of the Company, at a price of $3.10 perUnit for an aggregate of $25.0 million.

The Units (including the shares of Series B Preferred Stock and the Warrants) were offered and sold to the Investors under thePurchase Agreement in transactions exempt from registration under the Securities Act, in reliance on Section 4(a)(2) thereof andRule 506(b) of Regulation D of the Securities Act. Each of the Investors represented that it was an accredited investor within themeaning of Rule 501(a) of Regulation D, and acquired the Units for investment only and not with a view towards, or for resale inconnection with, the public sale or distribution thereof. The Units were offered without any general solicitation by the Company or itsrepresentatives. The Units were not registered under the Securities Act and such securities may not be offered or sold in the UnitedStates absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

In the event of the complete conversion of the shares of Series B Preferred Stock (and not including the issuance of any shares ofcommon stock or if applicable payment-in-kind shares of Series B Preferred Stock issued in connection with accrued dividends dueunder the terms of the Series B Preferred Stock) and disregarding any conversion limitations set forth in the Designation (or

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otherwise agreed between the parties), a total of 8,064,534 shares of common stock would be issuable to the holders. In the eventthe Warrants were exercised in full and disregarding any conversion limitations set forth in the Warrants (or otherwise agreedbetween the parties), a total of 4,032,267 shares of common stock would be issuable to the holders.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

Increases in Officer Salary

Effective on June 24, 2015, the Compensation Committee of the Board of Directors (the “Committee”) of the Company approved anincrease in the yearly base salary of (a) Benjamin P. Cowart, our Chief Executive Officer and President to $425,000 (compared to$267,500 prior to such increase); and (b) Chris Carlson, our Chief Financial Officer and Secretary to $240,000 (compared to $195,000prior to such increase)(collectively, the “Increases in Salary”). The Committee also set the total yearly target bonuses of Mr. Cowartand Mr. Carlson at $385,000 and $240,000, respectively. Notwithstanding the Increases in Salary, the Committee determined thatsuch increases would not go into effect for at least 90 days because of our lack of liquidity, after which time the Committee will re-examine our liquidity position and determine whether such Increases in Salary will become effective (the “90 Day Compensation Re-Examination”).

Employment Agreements

Effective on August 7, 2015, we entered into new employment agreements with Mr. Cowart and Mr. Carlson, which are described ingreater detail below:

Benjamin P. Cowart, Chief Executive Officer and President

On August 7, 2015, we entered into an Executive Employment Agreement with Benjamin P. Cowart, our Chief Executive Officer andPresident (Mr. Cowart’s prior employment agreement had expired on April 16, 2014; provided that the parties had agreed to continueoperating under the terms of the prior agreement until a new agreement was entered into). The agreement, which provides for Mr.Cowart to serve as our Chief Executive Officer, has a term extending through December 31, 2018, provided that the agreementautomatically extends for additional one year terms thereafter in the event neither party provides the other at least 60 days priornotice of their intention not to renew the terms of the agreement.

Pursuant to the terms of the agreement, Mr. Cowart’s annual compensation package includes (1) a base salary of $425,000 per year($267,500 per year subject to the terms of the 90 Day Compensation Re-Examination described above), subject to annual increasesas determined in the sole discretion of the Compensation Committee, and (2) a bonus payment to be determined in the solediscretion of the Compensation Committee in an annual targeted amount of not less than $385,000, subject to the compliance by Mr.Cowart with performance goals that may be established by the Compensation Committee from time to time, provided no goals havebeen established to date, and that in the absence of performance goals, the amount of such bonus would be wholly determined in thediscretion of the Compensation Committee. Mr. Cowart is also paid an automobile allowance of $750 per month during the term of theagreement and is eligible to participate in our stock option plan and other benefit plans.

The agreement prohibits Mr. Cowart from competing against us during the term of the agreement and for a period of twelve monthsafter the termination of the agreement in any state and any other geographic area in which we or our subsidiaries provide RestrictedServices or Restricted Products, directly or indirectly, during the twelve months preceding the date of the termination of theagreement. “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation, transportation,manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling, demolition,decommission and marine salvage services and any other services that we or our subsidiaries have provided or are researching,developing, performing and/or providing at any time during the two years immediately preceding the date of termination, or which Mr.Cowart has obtained any trade secret or other confidential information about at any time during the two years immediately precedingthe date of termination of the agreement. “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil,aggregated feedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/orother hydrocarbons and any other product, that we or our subsidiaries have provided or are researching, developing,

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manufacturing, distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two yearsimmediately preceding the date the agreement is terminated, or which Mr. Cowart obtained any trade secret or other confidentialinformation in connection with at any time during the two years immediately preceding the date of termination of the agreement.

We may terminate Mr. Cowart’s employment (a) for “cause” (which is defined to include, a material breach of the agreement byMr. Cowart, any act of misappropriation of funds or embezzlement by Mr. Cowart, Mr. Cowart committing any act of fraud, or Mr.Cowart being indicted of, or pleading guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or afelony under federal or applicable state law); (b) in the event Mr. Cowart suffers a physical or mental disability which renders himunable to perform his duties and obligations for either 90 consecutive days or 180 days in any 12-month period; (c) for any reasonwithout “cause”; or (d) upon expiration of the initial term of the agreement (or any renewal) upon notice as provided above. Theagreement also automatically terminates upon the death of Mr. Cowart.

Mr. Cowart may terminate his employment (a) for “good reason” (i.e., (a) if his position or duties are modified to such an extent thathis duties are no longer consistent with the position of CEO of the Company, (b) there has been a material breach by us of a materialterm of the agreement or Mr. Cowart reasonably believes that we are violating any law which would have a material adverse effect onour operations and such violation continues uncured thirty days after such breach and after notice thereof has been provided to us byMr. Cowart, or (c) Mr. Cowart’s compensation is reduced without his consent, or we fail to pay to Mr. Cowart any compensation dueto him upon five days written notice from Mr. Cowart informing us of such failure); provided, however, prior to any such termination byMr. Cowart for “good reason”, Mr. Cowart must first advise us in writing (within 15 days of the occurrence of such event) and provideus 15 days to cure (5 days in connection with the reduction of Mr. Cowart’s salary or the failure to pay amounts owed to him)); (b) forany reason without “good reason”; and (c) upon expiration of the initial term of the agreement (or any renewal) upon notice asprovided above.

In the event that Mr. Cowart’s employment is terminated for any reason (not including, however, a termination by us for “cause” or atermination as a result of Mr. Cowart’s death or disability) during the twelve month period following a Change of Control (a “Change ofControl Termination”) or in anticipation of a Change of Control, we are required to pay Mr. Cowart, within 60 days following the laterof (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment in alump sum in an amount equal to 3.0 times the sum of his current base salary and the amount of the last bonus payable to Mr. Cowart(the “Change of Control Payment”), which amount is due within 60 days of the later of (i) the date of such Change of ControlTermination; and (ii) the date of such Change of Control. If Mr. Cowart’s employment terminates due to a Change of ControlTermination within six (6) months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for allpurposes. In addition, in the event of a Change of Control, all of Mr. Cowart’s equity-based compensation immediately vests to Mr.Cowart and any outstanding stock options held by Mr. Cowart can be exercised by Mr. Cowart until the earlier of (A) one (1) year fromthe date of termination and (B) the latest date upon which such stock options would have expired by their original terms under anycircumstances, provided that if Mr. Cowart’s employment ends in anticipation of a Change of Control and such equity-basedcompensation awards or stock options have previously expired pursuant to their terms, the Company is required to pay Mr. Cowart alump sum payment, payable on the same date as the Change of Control Payment, equal to the black scholes value of the expiredand unexercised equity compensation awards and stock options held by Mr. Cowart on the date of termination, based on the value ofsuch awards had they been exercisable through the end of their stated term and had not previously expired. “Change of Control” forthe purposes of the agreement means: (a) any person obtaining beneficial ownership representing more than 50% of the total votingpower represented by our then outstanding voting securities without the approval of not fewer than two-thirds of our Board ofDirectors; (b) a merger or consolidation of us whether or not approved by our Board of Directors, other than a merger or consolidationthat would result in our voting securities immediately prior thereto continuing to represent at least 50% of the total voting poweroutstanding immediately after such merger or consolidation, (c) our shareholders approving a plan of complete liquidation or anagreement for the sale or disposition by us of all or substantially all of our assets, or (d) as a result of the election of members to ourBoard of Directors, a majority of the Board of Directors consists of persons who are not members of the Board of Directors on August7, 2015, except in the event that such slate of directors is proposed by a committee of the Board of Directors; provided that if thedefinition of “Change of Control” in our Stock Incentive Plans or Equity Compensation Plans is more favorable than the definitionabove, then such definition shall be controlling.

If Mr. Cowart’s employment is terminated pursuant to his death, disability, the end of the initial term (or any renewal term), without“good reason” by Mr. Cowart, or by us for “cause”, Mr. Cowart is entitled to all salary accrued through the termination date and noother benefits other than as required under the terms of employee benefit plans in which Mr. Cowart was participating as of thetermination date. Additionally, any unvested stock options or equity compensation held by Mr. Cowart immediately terminate and areforfeited (unless otherwise provided in the applicable award) and any previously vested stock options (or if applicable equitycompensation) are subject to the terms and conditions set forth in the applicable Stock Incentive Plan or Equity Compensation Plan,or award agreement, as such may describe the rights and obligations upon termination of employment of Mr. Cowart.

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If Mr. Cowart’s employment is terminated by Mr. Cowart for “good reason”, or by us without “cause”, (a) Mr. Cowart is entitled tocontinue to receive the salary due pursuant to the terms of the agreement at the rate in effect upon the termination date for twelve(12) months or otherwise until such obligation ceases. Additionally, unvested benefits (whether equity or cash benefits and bonuses)will vest immediately upon such termination and any outstanding stock options previously granted to Mr. Cowart will vest immediatelyupon such termination and will be exercisable until the earlier of (A) one year from the date of termination and (B) the latest date uponwhich such stock options would have expired by their original terms under any circumstances.

The agreement contains standard assignment of inventions, indemnification and confidentiality provisions. Further, Mr. Cowart issubject to non-solicitation covenants during the term of the agreement.

Although Mr. Cowart will be prohibited from competing with us while he is employed with us, he will only be prohibited fromcompeting for twelve months after his employment with us ends pursuant to the agreement, provided that Mr. Cowart is alsoprohibited from competing against us in connection with certain of our operations until August 17, 2017, pursuant to a prior Non-Competition and Non-Solicitation Agreement entered into with Mr. Cowart.

Chris Carlson, Chief Financial Officer and Secretary

On August 7, 2015, we entered into an Executive Employment Agreement with Chris Carlson, our Chief Financial Officer andSecretary (Mr. Carlson’s prior employment agreement had expired on April 1, 2015; provided that the parties had agreed to continueoperating under the terms of the prior agreement until a new agreement was entered into). The agreement, which provides for Mr.Carlson to serve as our Chief Financial Officer, has a term extending through December 31, 2018, provided that the agreementautomatically extends for additional one year terms thereafter in the event neither party provides the other at least 60 days priornotice of their intention not to renew the terms of the agreement.

Pursuant to the terms of the agreement, Mr. Carlson’s annual compensation package includes (1) a base salary of $240,000 per year($195,000 per year subject to the terms of the 90 Day Compensation Re-Examination described above), subject to annual increasesas determined in the sole discretion of the Compensation Committee, and (2) a bonus payment to be determined in the solediscretion of the Compensation Committee in an annual targeted amount of not less than $240,000, subject to the compliance by Mr.Carlson with performance goals that may be established by the Compensation Committee from time to time, provided no goals havebeen established to date, and that in the absence of performance goals, the amount of such bonus would be wholly determined in thediscretion of the Compensation Committee. Mr. Carlson is also paid an automobile allowance of $750 per month during the term ofthe agreement and is eligible to participate in our stock option plan and other benefit plans.

The agreement prohibits Mr. Carlson from competing against us during the term of the agreement and for a period of twelve monthsafter the termination of the agreement in any state and any other geographic area in which we or our subsidiaries provide RestrictedServices or Restricted Products, directly or indirectly, during the twelve months preceding the date of the termination of theagreement. “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation, transportation,manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling, demolition,decommission and marine salvage services and any other services that we or our subsidiaries have provided or are researching,developing, performing and/or providing at any time during the two years immediately preceding the date of termination, or which Mr.Carlson has obtained any trade secret or other confidential information about at any time during the two years immediately precedingthe date of termination of the agreement. “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil,aggregated feedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/orother hydrocarbons and any other product, that we or our subsidiaries have provided or are researching, developing, manufacturing,distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two years immediatelypreceding the date the agreement is terminated, or which Mr. Carlson obtained any trade secret or other confidential information inconnection with at any time during the two years immediately preceding the date of termination of the agreement.

We may terminate Mr. Carlson’s employment (a) for “cause” (which is defined to include, a material breach of the agreement byMr. Carlson, any act of misappropriation of funds or embezzlement by Mr. Carlson, Mr. Carlson committing any act of fraud, or Mr.Carlson being indicted of, or pleading guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or afelony under federal or applicable state law); (b) in the event Mr. Carlson suffers a physical or mental disability which renders himunable to perform his duties and obligations for either 90 consecutive days or 180 days in any 12-month period; (c) for any reasonwithout “cause”; or (d) upon expiration of the initial term of the agreement (or any renewal) upon notice as provided above. Theagreement also automatically terminates upon the death of Mr. Carlson.

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Mr. Carlson may terminate his employment (a) for “good reason” (i.e., (a) if his position or duties are modified to such an extent thathis duties are no longer consistent with the position of CFO of the Company, (b) there has been a material breach by us of a materialterm of the agreement or Mr. Carlson reasonably believes that we are violating any law which would have a material adverse effecton our operations and such violation continues uncured thirty days after such breach and after notice thereof has been provided to usby Mr. Carlson, or (c) Mr. Carlson’s compensation is reduced without his consent, or we fail to pay to Mr. Carlson any compensationdue to him upon five days written notice from Mr. Carlson informing us of such failure); provided, however, prior to any suchtermination by Mr. Carlson for “good reason”, Mr. Carlson must first advise us in writing (within 15 days of the occurrence of suchevent) and provide us 15 days to cure (5 days in connection with the reduction of Mr. Carlson’s salary or the failure to pay amountsowed to him)); (b) for any reason without “good reason”; and (c) upon expiration of the initial term of the agreement (or any renewal)upon notice as provided above.

In the event that Mr. Carlson’s employment is terminated for any reason (not including, however, a termination by us for “cause” or atermination as a result of Mr. Carlson’s death or disability) during the twelve month period following a Change of Control (a “Changeof Control Termination”) or in anticipation of a Change of Control, we are required to pay Mr. Carlson, within 60 days following thelater of (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment ina lump sum in an amount equal to 3.0 times the sum of his current base salary and the amount of the last bonus payable to Mr.Carlson (the “Change of Control Payment”), which amount is due within 60 days of the later of (i) the date of such Change of ControlTermination; and (ii) the date of such Change of Control. If Mr. Carlson’s employment terminates due to a Change of ControlTermination within six (6) months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for allpurposes. In addition, in the event of a Change of Control, all of Mr. Carlson’s equity-based compensation immediately vests to Mr.Carlson and any outstanding stock options held by Mr. Carlson can be exercised by Mr. Carlson until the earlier of (A) one (1) yearfrom the date of termination and (B) the latest date upon which such stock options would have expired by their original terms underany circumstances, provided that if Mr. Carlson’s employment ends in anticipation of a Change of Control and such equity-basedcompensation awards or stock options have previously expired pursuant to their terms, the Company is required to pay Mr. Carlson alump sum payment, payable on the same date as the Change of Control Payment, equal to the black scholes value of the expiredand unexercised equity compensation awards and stock options held by Mr. Carlson on the date of termination, based on the value ofsuch awards had they been exercisable through the end of their stated term and had not previously expired. “Change of Control” forthe purposes of the agreement means: (a) any person obtaining beneficial ownership representing more than 50% of the total votingpower represented by our then outstanding voting securities without the approval of not fewer than two-thirds of our Board ofDirectors; (b) a merger or consolidation of us whether or not approved by our Board of Directors, other than a merger or consolidationthat would result in our voting securities immediately prior thereto continuing to represent at least 50% of the total voting poweroutstanding immediately after such merger or consolidation, (c) our shareholders approving a plan of complete liquidation or anagreement for the sale or disposition by us of all or substantially all of our assets, or (d) as a result of the election of members to ourBoard of Directors, a majority of the Board of Directors consists of persons who are not members of the Board of Directors on August7, 2015, except in the event that such slate of directors is proposed by a committee of the Board of Directors; provided that if thedefinition of “Change of Control” in our Stock Incentive Plans or Equity Compensation Plans is more favorable than the definitionabove, then such definition shall be controlling.

If Mr. Carlson’s employment is terminated pursuant to his death, disability, the end of the initial term (or any renewal term), without“good reason” by Mr. Carlson, or by us for “cause”, Mr. Carlson is entitled to all salary accrued through the termination date and noother benefits other than as required under the terms of employee benefit plans in which Mr. Carlson was participating as of thetermination date. Additionally, any unvested stock options or equity compensation held by Mr. Carlson immediately terminate and areforfeited (unless otherwise provided in the applicable award) and any previously vested stock options (or if applicable equitycompensation) are subject to the terms and conditions set forth in the applicable Stock Incentive Plan or Equity Compensation Plan,or award agreement, as such may describe the rights and obligations upon termination of employment of Mr. Carlson.

If Mr. Carlson’s employment is terminated by Mr. Carlson for “good reason”, or by us without “cause”, (a) Mr. Carlson is entitled tocontinue to receive the salary due pursuant to the terms of the agreement at the rate in effect upon the termination date for twelve(12) months following the termination date, payable in accordance with our normal payroll practices and policies; (b) Mr. Carlson isentitled to the pro rata amount of any cash bonus which would be payable to Mr. Carlson had he remained employed for an additionaltwelve months following the termination date; and (c) provided Mr. Carlson elects to receive continued health insurance coveragethrough COBRA, we are required to pay Mr. Carlson’s monthly COBRA contributions for health insurance coverage, as may beamended from time to time (less an amount equal to the premium contribution paid by active Company employees, if any) for twelvemonths following the termination date; provided, however, that if at any time Mr. Carlson is covered by a substantially similar level ofhealth insurance through subsequent employment or otherwise such obligation ceases. Additionally, unvested benefits (whetherequity or cash benefits and bonuses) will vest immediately upon such termination and any outstanding stock options previouslygranted to Mr. Carlson will vest immediately upon such termination and will be exercisable until the

47


earlier of (A) one year from the date of termination and (B) the latest date upon which such stock options would have expired by theiroriginal terms under any circumstances.

The agreement contains standard assignment of inventions, indemnification and confidentiality provisions. Further, Mr. Carlson issubject to non-solicitation covenants during the term of the agreement.

Although Mr. Carlson will be prohibited from competing with us while he is employed with us, he will only be prohibited fromcompeting for twelve months after his employment with us ends pursuant to the agreement, provided that Mr. Carlson is alsoprohibited from competing against us in connection with certain of our operations until August 17, 2017, pursuant to a prior Non-Competition and Non-Solicitation Agreement entered into with Mr. Carlson.

Aaron Oil Acquisition

Effective August 6, 2015, H&H Oil acquired a collection route consisting of collecting, shipping and selling used oil, oil filters,antifreeze and other related services in the state of Louisiana, but excluding industrial customers, maritime customers, off shorecustomers, dockside locations, industrial services, used absorbent services, wastewater generating customers andcollectors/transporters of crankcase used oil, petroleum fuel reclamation customers and crude oilproducers/processing/recovery/reclamation customers of Aaron Oil Company, Inc. (“Aaron Oil” ) . Included in the purchase werecertain trucks and other assets owned by Aaron Oil and certain contract rights. The President, Chief Executive Officer and owner ofAaron Oil is Dan Cowart, the brother of our Chief Executive Officer and largest stockholder, Benjamin P. Cowart. The acquisition pricepaid at closing was approximately $1 million, which included a reimbursement for certain prepaid contract rights. Aaron Oil alsoagreed to provide account servicing services to us for a period of sixty days following the closing at an agreed upon price per gallon ofoil serviced. Aaron Oil also agreed to a non-compete provision prohibiting Aaron Oil from competing against the Company in theLouisiana market for a period of two years from the closing.

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 withthis report, which Exhibit Index is incorporated herein by reference.

48


SIGNATURES

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

VERTEX ENERGY, INC. Date: August 10, 2015 By: /s/ Benjamin P. Cowart Benjamin P. Cowart Chief Executive Officer (Principal Executive Officer) Date: August 10, 2015 By: /s/ Chris Carlson Chris Carlson Chief Financial Officer (Principal Financial Officer)

49


EXHIBIT INDEX

Incorporated by Reference

ExhibitNumber Description of Exhibit

Filed orFurnishedHerewith Form Exhibit

FilingDate/Period

End Date File No.1.1

Underwriting Agreement, dated November20, 2013, by and among Vertex Energy,Inc. and Craig-Hallum Capital Group LLC

8-K

1.1

11/21/2013

001-11476

2.1

Unit Purchase Agreement by and amongVertex Energy, Inc., Vertex AcquisitionSub, LLC, Vertex Holdings, L.P. and B&SCowart Family L.P. dated as of August 14,2012

8-K

2.1

8/15/2012

000-53619

2.2

First Amendment to Unit PurchaseAgreement by and among Vertex Energy,Inc., Vertex Acquisition Sub, LLC, VertexHoldings, L.P. and B&S Cowart Family L.P.dated as of September 11, 2012

8-K

2.2

9/12/2012

000-53619

2.3

Asset Purchase Agreement by and amongVertex Energy, Inc., Vertex Refining LA,LLC.,Vertex Refining NV., LLC, OmegaRefining, LLC, Bango Refining NV, LLC andOmega Holdings Company LLC (March 17,2014)

8-K

2.1

3/19/2014

001-11476

2.4

Second Amendment to Asset PurchaseAgreement by and among Vertex Energy,Inc., Vertex Refining LA, LLC, VertexRefining NV, LLC, Bango Refining NV, LLCand Omega Holdings Company LLC (April30, 2014)

8-K

2.3

5/6/2014

001-11476

2.5(#)

Third Amendment to Asset PurchaseAgreement by and among Vertex Energy,Inc., Vertex Refining LA, LLC, VertexRefining NV, LLC, Bango Refining NV, LLCand Omega Holdings Company LLC (May2, 2014)

8-K

2.4

5/6/2014

001-11476

2.6

Fourth Amendment to Asset PurchaseAgreement by and among Vertex Energy,Inc., Vertex Refining LA, LLC, VertexRefining NV, LLC, Louisiana LV OR LLC,formerly known as Omega Refining, LLC,Bango Refining NV, LLC and OmegaHoldings Company LLC (January 19, 2015)

8-K

2.1

1/21/2015

001-11476

2.7

Asset Purchase Agreement by and amongVertex Energy Operating, LLC, VertexRefining OH, LLC, Vertex Energy Inc. andHeartland Group Holdings, LLC (October21, 2014)

8-K 2.1 10/28/2014 001-11476

2.8

First Amendment to Asset PurchaseAgreement by and among Vertex EnergyOperating, LLC, Vertex Refining OH, LLC,Vertex Energy, Inc. and Heartland GroupHoldings, LLC (November 26, 2014)

8-K

2.2

12/1/2014

001-11476

50


2.9

Second Amendment to Asset PurchaseAgreement by and among Vertex EnergyOperating, LLC, Vertex Refining OH, LLC,Vertex Energy, Inc. and Heartland GroupHoldings, LLC (December 5, 2014)

8-K

2.3

12/9/2014

001-11476

2.10

Third Amendment to Asset PurchaseAgreement by and among Vertex EnergyOperating, LLC, Vertex Refining OH, LLC,Vertex Energy, Inc. and Heartland GroupHoldings, LLC (March 4, 2015)

8-K

2.4

3/6/2015

001-11476

3.1

Articles of Incorporation (and amendmentsthereto) of Vertex Energy, Inc.

8-K/A

3.1

6/26/2009

000-53619

3.2

Amended and Restated Certificate ofDesignation of Rights, Preferences andPrivileges of Vertex Energy, Inc.'s Series AConvertible Preferred Stock.

8-K

3.1

7/16/2010

000-53619

3.3

Amended and Restated Certificate ofDesignation of Vertex Energy, Inc.Establishing the Designation, Preferences,Limitations and Relative Rights of Its SeriesB Preferred Stock (as filed with theSecretary of State of Nevada on June 23,2015)

8-K

3.1

6/24/2014

001-11476

3.4

Amended and Restated Bylaws of VertexEnergy, Inc.

8-K

3.1

1/15/2014

001-11476

10.1

Employment Agreement with Benjamin P.Cowart effective April 16, 2009 ***

8-K/A 10.5 6/26/2009 000-53619

10.2

Employment Agreement with Matthew Liebeffective April 16, 2009 ***

8-K/A 10.7 6/26/2009 000-53619

10.3

Loan Agreement with Bank of Americadated September 16, 2010

8-K

10.1

9/24/2010

000-53619

10.4

Security Agreement with Bank of Americadated September 16, 2010

8-K

10.2

9/24/2010

000-53619

10.5(+)

Tolling Agreement between KMTEX, Ltd.and Vertex Energy Inc., dated April 17,2013

8-K

10.1

11/12/2013

001-11476

10.6

Amended and Restated EmploymentAgreement with Chris Carlson dated March29, 2011 and effective April 1, 2010***

10-K

10.18

12/31/2010

000-53619

10.7

First Amendment to EmploymentAgreement with Benjamin P. Cowart datedMarch 25, 2011 and effective as ofDecember 15, 2010***

10-K

10.19

12/31/2010

000-53619

10.8

First Amendment to EmploymentAgreement with Matt Lieb dated February1, 2011 and effective March 28, 2011***

10-K

10.20

12/31/2010

000-53619

10.9

Addendum to Employment AgreementBetween Vertex Energy, Inc. and GregWallace dated July 5, 2011***

10-Q

10.21

9/30/2011

000-53619

10.10

Second Addendum to EmploymentAgreement Between Vertex Energy, Inc.and Greg Wallace dated June 15, 2012***

10-Q

10.11

9/30/2012

000-53619

10.11

Employment Agreement with JohnStrickland - July 2012**

10-Q

10.12

9/30/2012

000-53619

51


10.12

Credit Agreement between Vertex Energy,Inc. and Bank of America, N.A. datedAugust 31, 2012

8-K

10.1

9/12/2012

000-53619

10.13

$10,000,000 Revolving Note by VertexEnergy, Inc. in favor of Bank of America,N.A. dated August 31, 2012

8-K

10.2

9/12/2012

000-53619

10.14

$8,500,000 Term Note by Vertex Energy,Inc. in favor of Bank of America, N.A. datedAugust 31, 2012

8-K

10.3

9/12/2012

000-53619

10.15

Security Agreement with Bank of America,N.A. dated August 31, 2012

8-K

10.4

9/12/2012

000-53619

10.16

Corporate Guaranty in favor of Bank ofAmerica, N.A. dated August 31, 2012

8-K

10.5

9/12/2012

000-53619

10.17

First Amendment to Credit Agreementbetween Vertex Energy, Inc. and Bank ofAmerica, N.A. dated August 31, 2012

10-Q

10.18

9/30/2012

000-53619

10.18

Non-Competition and Non-SolicitationAgreement by Vertex Holdings, L.P., B & SCowart Family L.P., Benjamin P. Cowart,Chris Carlson and Greg Wallace in favor ofVertex Energy, Inc., dated August 31,2012***

10-Q

10.19

9/30/2012

000-53619

10.19

Second Addendum to EmploymentAgreement with Benjamin P. Cowart, datedAugust 31, 2012***

10-Q

10.20

9/30/2012

000-53619

10.20

First Addendum to Amended and RestatedEmployment Agreement with ChrisCarlson, dated August 31, 2012***

10-Q

10.21

9/30/2012

000-53619

10.21

2004 Stock Option Plan - World WasteTechnologies, Inc.***

10-KSB

10.3

12/31/2004

001-11476

10.22

Form of Stock Option Agreement, pursuantto 2004 Stock Option Plan***

10-KSB

10.4

12/31/2004

001-11476

10.23

2007 Stock Plan - World WasteTechnologies, Inc.***

8-K

10.2

5/21/2007

001-11476

10.24

Form of Stock Option Agreement, pursuantto 2007 Stock Option Plan***

8-K

10.3

5/21/2007

001-11476

10.25

Vertex Energy, Inc., 2008 Stock IncentivePlan***

8-K/A

4.1

6/26/2009

000-53619

10.26

2008 Stock Incentive Plan - Form of StockOption Agreement***

10-K

10.27

12/31/2012

001-11476

10.27

Vertex Energy, Inc., 2009 Stock IncentivePlan***

8-K

4.1

7/31/2009

000-53619

10.28

2009 Stock Incentive Plan - Form of StockOption Agreement***

10-K

10.29

12/31/2012

001-11476

10.29

Waiver and Second Amendment to CreditAgreement with Bank of America, N.A.(January 2013)

10-K

10.30

12/31/2012

001-11476

10.30

Vertex Energy, Inc. 2013 Stock IncentivePlan***

S-8

4.1

7/28/2014

333-197659

10.31

Vertex Energy, Inc.-Form of 2013 StockIncentive Plan Stock Option Award***

8-K

10.1

9/30/2013

001-11476

10.32

Vertex Energy, Inc.-Form of 2013 StockIncentive Plan Restricted Stock GrantAgreement***

S-8

4.3

7/28/2014

333-197659

52


10.33(+)

Secured Promissory Note($13,858,066.67)-May 2, 2014-OmegaRefining, LLC and Bango Refining NV, LLCas borrowers and Vertex Refining NV, LLCas lender

8-K

10.1

5/6/2014

001-11476

10.34

Guaranty Agreement-Omega Holdings-May2, 2014

8-K

10.2

5/6/2014

001-11476

10.35(+)

Credit and Guaranty Agreement dated as ofMay 2, 2014, by and among Vertex EnergyOperating, LLC, Vertex Energy, Inc., andcertain other subsidiaries of Vertex Energy,Inc., as Guarantors, and Goldman SachsUSA, as Lender and as AdministrativeAgent, Collateral Agent, and Lead Arranger

8-K

10.3

5/6/2014

001-11476

10.36

Term Loan Note ($40,000,000)-Credit andGuaranty Agreement dated as of May 2,2014

8-K

10.4

5/6/2014

001-11476

10.37(+)

Pledge and Security Agreement-Credit andGuaranty Agreement dated as of May 2,2014

8-K

10.5

5/6/2014

001-11476

10.38(+)

Amended and Restated Credit Agreement,among Vertex Energy, Inc., and VertexEnergy Operating, LLC, as Borrowers andBank of America, N.A., as Lender as ofMay 2, 2014

8-K

10.6

5/6/2014

001-11476

10.39

Revolving Note ($20,000,000)-Amendedand Restated Credit Agreement, as of May2, 2014

8-K

10.7

5/6/2014

001-11476

10.40(+)

Pledge and Security Agreement-Amendedand Restated Credit Agreement, as of May2, 2014

8-K

10.8

5/6/2014

001-11476

10.41

Amended and Restated Guaranty-Amended and Restated Credit Agreement,as of May 2, 2014

8-K

10.9

5/6/2014

001-11476

10.42

Intercreditor Agreement, May 2, 2014, byand among Bank of America, N.A. andGoldman Sachs Bank USA

8-K

10.10

5/6/2014

001-11476

10.43

At-Will Employment, ConfidentialInformation, Invention Assignment andArbitration Agreement with David Peel(April 2014)***

8-K

10.1

6/24/2014

001-11476

10.44

Retention and Noncompetition Agreementwith David Peel (April 2014)***

8-K

10.2

6/24/2014

001-11476

10.45

Employment Agreement between VertexRefining LA, LLC and James P. Gregory(Effective May 2, 2014)***

8-K

10.1

7/29/2014

001-11476

10.46

Form of Common Stock PurchaseAgreement dated June 5, 2014 by andbetween Vertex Energy, Inc. and thepurchasers named therein

8-K

10.1

6/6/2014

001-11476

10.47

Land Lease between Marrero TerminalLLC, as Landlord and Omega Refining,LLC, as Tenant, relating to the Used MotorOil Re-Refinery Located at 5000 RiverRoad, Marrero, Louisiana 70094, dated asof April 30, 2008 and amendments

10-Q

10.22

6/30/2014

001-11476

53


10.48

Commercial Lease between PlaqueminesHoldings, LLC as Landlord and OmegaRefining, LLC, as Tenant, relating to theMyrtle Grove Facility Located at 278 EastRavenna Road, Myrtle Grove, LA, dated asof May 25, 2012 and amendments

10-Q

10.23

6/30/2014

001-11476

10.49

Operation and Maintenance Agreementdated as of November 3, 2010, by andbetween Magellan Terminals Holdings, L.P.(f/k/a Marrero Terminal, LLC) and OmegaRefining, LLC

10-Q

10.24

6/30/2014

001-11476

10.50(#)

Terminaling Services Agreement betweenMarrero Terminal LLC (Owner) and OmegaRefining, LLC (Customer) dated as of May1, 2008

10-Q

10.25

6/30/2014

001-11476

10.51(#)

Second Use Motor Oil Buy/Sell Contractdated August 1, 2012, by and betweenThermo Fluids, Inc. and Omega Refining,LLC

10-Q

10.26

6/30/2014

001-11476

10.52

Consulting Agreement, Timothy C. Harvey(October 3, 2014)***

8-K

10.1

10/9/2014

001-11476

10.53

Consulting Agreement between HeartlandGroup Holdings, LLC and Vertex EnergyOperating, LLC (July 28, 2014)

8-K

10.1

10/28/2014

001-11476

10.54

Common Stock Purchase Warrant topurchase 109,934 shares of common stockof the Company held by The Benjamin PaulCowart 2012 Grantor Retained Trust(December 4, 2014)

8-K

4.1

12/9/2014

001-11476

10.55

Common Stock Purchase Warrant topurchase 109,934 shares of common stockof the Company held by The Shelley T.Cowart 2012 Grantor Retained Trust(December 4, 2014)

8-K

4.2

12/9/2014

001-11476

10.56

Form of Subscription Agreement datedDecember 4, 2014

8-K

10.2

12/9/2014

001-11476

10.57

First Amendment to Credit and GuarantyAgreement between Vertex EnergyOperating, LLC, Vertex Energy, Inc. andGoldman Sachs Bank USA (December 5,2014)

8-K

10.3

12/9/2014

001-11476

10.58

First Amendment to Amended andRestated Credit Agreement between VertexEnergy Operating, LLC, Vertex Energy, Inc.and Bank of America, N.A. (December 5,2014)

8-K

10.4

12/9/2014

001-11476

10.59

First Amendment to Secured PromissoryNote dated January 7, 2015 - OmegaRefining, LLC and Bango Refining NV, LLCas borrowers and Vertex Refining NV, LLCas lender

8-K

10.2

1/15/2015

001-11476

10.60

Second Amendment to Credit andGuaranty Agreement dated March 26,2015, by and between Vertex EnergyOperating, LLC, Vertex Energy, Inc.,certain of the Company's subsidiaries,Goldman Sachs Specialty LendingHoldings, Inc. ("Lender") and GoldmanSachs Bank USA. as Administrative Agentand Collateral Agent for Lender

8-K

10.1

3/31/2015

001-11476


54


10.61

Common Stock Purchase Warrant topurchase 1,766,874 shares of commonstock dated March 26, 2015, by VertexEnergy, Inc., in favor of Goldman, Sachs &Co.

8-K

10.2

3/31/2015

001-11476

10.62(#)

Loan and Security Agreement betweenVertex Energy, Inc., Vertex EnergyOperating, LLC, Vertex Acquisition Sub,LLC, Vertex Refining LA, LLC, Vertex II GP,LLC, Vertex Merger Sub, LLC, CedarMarine Terminals, LP, Crossroad Carriers,L.P., H & H Oil, L. P., and Vertex Recovery,L.P., as borrower and MidCap BusinessCredit LLC, as lender, dated March 27,2015

8-K/A

10.3

6/16/2015

001-11476

10.63

Revolving Note by Vertex Energy, Inc.,Vertex Energy Operating, LLC, VertexAcquisition Sub, LLC, Vertex Refining LA,LLC, Vertex II GP, LLC, Vertex MergerSub, LLC, Cedar Marine Terminals, LP,Crossroad Carriers, L.P., H & H Oil, L. P.,and Vertex Recovery, L.P. in favor ofMidCap Business Credit LLC dated March27, 2015, in the face amount of up to $7million [provided that notwithstanding theface amount of such Revolving Note, theRevolving Note only evidences amountsborrowed under such security from time totime]

8-K

10.4

3/31/2015

001-11476

10.64

Intercreditor Agreement dated March 26,2015, by and between MidCap BusinessCredit LLC and Goldman Sachs Bank USA

8-K

10.5

3/31/2015

001-11476

10.65

Lease With Option For Membership InterestPurchase (April 30, 2015), by and betweenVertex Refining NV, LLC as lessee andBango Oil, LLC, as landowner

8-K

10.1

5/5/2015

001-11476

10.66

Acknowledgement and ConfirmationAgreement (April 30, 2015), by and amongVertex Energy, Inc., Vertex Refining NV,LLC, Bango Oil, LLC, RESC, LLC, andDiatom Rail Park, LLC

8-K

10.2

5/5/2015

001-11476

10.67

Personal Property Lease (April 30, 2015),by and between Vertex Refining NV, LLC,Omega Refining, LLC and Bango RefiningNV, LLC

8-K

10.3

5/5/2015

001-11476

10.68

Consent Letter (April 30, 2015) FromGoldman Sachs Bank USA

8-K

10.4

5/5/2015

001-11476

10.69

Loan and Security Agreement betweenVertex Energy, Inc., Vertex EnergyOperating, LLC, Vertex Acquisition Sub,LLC, Vertex Refining LA, LLC, Vertex II GP,LLC, Vertex Merger Sub, LLC, CedarMarine Terminals, LP, Crossroad Carriers,L.P., H & H Oil, L. P., and Vertex Recovery,L.P., as borrower and MidCap BusinessCredit LLC, as lender, dated March 27,2015

8-K

10.3

6/16/2015

001-11476


10.70

Form of Unit Purchase Agreement datedJune 19, 2015 by and between VertexEnergy, Inc. and the purchasers namedtherein

8-K

10.1

6/19/2015

001-11476

55


10.71

Third Amendment to Credit and GuarantyAgreement dated June 18, 2015, by andbetween Vertex Energy Operating, LLC,Vertex Energy, Inc., certain of theCompany’s subsidiaries, Goldman SachsSpecialty Lending Holdings, Inc. (“Lender")and Goldman Sachs Bank USA, asAdministrative Agent and Collateral Agentfor Lender

8-K

10.2

6/24/2015

001-11476

10.72

Form of Warrant (incorporated by referenceto Exhibit B of the Form of Unit PurchaseAgreement incorporated by referenceherein as Exhibit 10.69)

8-K

10.3

6/19/2015

001-11476

10.73

Executive Employment Agreement withBenjamin P. Cowart (August 7, 2015)*** X

10.74

Executive Employment Agreement withChris Carlson (August 7, 2015)*** X

16.1

Letter dated April 30, 2015 From LBB &Associates Ltd., LLP

8-K

16.1

5/1/2015

001-11476

31.1

Certification of Principal Executive Officerpursuant to Section 302 of the Sarbanes-Oxley Act X

31.2

Certification of Principal Accounting Officerpursuant to Section 302 of the Sarbanes-Oxley Act X

32.1

Certification of Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act** X

32.2

Certification of Principal Accounting OfficerPursuant to Section 906 of the Sarbanes-Oxley Act** X

99.1 Glossary of Selected Terms 10-K 99.1 12/31/2012 001-11476101.INS++ XBRL Instance Document X 101.SCH++

XBRL Taxonomy Extension SchemaDocument X

101.CAL++

XBRL Taxonomy Extension CalculationLinkbase Document X

101.DEF++

XBRL Taxonomy Extension DefinitionLinkbase Document X

101.LAB++

XBRL Taxonomy Extension Label LinkbaseDocument X

101.PRE++

XBRL Taxonomy Extension PresentationLinkbase Document X

* Filed herewith.

** Furnished herewith.

*** Indicates management contract or compensatory plan or arrangement. + Certain portions of these documents (which portions have been replaced by "X's") have been omitted in connection with a requestfor Confidential Treatment which has been accepted by the Commission. This entire exhibit including the omitted confidentialinformation has been filed separately with the Commission.

# Certain portions of this document (which portions have been replaced by "***'s") have been omitted in connection with a request forConfidential Treatment which has been accepted by the Commission. This entire exhibit including the omitted confidential informationhas been filed separately with the Commission.

56


++XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement orprospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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EXHIBIT 10.73

VERTEX ENERGY, INC.EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into this 7th day of August 2015, to be

effective as of the Effective Date as defined below between Vertex Energy, Inc., a Nevada corporation (the “Company”), andBenjamin P. Cowart (“Executive”) (each of the Company and Executive are referred to herein as a “Party”, and collectively referred toherein as the “Parties”).

W I T N E S S E T H:

WHEREAS, the Executive currently serves as the Chief Executive Officer of the Company; and

WHEREAS, the Company desires to continue to obtain the services of Executive, and Executive desires to continue to beemployed by the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises, the agreements herein contained and other good and valuableconsideration, receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as of the Effective Date as follows:

ARTICLE I.EMPLOYMENT; TERM; DUTIES

1.1. Employment. Pursuant to the terms and conditions hereinafter set forth, the Company hereby employs Executive, andExecutive hereby accepts such employment, as the Chief Executive Officer (“CEO”) of the Company for a period beginning on theEffective Date and ending on December 31, 2018 (the “Initial Term”); provided that this Agreement shall automatically extend foradditional one (1) year periods after the Initial Term (each an “Automatic Renewal Term”) in the event that neither Party providesthe other written notice of their intent not to automatically extend the term of this Agreement at least sixty (60) days prior to the end ofthe Initial Term or any Automatic Renewal Term, as applicable (each a “Non-Renewal Notice”).

1.2. Duties and Responsibilities. Executive, as CEO, shall perform such administrative, managerial and executive duties forthe Company (i) as are prescribed by applicable job specifications for the chief executive officer of a public company the size andnature of the Company, (ii) as may be prescribed by the Bylaws of the Company, (iii) as are customarily vested in and incidental tosuch position, and (iv) as may be assigned to him from time to time by the Board of Directors of the Company (the “Board”).

1.3. Non-Competition. For $10 and other good and valuable consideration which Executive acknowledges the receipt andsufficiency of, Executive agrees to (a) devote substantially all of Executive’s business time, energy and efforts to the business of theCompany (except as specifically provided for in Section 1.4 below), (b) to use Executive’s best efforts and abilities faithfully anddiligently to promote the business interests of the Company and (c) to comply with the other terms and conditions of this Section 1.3.For so long as Executive is employed hereunder, and for a period of twelve (12) months thereafter (the “Non-Compete Period”),Executive (whether by himself, through his employers or employees or agents or otherwise, and whether on his own behalf or onbehalf of any other Person) shall not, directly or indirectly, either as an employee, employer, consultant, agent, investor, principal,partner, stockholder (except as the holder of less than 1% of the issued and outstanding stock of a publicly held corporation), own,manage, operate, control, be employed by, act as an officer, director, agent or consultant for, or be in any other way connected withor provide services or products to or for, any Person in the business of manufacturing, selling, creating, renting, aggregating, trading,distributing, marketing, producing, undertaking, developing, supplying, or otherwise dealing with or in Restricted Services orRestricted Products in the Restricted Area (the “Post-Employment Non-Competition Requirement”).


1.3.1 For purposes of this Section 1.3, the following terms shall have the following meanings:

(i) “Person” means any individual, corporation, partnership, joint venture, limited liability company, trust,unincorporated organization or governmental entity.

(ii) “Restricted Area” means (A) any State (in the United States); and/or (B) any other geographic area(Providence, if such Restricted Area is in Canada, or country, if such Restricted Area is in a country other than the United States orCanada), in which the Company or any of its Subsidiaries provides Restricted Services or Restricted Products, directly or indirectly,during the twelve months preceding the Termination Date of Executive’s employment hereunder.

(iii) “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil, aggregatedfeedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/or otherhydrocarbons and any other product, that the Company or any of its Subsidiaries has provided or is researching, developing,manufacturing, distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two yearsimmediately preceding the Termination Date, or which the Executive obtained any trade secret or other Confidential/Trade SecretInformation (as defined in Section 4.2, below) about at any time during the two years immediately preceding the Termination Date asa result of his employment with the Company, consulting services provided to the Company, or which he became aware of as a resultof his position as a director of the Company.

(iv) “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation,transportation, manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling,demolition, decommission and marine salvage services and any other services that the Company or any of its Subsidiaries hasprovided or is researching, developing, performing and/or providing at any time during the two years immediately preceding theTermination Date, or which Executive obtained any trade secret or other Confidential/Trade Secret Information (as defined in Section4.2, below) about at any time during the two years immediately preceding the Termination Date as a result of his employment withthe Company, consulting services provided to the Company, or which he became aware of as a result of his position as a director ofthe Company.

(v) “Subsidiary” or “Subsidiaries” means any or all Persons of which the Company owns directly orindirectly through another Person, a nominee arrangement or otherwise (a) at least 20% of the outstanding capital stock (or othershares of beneficial interest) entitled to vote generally or otherwise have the power to elect a majority of the board of directors orsimilar governing body or the legal power to direct the business or policies of such Person or (b) at least 20% of the economicinterests of such Person.

1 . 4 . Other Activities. Subject to the foregoing prohibition and provided such services or investments do not violate anyapplicable law, regulation or order, or interfere in any way with the faithful and diligent performance by Executive of the services tothe Company otherwise required or contemplated by this Agreement, the Company expressly acknowledges that Executive may:

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

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

1.4.3 undertake any other actions, business transactions, agreements and undertakings which the Executive hasreceived approval of the Related Party Transaction Committee (as defined below) to enter into and/or undertake, provided that


1.4.4 undertake such actions or services that do not interfere with the Executive’s obligations hereunder.

1.5. The Company’s “Related Party Transaction Committee,” composed of at least two (2) independent directors (asdetermined by the rules and regulations of the NASDAQ Capital Market, or the principal exchange or market on which the Company’ssecurities then trade), shall be available to Executive to review any potential conflicts of interest between Executive, the Companyand any other entity or individual which may be affiliated with Executive.

1 . 6 . Board of Directors. Provided that Executive is still employed hereunder, the Board shall nominate Executive to beelected to serve on the Board at each meeting of the Company’s shareholders held during the term of this Agreement to electdirectors, consistent with the provisions of the Bylaws and Articles of Incorporation of the Company, as amended and in effect fromtime to time.

1.7. Covenants of Executive.

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

1 . 7 . 2 Records. Executive shall use his best efforts and skills to truthfully, accurately, and promptly prepare,maintain, and preserve all records and reports that the Company may, from time to time, request or require, fully account for allmoney, records, equipment, materials, or other property belonging to the Company of which he may have custody, and promptly payand deliver the same whenever he may be directed to do so by the Board.

1.7.3 Compliance. Executive shall use his best efforts to maintain the Company’s compliance with all rules andregulations of the Securities and Exchange Commission (“SEC”), and reporting requirements for publicly traded companies, including,without limitation, overseeing and filing with the SEC all periodic reports the Company is required to file under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). Executive shall at all times comply, and cause the Company to comply,with the then-current good corporate governance standards and practices as prescribed by the SEC, any exchange on which theCompany’s capital stock or other securities may be traded and any other applicable governmental entity, agency or organization.

1.7.4 Exchange Act Filing Requirements. The Executive Agreements and acknowledges that due to the Executive’sstatus as a Section 16(a) “officer” of the Company (as described in Rule 16a-1(f) of the Exchange Act), he has an obligation to filevarious beneficial ownership reports and forms with the Securities and Exchange Commission, including Form’s 3, 4 and 5 (whereapplicable) and that such obligation is solely the Executive’s regardless of whether the Company assists the Executive in filing suchforms or not. The Executive agrees to use his best efforts to timely and adequately file all required beneficial ownership reports andforms required under the Exchange Act.

1.8. Effective Date. The “Effective Date” of this Agreement shall be August 7, 2015. 1.9. At Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement. A required condition to

the Company’s acceptance of this Agreement is the entry by the Executive into the At Will Employment, Confidential Information,Invention Assignment and Arbitration Agreement in the form of Exhibit A attached hereto.


ARTICLE II.

COMPENSATION AND OTHER BENEFITS

2.1 . Base Salary. So long as this Agreement remains in effect, for all services rendered by Executive hereunder and allcovenants and conditions undertaken by the Parties pursuant to this Agreement, the Company shall pay, and Executive shall accept,as compensation, an annual base salary (“Base Salary”) of $425,000. The Base Salary shall be payable in regular installments inaccordance with the normal payroll practices of the Company, in effect from time to time, but in any event no less frequently than ona monthly basis. For so long as Executive is employed hereunder, beginning December 31, 2015, and on each December 31stthereafter, the Base Salary may be increased as determined by the Compensation Committee of the Board (the “CompensationCommittee”), in its sole and absolute discretion. Such increase in salary shall be documented in the Company’s records, but shallnot require the Parties enter into a new or amended form of this Agreement.

2.2. Discretionary Cash Bonus. Executive shall be eligible for a yearly discretionary cash bonus (a “Cash Bonus”) equal toan amount as determined by the Compensation Committee of the Board of Directors (the “Committee”) and based on the condition ofthe Company’s business and results of operations, the Committee’s evaluation of Executive’s individual performance for the relevantperiod, and the satisfaction of goals that may be established by the Committee. Each Cash Bonus shall be paid in the Committee’sdiscretion, provided that the minimum targeted yearly Cash Bonus shall be in an amount equal to not less than $385,000.

2 .3 . Performance Standards. The Executive and the Company agree that the Executive’s discretionary Cash Bonus andequity-based compensation will be based on the Executive’s and the Company’s achievement of performance goals that may beestablished by the Committee after discussion with the Executive and his supervisors (if any). Until or unless the Company and theCommittee establish performance goals, the Executive’s discretionary Cash Bonus and equity based compensation will be whollydiscretionary.

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

2.5. Vacation. Executive will be entitled to 20 days of paid time-off (“PTO”) per year. PTO days shall accrue beginning onthe 1st of January for each year during the term of this Agreement. Unused PTO days shall expire on December 31 of each year andshall not roll over into the next year. Other than the use of PTO days for illness or personal emergencies, PTO days must be pre-approved by the Company.

2 . 6 . Other Benefits. Executive shall be entitled to participate in the Company’s employee stock option plan, life, health,accident, disability insurance plans, pension plans and retirement plans, in effect from time to time (including, without limitation, anyincentive program or discretionary bonus program of the Company which may be implemented in the future by the Board), to theextent and on such terms and conditions as the Company customarily makes such plans available to its senior executives.

2 . 7 . Withholding. The Company may deduct from any compensation payable to Executive (including payments madepursuant to this ARTICLE II or in connection with the termination of employment pursuant to ARTICLE III of this Agreement) amountssufficient to cover Executive’s share of applicable federal, state and/or local income tax withholding, social security payments, statedisability and other insurance premiums and payments.


2.8. Car Allowance. The Company shall provide the Executive an automobile allowance of $750 per month during the termof Executive’s employment hereunder.

ARTICLE III. TERMINATION OF EMPLOYMENT

3 . 1 . Termination of Employment. Executive’s employment pursuant to this Agreement shall terminate on the earliest tooccur of the following:

3.1.2 upon the death of Executive;

3.1.3 upon the delivery to Executive of written notice of termination by the Company if Executive shall suffer aphysical or mental disability which renders Executive, in the reasonable judgment of the Committee, unable to perform his duties andobligations under this Agreement for either 90 consecutive days or 180 days in any 12-month period;

3.1.4 upon the expiration of the Initial Term, unless a notice of termination pursuant to Section 1.1 is not given byeither Party, in which case upon the expiration of the first Automatic Renewal Term that such a notice of termination is given withrespect to either Party (if any);

3.1.5 upon delivery to the Company of written notice of termination by Executive for any reason other than for GoodReason;

3.1.6 upon delivery to Executive of written notice of termination by the Company for Cause;

3.1.7 upon delivery of written notice of termination from Executive to the Company for Good Reason, provided,however, prior to any such termination by Executive pursuant to this Section 3.1.6, Executive shall have advised the Company inwriting within fifteen (15) days of the occurrence of any circumstances that would constitute Good Reason, and the Company has notcured such circumstances within 15 days following receipt of Executive’s written notice, with the exception of only five (5) dayswritten notice in the event the Company reduces Executive’s salary without Executive’s consent or fails to pay Executive anycompensation due him; or

3.1.8 upon delivery to Executive of written notice of termination by the Company without Cause.

3 .2 . Termination in Connection with a Change of Control. In the event that Executive’s employment is terminated for anyreason (not including, however, a termination by the Company for Cause (Section 3.1.5) or a termination as a result of theExecutive’s death (Section 3.1.1) or disability (Section 3.1.2)(and for clarity, which shall include termination by Executive for GoodReason (Section 3.1.6)))(a “Change of Control Termination”) during the twelve month period following a Change of Control (asdefined in Section 3.3) or in anticipation of a Change of Control, the Company shall pay Executive, within 60 days following the laterof (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment in alump sum in an amount equal to 3.0 times the sum of (a) the current annual Base Salary of the Executive; and (b) the amount of themost recent Cash Bonus paid to the Executive pursuant to Section 2.2 of this Agreement less applicable withholding (the “Change ofControl Payment”), which amount shall be payable within 60 days of the later of (i) the date of such Change of Control Termination;and (ii) the date of such Change of Control. If Executive’s employment ends due to a Change of Control Termination within six (6)months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for purposes of this paragraph.In addition, in the event of a Change of Control, all of Executive’s equity-based compensation shall immediately vest regardless ofwhether the Executive is retained by the Company or successor following the Change of Control and any outstanding stock optionsheld by the


Executive shall be able to be exercised by the Executive until the earlier of (A) one (1) year from the date of termination and (B) thelatest date upon which such stock options would have expired by their original terms under any circumstances, provided that ifExecutive’s employment ends in anticipation of a Change of Control and such equity-based compensation awards or stock optionshave previously expired pursuant to their terms, the Company shall pay the Executive a lump sum payment, payable on the samedate as the Change of Control Payment, equal to the black scholes value of the expired and unexercised equity compensation awardsand stock options held by the Executive on the date of termination, based on the value of such awards had they been exercisablethrough the end of their stated term and had not previously expired.

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

3.3.1 “Cause” shall mean, in the context of a basis for termination by the Company of Executive’s employment withthe Company, that:

(i) Executive materially breaches any obligation, duty, covenant or agreement under this Agreement, whichbreach is not cured or corrected within thirty (30) days of written notice thereof from the Company (except for breaches of Section 1.3and ARTICLE IV of this Agreement, which cannot be cured and for which the Company need not give any opportunity to cure); or

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

(iii) Executive commits any act of fraud; or

(iv) Executive is indicted of, or pleads guilty or nolo contendere with respect to, theft, fraud, a crimeinvolving moral turpitude, or a felony under federal or applicable state law.

3.3.2 “Change of Control” shall mean the happening of any of the following:

(i) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act is or becomes the“Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Companyrepresenting more than 50% of the total voting power represented by the Company’s then outstanding voting securities without theapproval of not fewer than two-thirds of the Board of Directors of the Company voting on such matter, unless the Board of Directorsspecifically designates such acquisition to be a change of control;

(ii) A merger or consolidation of the Company whether or not approved by the Board of Directors of theCompany, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or by being converted or into voting securities of the survivingentity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstandingimmediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) As a result of the election of members to the Board of Directors, a majority of the Board of Directorsconsists of persons who are not members of the Board of Directors as of the Effective Date (including Executive as a member of theBoard of Directors as of the Effective Date), except in the event that such slate of directors is proposed by the Committee.


(iv) Notwithstanding the foregoing, if the definition of “Change of Control” in the Company’s StockIncentive Plans or Equity Compensation Plans (each as amended from time to time) is more favorable to the Executive, then suchdefinition shall be controlling for purposes of this Agreement.

3.3.3 “Good Reason” shall mean, in the context of a basis for termination by Executive of his employment with theCompany (a) without Executive’s consent, his position or duties are modified by the Company to such an extent that his duties are nolonger consistent with the position of CEO of the Company, (b) there has been a material breach by the Company of a material termof this Agreement or Employee reasonably believes that the Company is violating any law which would have a material adverse effecton the Company’s operations and such violation continues uncured following thirty (30) days after such breach and after noticethereof has been provided to the Company by the Executive, or (c) Executive’s compensation as set forth hereunder is reducedwithout Executive’s consent, or the Company fails to pay to Executive any compensation due to him hereunder upon five (5) dayswritten notice from Executive informing the Company of such failure.

3.3.4 “Termination Date” shall mean the date on which Executive’s employment with the Company hereunder isterminated.

3 . 4 . Effect of Termination. In the event that Executive’s employment hereunder is terminated in accordance with theprovisions of this Agreement, Executive shall be entitled to the following:

3.4.1 If Executive’s employment is terminated pursuant to Sections 3.1.1 (death), Section 3.1.2 (disability), Section3.1.3 (the end of the Initial Term if either Party has timely delivered a Non-Renewal Notice as provided in Section 1.1 or the end ofany Automatic Renewal Term pursuant to which either Party has timely delivered a Non-Renewal Notice as provided in Section 1.1),Section 3.1.4 (without Good Reason by the Executive), or Section 3.1.5 (by the Company for Cause), Executive shall be entitled tosalary accrued through the Termination Date and no other benefits other than as required under the terms of employee benefit plansin which Executive was participating as of Termination Date. Additionally, any unvested stock options or equity compensation held byExecutive shall immediately terminate and be forfeited (unless otherwise provided in the applicable award) and any previously vestedstock options (or if applicable equity compensation) shall be subject to terms and conditions set forth in the applicable Stock IncentivePlan or Equity Compensation Plan, or award agreement, as such may describe the rights and obligations upon termination ofemployment of Executive.

3.4.2 If Executive’s employment is terminated by Executive pursuant to Section 3.1.6 (Good Reason), or pursuantto Section 3.1.7 (without Cause by the Company), (a) Executive shall be entitled to continue to receive the salary at the rate in effectupon the Termination Date of employment for twelve (12) months following the Termination Date, payable in accordance with theCompany’s normal payroll practices and policies, as if Executive’s employment had not terminated; (b) Executive shall be entitled tothe pro rata amount of any Cash Bonus which would be payable to Executive had he remained employed for an additional twelve (12)months following the Termination Date; and (c) provided Executive elects to receive continued health insurance coverage throughCOBRA, the Company will pay Executive’s monthly COBRA contributions for health insurance coverage, as may be amended fromtime to time (less an amount equal to the premium contribution paid by active Company employees, if any) for twelve months (12)following the Termination Date; provided, however, that if at any time Executive is covered by a substantially similar level of healthinsurance through subsequent employment or otherwise, the Company’s health benefit obligations shall immediately cease, and theCompany shall have no further obligation to make COBRA contributions on Executive’s behalf. Additionally, unvested benefits(whether equity or cash benefits and bonuses (subject to this Section 3.4.2 in connection with the Cash Bonus)) will vest immediatelyupon such termination and any outstanding stock options previously granted to the Executive will vest immediately upon suchtermination and shall be exercisable by the Executive until the earlier of (A) one (1) year from the date of termination and (B) the latestdate upon which such stock options would have expired by their original terms under any circumstances. Executive shall be entitledto no other post-employment benefits except as provide for under this Section 3.4.2 and for benefits payable under applicable benefitplans in which Executive is entitled to


participate pursuant to Section 2.6 hereof through the Termination Date, subject to and in accordance with the terms of such plans.

3.4.3 As a condition to Executive’s right to receive any benefits pursuant to Section 3.4.2 of this Agreement, (A)Executive must execute and deliver to the Company a written release in form and substance satisfactory to the Company, of any andall claims against the Company and all directors and officers of the Company with respect to all matters arising out of Executive’semployment hereunder, or the termination thereof (other than claims for entitlements under the terms of this Agreement or plans orprograms of the Company in which Executive has accrued a benefit); and (B) Executive must not breach any of his covenants andagreements under Section 1.3 and ARTICLE IV of this Agreement, which shall continue following the Termination Date.

3.4.4 In the event of termination of Executive’s employment pursuant to Section 3.1.5 (by the Company for Cause),and subject to applicable law and regulations, the Company shall be entitled to offset against any payments due Executive the lossand damage, if any, which shall have been suffered by the Company as a result of the acts or omissions of Executive giving rise totermination. The foregoing shall not be construed to limit any cause of action, claim or other rights, which the Company may haveagainst Executive in connection with such acts or omissions.

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

3.4.6 Executive also agrees to keep the Company advised of his home and business address for a period of three(3) years after termination of Executive’s employment hereunder, so that the Company can contact Executive regarding hiscontinuing obligations provided by this Agreement. In the event that Executive’s employment hereunder is terminated, Executiveagrees to grant consent to notification by the Company to Executive’s new employer about his obligations under this Agreement.

3.4.7 Consulting. During the sixty day period following any termination of this Agreement pursuant to Section 3.1.3,Section 3.1.4, Section 3.1.6, or Section 3.1.7, Executive shall be available, subject to his other reasonable commitments orobligations made or incurred in mitigation of the termination of his employment, by telephone, email or fax, as a consultant to theCompany, without further compensation, to consult with its officers and directors regarding projects and/or tasks as defined by theBoard.

ARTICLE IV. INVENTIONS; CONFIDENTIAL/TRADE SECRET INFORMATION

AND RESTRICTIVE COVENANTS

4 . 1 . Inventions. All processes, technologies and inventions relating to the business of the Company (collectively,“Inventions”), including new contributions, improvements, ideas, discoveries, trademarks and trade names, conceived, developed,invented, made or found by Executive, alone or with others, during his employment by the Company, whether or not patentable andwhether or not conceived, developed, invented, made or found on the Company’s time or with the use of the Company’s facilities ormaterials, shall be the property of the Company and shall be promptly and fully disclosed by Executive to the Company. Executiveshall perform all necessary acts (including, without limitation, executing and delivering


any confirmatory assignments, documents or instruments requested by the Company) to assign or otherwise to vest title to any suchInventions in the Company and to enable the Company, at its sole expense, to secure and maintain domestic and/or foreign patentsor any other rights for such Inventions.

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

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

4 . 2 . 6 Restriction on Use of Confidential/Trade Secret Information. Executive agrees that his/her use ofConfidential/Trade Secret Information is subject to the following restrictions for an indefinite period of time so long as theConfidential/Trade Secret Information has not become generally known to the public:

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

(ii) Non-Removal/Surrender. Executive agrees that he will not remove any Confidential/Trade Secret

Information from the offices of the Company or the premises of any facility in which the Company is performing services, exceptpursuant to his duties under this Agreement. Executive further agrees that he shall surrender to the Company all documents andmaterials in his possession or control which contain Confidential/Trade Secret Information and which are the property of the Companyupon the termination of his employment with the Company, and that he shall not thereafter retain any copies of any such materials.

4.2.7 Prohibition Against Unfair Competition/ Non-Solicitation of Customers. Executive agrees that at no time after

his employment with the Company will he engage in competition with the Company while making any use of the Confidential/TradeSecret Information, or otherwise exploit or make use of the Confidential/Trade Secret Information. Executive agrees that during thetwelve-month period following the Termination Date, he will not directly or indirectly accept or solicit, in any capacity, the business ofany customer of the Company with whom Executive worked or otherwise had access to the Confidential/Trade


Secret Information pertaining to the Company’s business with such customer during the last year of Executive’s employment with theCompany, or solicit, directly or indirectly, or encourage any of the Company’s customers or suppliers to terminate their businessrelationship with the Company, or otherwise interfere with such business relationships.

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

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

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

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

4 . 7 . Reasonable Restrictions. The Parties acknowledge that the foregoing restrictions, as well as the duration and theterritorial scope thereof as set forth in this ARTICLE IV, are under all of the circumstances reasonable and necessary for theprotection of the Company and its business.

4 . 8 . Specific Performance. Executive acknowledges and agrees that the Company’s remedies at law for a breach orthreatened breach of any of the provisions of Section 1.3, Section 4.2, Section 4.3 or Section 4.4 hereof would be inadequate and, inrecognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law,the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporaryrestraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

ARTICLE V. INDEMNIFICATION

5.1. The Company agrees to indemnify Executive and hold Executive harmless from and against any and all losses, claims,

damages, liabilities and costs (and all actions in respect thereof and any legal or other expenses in giving testimony or furnishingdocuments in response to a subpoena or otherwise), including, without limitation, the costs of investigating, preparing or defendingany such action or claim, whether or not in connection with litigation in which Executive is a party, as and when incurred, directly orindirectly caused by, relating to, based upon or arising out of any work performed by Executive in connection with this Agreement tothe full extent permitted by the Nevada Revised Statutes, and by the Articles of Incorporation and Bylaws of the Company, as may beamended from time to time, and pursuant to any indemnification agreement between Executive and the Company.


5.2. The indemnification provision of this ARTICLE V shall be in addition to any liability which the Company may otherwisehave to Executive.

5.3. If any action, proceeding or investigation is commenced as to which Executive proposes to demand such

indemnification, Executive shall notify the Company with reasonable promptness. Executive shall have the right to retain counsel ofExecutive’s own choice to represent Executive and the Company shall pay all reasonable fees and expenses of such counsel; andsuch counsel shall, to the fullest extent consistent with such counsel’s professional responsibilities, cooperate with the Company andany counsel designated by the Company. The Company shall be liable for any settlement of any claim against Executive made withthe Company’s written consent, which consent shall not be unreasonably withheld or delayed, to the fullest extent permitted by theNevada Revised Statutes and the Articles of Incorporation and Bylaws of the Company, as may be amended from time to time.

ARTICLE VI. ARBITRATION

6.1. Scope. To the fullest extent permitted by law, Executive and the Company agree to the binding arbitration of any and all

controversies, claims or disputes between them arising out of or in any way related to this Agreement, the employment relationshipbetween the Company and Executive and any disputes upon termination of employment, including but not limited to breach ofcontract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medicalleave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute,regulation or ordinance or common law. For the purpose of this agreement to arbitrate, references to “Company” include allsubsidiaries or related entities and their respective executives, supervisors, officers, directors, agents, pension or benefit plans,pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and thisagreement to arbitrate shall apply to them to the extent Executive’s claims arise out of or relate to their actions on behalf of theCompany.

6 . 2 . Arbitration Procedure. To commence any such arbitration proceeding, the Party commencing the arbitration mustprovide the other Party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the otherParty of the substance of such claims. In no event shall this notice for arbitration be made after the date when institution of legal orequitable proceedings based on such claims would be barred by the applicable statute of limitations. The arbitration will beconducted in Houston, Texas, by a single neutral arbitrator and in accordance with the then-current rules for resolution of employmentdisputes of the American Arbitration Association (“AAA”). The Arbitrator is to be selected by the mutual agreement of the Parties. Ifthe Parties cannot agree, the Superior Court will select the arbitrator. The Parties are entitled to representation by an attorney orother representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of thetrial court of the State of Texas, and only such power, and shall follow the law. The award shall be binding and the Parties agree toabide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein state theessential findings and conclusions on which the award is based. Judgment on the award may be entered in any court havingjurisdiction thereof. The losing Party in the arbitration hearing shall bear the costs of the arbitration filing and hearing fees and the costof the arbitrator.

ARTICLE VII. MISCELLANEOUS

7 . 1 . Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and theirrespective legal representatives, heirs, successors and assigns. Executive may not assign any of his rights or obligations under thisAgreement. The Company may assign its rights and obligations under this Agreement to any successor entity.


7.2. Notices. Any notice provided for herein shall be in writing and shall be deemed to have been given or made (a) whenpersonally delivered or (b) when sent by telecopier and confirmed within 48 hours by letter mailed or delivered to the Party to benotified at its or his address set forth herein; or three (3) days after being sent by registered or certified mail, return receipt requested(or by equivalent currier with delivery documentation such as FEDEX or UPS) to the address of the other Party set forth or to suchother address as may be specified by notice given in accordance with this Section 7.2:

If to the Company: Vertex Energy, Inc.1331 Gemini, Suite 250Houston, Texas 77058Telephone: (866) 660-8156Attention: Secretary

If to the Executive: Benjamin P. Cowart(Address and contact information on file)

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

7 .4 . Waiver. No waiver by a Party of a breach or default hereunder by the other Party shall be considered valid, unlessexpressed in a writing signed by such first Party, and no such waiver shall be deemed a waiver of any subsequent breach or defaultof the same or any other nature.

7 . 5 . Entire Agreement. This Agreement sets forth the entire agreement between the Parties with respect to the subjectmatter hereof, and supersedes any and all prior agreements between the Company and Executive, whether written or oral, relating toany or all matters covered by and contained or otherwise dealt with in this Agreement. This Agreement does not constitute acommitment of the Company with regard to Executive’s employment, express or implied, other than to the extent expressly providedfor herein.

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

7 . 7 . Authority. The Parties each represent and warrant that it/he has the power, authority and right to enter into thisAgreement and to carry out and perform the terms, covenants and conditions hereof.

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

7.9. Construction. When used in this Agreement, unless a contrary intention appears: (i) a term has the meaning assignedto it; (ii) “or” is not exclusive; (iii) “including” means including without limitation; (iv) words in the singular include the plural and wordsin the plural include the singular, and words importing


the masculine gender include the feminine and neuter genders; (v) any agreement, instrument or statute defined or referred to hereinor in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to timeamended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments theretoand instruments incorporated therein; (vi) the words “hereof”, “herein” and “hereunder” and words of similar import when used in thisAgreement shall refer to this Agreement as a whole and not to any particular provision hereof; (vii) references contained herein toArticle, Section, Schedule and Exhibit, as applicable, are references to Articles, Sections, Schedules and Exhibits in this Agreementunless otherwise specified; (viii) references to “writing” include printing, typing, lithography and other means of reproducing words ina visible form, including, but not limited to email; (ix) references to “dollars”, “Dollars” or “$” in this Agreement shall mean UnitedStates dollars; (x) reference to a particular statute, regulation or Law means such statute, regulation or Law as amended or otherwisemodified from time to time; (xi) any definition of or reference to any agreement, instrument or other document herein shall beconstrued as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwisemodified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (xii) unless otherwisestated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means“from and including” and the words “to” and “until” each mean “to but excluding”; (xiii) references to “days” shall mean calendardays; and (xiv) the paragraph headings contained in this Agreement are for convenience only, and shall in no manner be construedas part of this Agreement.

7.10. Governing Law. This Agreement, and all of the rights and obligations of the Parties in connection with the employmentrelationship established hereby, shall be governed by and construed in accordance with the substantive laws of the State of Texaswithout giving effect to principles relating to conflicts of law.

7.11. Survival. The termination of Executive’s employment with the Company pursuant to the provisions of this Agreementshall not affect Executive’s obligations to the Company hereunder which by the nature thereof are intended to survive any suchtermination, including, without limitation, Executive’s obligations under Section 1.3 and ARTICLE IV of this Agreement.

7.12. Section 280G Safe Harbor Cap. In the event it shall be determined that any payment or distribution or any part thereofof any type to or for the benefit of Executive whether pursuant to the Agreement or any other agreement between Executive and theCompany, or any person or entity that acquires ownership or effective control the Company or ownership of a substantial portion ofthe Company’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and the regulationsthereunder (the “Code”)) whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or any otheragreement, (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”),then the Total Payments shall be reduced to the maximum amount that could be paid to Executive without giving rise to the ExciseTax (the “Safe Harbor Cap”), if the net after-tax payment to Executive after reducing Executive’s Total Payments to the Safe HarborCap is greater than the net after-tax (including the Excise Tax) payment to Executive without such reduction. The reduction of theamounts payable hereunder, if applicable, shall be made by reducing first the payment made pursuant to the Agreement and then toany other agreement that triggers such Excise Tax, unless an alternative method of reduction is elected by Executive. Allmathematical determinations, and all determinations as to whether any of the Total Payments are “parachute payments” (within themeaning of Section 280G of the Code), that are required to be made under ARTICLE III, including determinations as to whether theTotal Payments to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be utilized in arriving at suchdeterminations, shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”). If theAccounting Firm determines that the Total Payments to Executive shall be reduced to the Safe Harbor Cap (the “Cutback Payment”)and it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which hasbeen finally and conclusively resolved, that the Cutback Payment is in excess of the limitations provided in this Section 7.12(hereinafter referred to as an “Excess Payment”), such Excess Payment shall be deemed for all purposes to be an overpayment toExecutive made on the date such Executive received the Excess Payment and Executive shall repay the Excess


Payment to the Company on demand; provided, however, if Executive shall be required to pay an Excise Tax by reason of receivingsuch Excess Payment (regardless of the obligation to repay the Company), Executive shall not be required to repay the ExcessPayment (if Executive has already repaid such amount, the Company shall refund the amount to the Executive), and the Companyshall pay Executive an amount equal to the difference between the Total Payments and the Safe Harbor Cap (provided that suchamount has previously been repaid by the Executive or not previously paid by the Company).

7.13. Section 409A and 457A Compliance. To the extent applicable, this Agreement is intended to meet the requirements ofSection 409A and 457A of the Code, and shall be interpreted and construed consistent with that intent. For purposes of thisAgreement, each payment under this Agreement shall be considered a “separate payment” and not as part of a series of paymentsfor purposes of Section 409A.

7.14. Clawback. Notwithstanding any provision in this Agreement to the contrary, any portion of the payments and benefitsprovided under this Agreement, as well as any other payments and benefits which the Executive receives pursuant to a Companyplan or other arrangement, shall be subject to a clawback to the extent necessary to comply with the requirements of the Dodd-FrankWall Street Reform and Consumer Protection Act or any Securities and Exchange Commission rule.

7.15. Legal Counsel. Executive acknowledges and warrants that (A) he has been advised that Executive’s interests may bedifferent from the Company’s interests, (B) he has been afforded a reasonable opportunity to review this Agreement, to understand itsterms and to discuss it with an attorney and/or financial advisor of his choice and (C) he knowingly and voluntarily entered into thisAgreement. The Company and Executive shall each bear their own costs and expenses in connection with the negotiation andexecution of this Agreement.

7.16. Counterparts, Effect of Facsimile, Emailed and Photocopied Signatures. This Agreement and any signed agreementor instrument entered into in connection with this Agreement, and any amendments hereto or thereto, may be executed in one ormore counterparts, all of which shall constitute one and the same instrument. Any such counterpart, to the extent delivered by meansof a facsimile machine or by .pdf, .tif, .gif, .peg or similar attachment to electronic mail (any such delivery, an “Electronic Delivery”)shall be treated in all manners and respects as an original executed counterpart and shall be considered to have the same bindinglegal effect as if it were the original signed version thereof delivered in person. At the request of any Party, each other Party shall reexecute the original form of this Agreement and deliver such form to all other Parties. No Party shall raise the use of ElectronicDelivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated throughthe use of Electronic Delivery as a defense to the formation of a contract, and each such Party forever waives any such defense,except to the extent such defense relates to lack of authenticity.

[Remainder of page left intentionally blank. Signature page follows]


This Agreement contains provisions requiring binding arbitration of disputes. By signing this Agreement, Executiveacknowledges that he (i) has read and understood the entire Agreement; (ii) has received a copy of it (iii) has had theopportunity to ask questions and consult counsel or other advisors about its terms; and (iv) agrees to be bound by it.

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

“COMPANY”VERTEX ENERGY, INC.a Nevada corporation By: /s/ Chris CarlsonName: Chris CarlsonTitle: Chief Financial Officer

“EXECUTIVE”/s/ Benjamin P. CowartBenjamin P. Cowart


AT‑WILL EMPLOYMENT, CONFIDENTIAL INFORMATION,INVENTION ASSIGNMENT

AND ARBITRATION AGREEMENT

As a condition of my employment with Vertex Energy, Inc., a Nevada corporation, and/or any of its subsidiaries, affiliates,partners, successors or assigns (together the “Company”), and in consideration of my employment with the Company, ten dollars($10) and other good and valuable consideration, which I confirm receipt and sufficiency of, and my receipt of the compensation nowand hereafter paid to me by the Company, I (the “Employee”) agree to the following:

1. At-Will Employment.I understand and acknowledge that, notwithstanding the terms of any employment agreement or understanding between

myself and the Company, my employment with the Company constitutes “at-will” employment. I also understand that anyrepresentation to the contrary is unauthorized and not valid unless obtained in writing and signed by an authorized corporaterepresentative of the Company. I acknowledge that this employment relationship may be terminated at any time, with or without goodcause or for any or no cause, at the option either of the Company or myself, with or without notice, pursuant to where applicable, theterms and provisions of any employment agreement or understanding between myself and the Company.

2. Confidential InformationA. Company Information. I agree at all times during the term of my employment and thereafter, to hold

in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation withoutwritten authorization of the Board of Directors of the Company, any Confidential Information of the Company, except under a non-disclosure agreement duly authorized and executed by the Company. I understand that “Confidential Information” means any non-public information that relates to the actual or anticipated business or research and development of the Company, technical data,trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Company’sproducts or services and markets therefor, customer lists and customers (including, but not limited to, customers of the Company onwhom I called or with whom I became acquainted during the term of my employment), software, developments, inventions,processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or otherbusiness information. I further understand that Confidential Information does not include any of the foregoing items which havebecome publicly known and made generally available through no wrongful act of mine or of others who were under confidentialityobligations as to the item or items involved or improvements or new versions thereof.

B. Former Employer Information. I agree that I will not, during my employment with the Company,improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entityand that I will not bring onto the premises of the Company any unpublished document or proprietary information belonging to anysuch employer, person or entity unless consented to in writing by such employer, person or entity.

C. Third Party Information. I recognize that the Company has received and in the future will receivefrom third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality ofsuch information and to use it only for certain limited purposes. I agree to hold all such confidential or proprietary information in thestrictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my workfor the Company consistent with the Company’s agreement with such third party.

3. Inventions.A. Inventions Retained and Licensed. I have attached hereto, as Exhibit A, a list describing all

inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to myemployment with the Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to the Company’sproposed business, products or research and development, and which are not assigned to the Company hereunder; or, if no such listis attached, I represent that there are no such Prior Inventions. If in the course of my employment with the Company, I


incorporate into a Company product, process or service a Prior Invention owned by me or in which I have an interest, I hereby grantto the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license to make, have made, modify,use and sell such Prior Invention as part of or in connection with such product, process or service, and to practice any method relatedthereto.

B. Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company,will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title,and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs,discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I maysolely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during theentire period of time I am in the employ of the Company (whether before or after the execution of this Agreement) (collectivelyreferred to as “Inventions”). I further acknowledge that all original works of authorship which are made by me (solely or jointly withothers) within the scope of and during the period of my employment with the Company (whether before or after the execution of thisAgreement) and which are protectible by copyright are “works made for hire,” as that term is defined in the United States CopyrightAct. Employee understands that this means that the Company will have the right to undertake any of the actions set forth in section106 of the United States Copyright Act (17 U.S.C. § 106) with respect to such copyrightable works prepared by Employee within thescope of Employee’s employment. Employee understands that this includes, without limitation, the right to sell, license, use,reproduce and have reproduced, create derivative works of, distribute, display, transmit and otherwise commercially exploit suchcopyrightable works by all means without further compensating the Employee. I understand and agree that the decision whether ornot to commercialize or market any invention developed by me solely or jointly with others is within the Company’s sole discretionand for the Company’s sole benefit and that no royalty will be due to me as a result of the Company’s efforts to commercialize ormarket any such invention.

C. Assignment of Other Rights. In addition to the foregoing assignment of Inventions to the Company,Employee hereby irrevocably transfers and assigns to the Company: (i) all worldwide patents, patent applications, copyrights, maskworks, trade secrets and other intellectual property rights in any Assigned Inventions; and (ii) any and all “Moral Rights” (as definedbelow) that Employee may have in or with respect to any Inventions. Employee also hereby forever waives and agrees never toassert any and all Moral Rights Employee may have in or with respect to any Inventions, even after termination of Employee’s workon behalf of the Company. “Moral Rights” means any rights to claim authorship of any Inventions, to object to or prevent themodification of any Inventions, or to withdraw from circulation or control the publication or distribution of any Inventions, and anysimilar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not suchright is denominated or generally referred to as a “moral right”.

D. Inventions Assigned to the United States. I agree to assign to the United States government all myright, title, and interest in and to any and all Inventions whenever such full title is required to be in the United States by a contractbetween the Company and the United States or any of its agencies.

E. Maintenance of Records. I agree to keep and maintain adequate and current written records of allInventions made by me (solely or jointly with others) during the term of my employment with the Company. The records will be in theform of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to andremain the sole property of the Company at all times.

F. Patent and Copyright Registrations. I agree to assist the Company, or its designee, at theCompany’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, mask workrights or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of allpertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all otherinstruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and conveyto the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, andany copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation toexecute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the terminationof this Agreement. If the Company is unable


because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any applicationfor any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to theCompany as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as myagent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfullypermitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal forceand effect as if executed by me.

4. Conflicting Employment. I agree that, during the term of my employment with the Company, I will notengage in any other employment, occupation or consulting directly related to the business in which the Company is now involved orbecomes involved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to theCompany.

5. Returning Company Documents. I agree that, at the time of leaving the employ of the Company, I willdeliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data,notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, otherdocuments or property, or reproductions of any aforementioned items developed by me pursuant to my employment with theCompany or otherwise belonging to the Company, its successors or assigns, including, without limitation, those records maintainedpursuant to Section 3.E. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification”attached hereto as Exhibit B.

6. Notification of New Employer. In the event that I leave the employ of the Company, I hereby grant consentto notification by the Company to my new employer about my rights and obligations under this Agreement.

7. Solicitation of Employees. I agree that for a period of twelve (12) months immediately following thetermination of my relationship with the Company for any reason, whether with or without cause, I will not either directly or indirectlysolicit, induce, recruit or encourage any of the Company’s employees to leave their employment or the Company’s customers toremove or reduce their business with the Company, or take away such employees or customers, or attempt to solicit, induce, recruit,encourage or take away employees or customers of the Company, either for myself or for any other person or entity.

8. Conflict of Interest Guidelines. I agree to diligently adhere to the Conflict of Interest Guidelines attached asExhibit C hereto.

9. Representations. I agree to execute any proper oath or verify any proper document required to carry outthe terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keepin confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I herebyrepresent and warrant that I have not entered into, and I will not enter into, any oral or written agreement in conflict herewith.

10. Arbitration and Equitable Relief.A. Arbitration. In consideration of my employment with the Company, its promise to arbitrate all

employment-related disputes and my receipt of the compensation, pay raises and other benefits paid to me by the Company, atpresent and in the future, I agree that any and all controversies, claims, or disputes with anyone (including the Company and anyemployee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relatingto, or resulting from my employment with the Company or the termination of my employment with the Company, including any breachof this Agreement, will be subject to binding arbitration, to the fullest extent permitted by law. Disputes which I agree to arbitrate, andthereby agree to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to,claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination inEmployment Act of 1967, the Older Workers Benefit Protection Act, claims of harassment, discrimination or wrongful termination andany statutory claims. I further understand that this agreement to arbitrate also applies to any disputes that the Company may havewith me.

B. Procedure. I agree that any arbitration will be administered by the American Arbitration Association(“AAA”) and that the neutral arbitrator will be selected in a manner consistent with its national rules for the resolution of employmentdisputes. I agree that the arbitrator will have the power to decide any motions brought by any party to the arbitration, includingmotions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. I also


agree that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicablelaw. I understand the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that I will paythe first $200.00 of any filing fees associated with any arbitration I initiate. I agree that the arbitrator will administer and conduct anyarbitration in a manner consistent with AAA’s national rules, to the extent that the AAA’s national rules for the resolution ofemployment disputes do not conflict with applicable law. I agree that the decision of the arbitrator will be in writing. Any procedure forremedying disputes as set forth in any employment agreement or understanding between myself and the Company shall supersedeand take precedence over the Procedure set forth in this Section 10.B.

C. Remedy. Except as provided by law and this Agreement (or provided for in any employmentagreement or understanding between myself and the Company), arbitration will be the sole, exclusive and final remedy for anydispute between me and the Company. Accordingly, except as provided for by law and this Agreement, neither I nor the Companywill be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have theauthority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company toadopt a policy not otherwise required by law which the Company has not adopted.

D. Availability of Injunctive Relief. In addition to any right under applicable law that the Company or Imay have to petition a court of competent jurisdiction for provisional relief, I agree that any party may also petition the arbitrator forprovisional injunctive relief where either party alleges or claims a violation of the employment, confidential information, inventionassignment agreement between me and the Company or any other agreement regarding trade secrets, confidential information, ornon-solicitation. I understand that any breach or threatened breach of such an agreement will cause irreparable injury and that moneydamages will not provide an adequate remedy therefor and both parties hereby consent to the issuance of an injunction. In the eventeither party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys’ fees.

E. Administrative Relief. I understand that this Agreement does not prohibit me from pursuing anadministrative claim with a local, state or federal administrative body. This Agreement does, however, preclude me from pursuingcourt action regarding any such claim.

F. Voluntary Nature of Agreement. I acknowledge and agree that I am executing this Agreementvoluntarily and without any duress or undue influence by the Company or anyone else. I further acknowledge and agree that I havecarefully read this Agreement and that I have asked any questions needed for me to understand the terms, consequences andbinding effect of this Agreement and fully understand it, including that I AM WAIVING MY RIGHT TO A JURY TRIAL. Finally, I agreethat I have been provided an opportunity to seek the advice of an attorney of my choice before signing this Agreement.

11. General Provisions.A. Governing Law, Consent to Personal Jurisdiction. This Agreement will be governed by the laws of

the State of Texas. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Texas for anylawsuit filed there against me by the Company arising from or relating to this Agreement.

B. Entire Agreement. This Agreement, along with my offer letter of employment (if any), employmentagreement or understanding, sets forth the entire agreement and understanding between the Company and me relating to the subjectmatter herein and supersedes all prior discussions or representations between us including, but not limited to, any representationsmade during my interview(s) or relocation negotiations, whether written or oral. No modification of or amendment to this Agreement,nor any waiver of any rights under this Agreement, will be effective unless in writing signed by an authorized officer of the Company(other than me) and me. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scopeof this Agreement. This Agreement prevails and supersedes in the event there is any inconsistency between this Agreement and anyother offer letter, unless the offer letter expressly provides otherwise. The terms of this Agreement shall supersede and amend,effective as of the date hereof, any prior At Will Employment, Confidential Information, Invention Assignment and ArbitrationAgreement entered into by the Employee in favor of the Company, provided that such prior At Will Employment, ConfidentialInformation, Invention Assignment and Arbitration Agreement shall continue to bind the Employee and be enforceable by theCompany against the Employee for all actions, events, occurrences and other matters between the date hereof through the date ofthis Agreement below. The terms of any employment agreement or understanding between myself and the Company shall prevailsand supersede,


where and to the extent applicable, in the event there is any inconsistency between this Agreement and such employment agreementor understanding, unless the employment agreement or understanding expressly provides otherwise.

C. Severability. If one or more of the provisions in this Agreement are deemed void by law, then theremaining provisions will continue in full force and effect.

D. Successors and Assigns. This Agreement will be binding upon my heirs, executors, administratorsand other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

Date: August 7, 2015 /s/Benjamin P. CowartSignature

Benjamin P. CowartName of Employee (typed or printed)


EXHIBIT A

LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP

Title DateIdentifying Number or Brief Description

No inventions or improvements Additional Sheets Attached

Signature of Employee:

Print Name of Employee: Benjamin P. Cowart

Date:


EXHIBIT B

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports,proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property,or reproductions of any aforementioned items belonging to Vertex Energy, Inc., a Nevada corporation, and/or its subsidiaries,affiliates, partners, predecessors, successors or assigns (together, the “Company”).

I further certify that I have complied with all the terms of the Company’s At‑Will Employment, Confidential Information,Invention Assignment and Arbitration Agreement signed by me, including the reporting of any inventions and original works ofauthorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the At-Will Employment, Confidential Information, Invention Assignment, andArbitration Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary informationrelating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases,other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to anybusiness of the Company or any of its employees, clients, consultants or licensees.

I agree that for a period of twelve (12) months immediately following the termination of my relationship with the Company forany reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of theCompany’s employees to leave their employment or customers to remove or reduce their business with, or take away suchemployees or customers, or attempt to solicit, induce, recruit, encourage or take away employees or customers of the Company,either for myself or for any other person or entity.

Date:

(Employee’s Signature)

Benjamin P. Cowart (Type/Print Employee’s Name)


EXHIBIT C

CONFLICT OF INTEREST GUIDELINES

It is the policy of Vertex Energy, Inc., a Nevada corporation (the “Company”) to conduct its affairs in strict compliance withthe letter and spirit of the law and to adhere to the highest principles of business ethics. Accordingly, all officers, employees andindependent contractors must avoid activities which are in conflict, or give the appearance of being in conflict, with these principlesand with the interests of the Company. The following are potentially compromising situations which must be avoided. Any exceptionsmust be reported to an authorized officer of the Company (other than me) and written approval for continuation must be obtained.

1. Revealing confidential information to outsiders or misusing confidential information. Unauthorized divulging ofinformation is a violation of this policy whether or not for personal gain and whether or not harm to the Company is intended. (TheAt‑Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement elaborates on this principle and isbinding).

2. Accepting or offering substantial gifts, excessive entertainment, favors or payments which may be deemed to constituteundue influence or otherwise be improper or embarrassing to the Company.

3. Participating in civic or professional organizations that might involve divulging confidential information of the Company.

4. Initiating or approving personnel actions affecting reward or punishment of employees or applicants where there is afamily relationship or is or appears to be a personal or social involvement.

5. Initiating or approving any form of personal or social harassment of employees.

6. Investing or holding outside directorship in suppliers, customers, or competing companies, including financialspeculations, where such investment or directorship might influence in any manner a decision or course of action of the Company.

7. Borrowing from or lending to employees, customers or suppliers.

8. Acquiring real estate of interest to the Company.

9. Improperly using or disclosing to the Company any proprietary information or trade secrets of any former or concurrentemployer or other person or entity with whom obligations of confidentiality exist.

10. Unlawfully discussing prices, costs, customers, sales or markets with competing companies or their employees.

11. Making any unlawful agreement with distributors with respect to prices.

12. Improperly using or authorizing the use of any inventions which are the subject of patent claims of any other person orentity.

13. Engaging in any conduct which is not in the best interest of the Company.


Each officer, employee and independent contractor must take every necessary action to ensure compliance with theseguidelines and to bring problem areas to the attention of higher management for review. Violations of this conflict of interest policymay result in discharge without warning.


EXHIBIT 10.74

VERTEX ENERGY, INC. EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into this 7th day of August 2015, to be

effective as of the Effective Date as defined below between Vertex Energy, Inc., a Nevada corporation (the “Company”), and ChrisCarlson (“Executive”) (each of the Company and Executive are referred to herein as a “Party”, and collectively referred to herein asthe “Parties”).

W I T N E S S E T H:

WHEREAS, the Executive currently serves as the Chief Financial Officer of the Company; and

WHEREAS, the Company desires to continue to obtain the services of Executive, and Executive desires to continue to beemployed by the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises, the agreements herein contained and other good and valuableconsideration, receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as of the Effective Date as follows:

ARTICLE I.

EMPLOYMENT; TERM; DUTIES

1.1. Employment. Pursuant to the terms and conditions hereinafter set forth, the Company hereby employs Executive, andExecutive hereby accepts such employment, as the Chief Financial Officer (“CFO”) of the Company for a period beginning on theEffective Date and ending on December 31, 2018 (the “Initial Term”); provided that this Agreement shall automatically extend foradditional one (1) year periods after the Initial Term (each an “Automatic Renewal Term”) in the event that neither Party providesthe other written notice of their intent not to automatically extend the term of this Agreement at least sixty (60) days prior to the end ofthe Initial Term or any Automatic Renewal Term, as applicable (each a “Non-Renewal Notice”).

1.2. Duties and Responsibilities. Executive, as CFO, shall perform such administrative, managerial and executive duties forthe Company (i) as are prescribed by applicable job specifications for the chief financial officer of a public company the size andnature of the Company, (ii) as may be prescribed by the Bylaws of the Company, (iii) as are customarily vested in and incidental tosuch position, and (iv) as may be assigned to him from time to time by the Board of Directors of the Company (the “Board”).

1.3. Non-Competition. For $10 and other good and valuable consideration which Executive acknowledges the receipt andsufficiency of, Executive agrees to (a) devote substantially all of Executive’s business time, energy and efforts to the business of theCompany (except as specifically provided for in Section 1.4 below), (b) to use Executive’s best efforts and abilities faithfully anddiligently to promote the business interests of the Company and (c) to comply with the other terms and conditions of this Section 1.3.For so long as Executive is employed hereunder, and for a period of twelve (12) months thereafter (the “Non-Compete Period”),Executive (whether by himself, through his employers or employees or agents or otherwise, and whether on his own behalf or onbehalf of any other Person) shall not, directly or indirectly, either as an employee, employer, consultant, agent, investor, principal,partner, stockholder (except as the holder of less than 1% of the issued and outstanding stock of a publicly held corporation), own,manage, operate, control, be employed by, act as an officer, director, agent or consultant for, or be in any other way connected withor provide services or products to or for, any Person in the business of manufacturing, selling, creating, renting, aggregating, trading,distributing, marketing, producing, undertaking, developing, supplying, or otherwise dealing with or in Restricted Services orRestricted Products in the Restricted Area (the “Post-Employment Non-Competition Requirement”).


1.3.1 For purposes of this Section 1.3, the following terms shall have the following meanings:

(i) “Person” means any individual, corporation, partnership, joint venture, limited liability company, trust,unincorporated organization or governmental entity.

(ii) “Restricted Area” means (A) any State (in the United States); and/or (B) any other geographic area(Providence, if such Restricted Area is in Canada, or country, if such Restricted Area is in a country other than the United States orCanada), in which the Company or any of its Subsidiaries provides Restricted Services or Restricted Products, directly or indirectly,during the twelve months preceding the Termination Date of Executive’s employment hereunder.

(iii) “Restricted Products” means used motor oil, petroleum by-products, vacuum gas oil, aggregatedfeedstock and re-refined oil products, gasoline blendstock, pygas and fuel oil cutterstock, oil filters, engine coolant and/or otherhydrocarbons and any other product, that the Company or any of its Subsidiaries has provided or is researching, developing,manufacturing, distributing, refining, re-refining, aggregating, purchasing, selling and/or providing at any time during the two yearsimmediately preceding the Termination Date, or which the Executive obtained any trade secret or other Confidential/Trade SecretInformation (as defined in Section 4.2, below) about at any time during the two years immediately preceding the Termination Date asa result of his employment with the Company, consulting services provided to the Company, or which he became aware of as a resultof his position as a director of the Company.

(iv) “Restricted Services” means the collection, trading, purchasing, processing, storing, aggregation,transportation, manufacture, distribution, recycling, storage, refinement, re-refinement and sale of Restricted Products, dismantling,demolition, decommission and marine salvage services and any other services that the Company or any of its Subsidiaries hasprovided or is researching, developing, performing and/or providing at any time during the two years immediately preceding theTermination Date, or which Executive obtained any trade secret or other Confidential/Trade Secret Information (as defined in Section4.2, below) about at any time during the two years immediately preceding the Termination Date as a result of his employment withthe Company, consulting services provided to the Company, or which he became aware of as a result of his position as a director ofthe Company.

(v) “Subsidiary” or “Subsidiaries” means any or all Persons of which the Company owns directly orindirectly through another Person, a nominee arrangement or otherwise (a) at least a 20% of the outstanding capital stock (or othershares of beneficial interest) entitled to vote generally or otherwise have the power to elect a majority of the board of directors orsimilar governing body or the legal power to direct the business or policies of such Person or (b) at least 20% of the economicinterests of such Person.

1 . 4 . Other Activities. Subject to the foregoing prohibition and provided such services or investments do not violate anyapplicable law, regulation or order, or interfere in any way with the faithful and diligent performance by Executive of the services tothe Company otherwise required or contemplated by this Agreement, the Company expressly acknowledges that Executive may:

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

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

1.4.3 undertake any other actions, business transactions, agreements and undertakings which the Executive hasreceived approval of the Related Party Transaction Committee (as defined below) to enter into and/or undertake, provided that


1.4.4 undertake such actions or services that do not interfere with the Executive’s obligations hereunder.

1.5. The Company’s “Related Party Transaction Committee,” composed of at least two (2) independent directors (asdetermined by the rules and regulations of the NASDAQ Capital Market, or the principal exchange or market on which the Company’ssecurities then trade), shall be available to Executive to review any potential conflicts of interest between Executive, the Companyand any other entity or individual which may be affiliated with Executive.

1.6. Covenants of Executive.

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

1 . 6 . 2 Records. Executive shall use his best efforts and skills to truthfully, accurately, and promptly prepare,maintain, and preserve all records and reports that the Company may, from time to time, request or require, fully account for allmoney, records, equipment, materials, or other property belonging to the Company of which he may have custody, and promptly payand deliver the same whenever he may be directed to do so by the Board.

1.6.3 Compliance. Executive shall use his best efforts to maintain the Company’s compliance with all rules andregulations of the Securities and Exchange Commission (“SEC”), and reporting requirements for publicly traded companies, including,without limitation, overseeing and filing with the SEC all periodic reports the Company is required to file under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). Executive shall at all times comply, and cause the Company to comply,with the then-current good corporate governance standards and practices as prescribed by the SEC, any exchange on which theCompany’s capital stock or other securities may be traded and any other applicable governmental entity, agency or organization.

1.6.4 Exchange Act Filing Requirements. The Executive Agreements and acknowledges that due to the Executive’sstatus as a Section 16(a) “officer” of the Company (as described in Rule 16a-1(f) of the Exchange Act), he has an obligation to filevarious beneficial ownership reports and forms with the Securities and Exchange Commission, including Form’s 3, 4 and 5 (whereapplicable) and that such obligation is solely the Executive’s regardless of whether the Company assists the Executive in filing suchforms or not. The Executive agrees to use his best efforts to timely and adequately file all required beneficial ownership reports andforms required under the Exchange Act.

1.7. Effective Date. The “Effective Date” of this Agreement shall be August 7, 2015. 1.8. At Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement. A required condition to

the Company’s acceptance of this Agreement is the entry by the Executive into the At Will Employment, Confidential Information,Invention Assignment and Arbitration Agreement in the form of Exhibit A attached hereto.


ARTICLE II.COMPENSATION AND OTHER BENEFITS

2.1 . Base Salary. So long as this Agreement remains in effect, for all services rendered by Executive hereunder and allcovenants and conditions undertaken by the Parties pursuant to this Agreement, the Company shall pay, and Executive shall accept,as compensation, an annual base salary (“Base Salary”) of $240,000. The Base Salary shall be payable in regular installments inaccordance with the normal payroll practices of the Company, in effect from time to time, but in any event no less frequently than ona monthly basis. For so long as Executive is employed hereunder, beginning on December 31, 2015, and on each December 31stthereafter, the Base Salary may be increased as determined by the Compensation Committee of the Board (the “CompensationCommittee”), in its sole and absolute discretion. Such increase in salary shall be documented in the Company’s records, but shallnot require the Parties enter into a new or amended form of this Agreement.

2.2. Discretionary Cash Bonus. Executive shall be eligible for a yearly discretionary cash bonus (a “Cash Bonus”) equal toan amount as determined by the Compensation Committee of the Board of Directors (the “Committee”) and based on the condition ofthe Company’s business and results of operations, the Committee’s evaluation of Executive’s individual performance for the relevantperiod, and the satisfaction of goals that may be established by the Committee. Each Cash Bonus shall be paid in the Committee’sdiscretion, provided that the minimum targeted yearly Cash Bonus shall be in an amount equal to not less than $240,000 per year.

2 .3 . Performance Standards. The Executive and the Company agree that the Executive’s discretionary Cash Bonus andequity-based compensation will be based on the Executive’s and the Company’s achievement of performance goals that may beestablished by the Committee after discussion with the Executive and his supervisors (if any). Until or unless the Company and theCommittee establish performance goals, the Executive’s discretionary Cash Bonus and equity based compensation will be whollydiscretionary.

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

2.5. Vacation. Executive will be entitled to 20 days of paid time-off (“PTO”) per year. PTO days shall accrue beginning onthe 1st of January for each year during the term of this Agreement. Unused PTO days shall expire on December 31 of each year andshall not roll over into the next year. Other than the use of PTO days for illness or personal emergencies, PTO days must be pre-approved by the Company.

2 . 6 . Other Benefits. Executive shall be entitled to participate in the Company’s employee stock option plan, life, health,accident, disability insurance plans, pension plans and retirement plans, in effect from time to time (including, without limitation, anyincentive program or discretionary bonus program of the Company which may be implemented in the future by the Board), to theextent and on such terms and conditions as the Company customarily makes such plans available to its senior executives.

2 . 7 . Withholding. The Company may deduct from any compensation payable to Executive (including payments madepursuant to this ARTICLE II or in connection with the termination of employment pursuant to ARTICLE III of this Agreement) amountssufficient to cover Executive’s share of applicable federal, state and/or local income tax withholding, social security payments, statedisability and other insurance premiums and payments.


2.8. Car Allowance. The Company shall provide the Executive an automobile allowance of $750 per month during the termof Executive’s employment hereunder.

ARTICLE III.TERMINATION OF EMPLOYMENT

3 . 1 . Termination of Employment. Executive’s employment pursuant to this Agreement shall terminate on the earliest tooccur of the following:

3.1.2 upon the death of Executive;

3.1.3 upon the delivery to Executive of written notice of termination by the Company if Executive shall suffer aphysical or mental disability which renders Executive, in the reasonable judgment of the Committee, unable to perform his duties andobligations under this Agreement for either 90 consecutive days or 180 days in any 12-month period;

3.1.4 upon the expiration of the Initial Term, unless a notice of termination pursuant to Section 1.1 is not given byeither Party, in which case upon the expiration of the first Automatic Renewal Term that such a notice of termination is given withrespect to either Party (if any);

3.1.5 upon delivery to the Company of written notice of termination by Executive for any reason other than for GoodReason;

3.1.6 upon delivery to Executive of written notice of termination by the Company for Cause;

3.1.7 upon delivery of written notice of termination from Executive to the Company for Good Reason, provided,however, prior to any such termination by Executive pursuant to this Section 3.1.6, Executive shall have advised the Company inwriting within fifteen (15) days of the occurrence of any circumstances that would constitute Good Reason, and the Company has notcured such circumstances within 15 days following receipt of Executive’s written notice, with the exception of only five (5) dayswritten notice in the event the Company reduces Executive’s salary without Executive’s consent or fails to pay Executive anycompensation due him; or

3.1.8 upon delivery to Executive of written notice of termination by the Company without Cause.

3 .2 . Termination in Connection with a Change of Control. In the event that Executive’s employment is terminated for anyreason (not including, however, a termination by the Company for Cause (Section 3.1.5) or a termination as a result of theExecutive’s death (Section 3.1.1) or disability (Section 3.1.2)(and for clarity, which shall include termination by Executive for GoodReason (Section 3.1.6)))(a “Change of Control Termination”) during the twelve month period following a Change of Control (asdefined in Section 3.3) or in anticipation of a Change of Control, the Company shall pay Executive, within 60 days following the laterof (i) the date of such Change of Control Termination; and (ii) the date of such Change of Control, a cash severance payment in alump sum in an amount equal to 3.0 times the sum of (a) the current annual Base Salary of the Executive; and (b) the amount of themost recent Cash Bonus paid to the Executive pursuant to Section 2.2 of this Agreement less applicable withholding (the “Change ofControl Payment”), which amount shall be payable within 60 days of the later of (i) the date of such Change of Control Termination;and (ii) the date of such Change of Control. If Executive’s employment ends due to a Change of Control Termination within six (6)months prior to a Change of Control, it will be deemed to be “in anticipation of a Change of Control” for purposes of this paragraph.In addition, in the event of a Change of Control, all of Executive’s equity-based compensation shall immediately vest regardlesswhether the Executive is retained by the Company or successor following the Change of Control and any outstanding stock optionsheld by the


Executive shall be able to be exercised by the Executive until the earlier of (A) one (1) year from the date of termination and (B) thelatest date upon which such stock options would have expired by their original terms under any circumstances, provided that ifExecutive’s employment ends in anticipation of a Change of Control and such equity-based compensation awards or stock optionshave previously expired pursuant to their terms, the Company shall pay the Executive a lump sum payment, payable on the samedate as the Change of Control Payment, equal to the black scholes value of the expired and unexercised equity compensation awardsand stock options held by the Executive on the date of termination, based on the value of such awards had they been exercisablethrough the end of their stated term and had not previously expired.

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

3.3.1 “Cause” shall mean, in the context of a basis for termination by the Company of Executive’s employment withthe Company, that:

(i) Executive materially breaches any obligation, duty, covenant or agreement under this Agreement, whichbreach is not cured or corrected within thirty (30) days of written notice thereof from the Company (except for breaches of Section 1.3and ARTICLE IV of this Agreement, which cannot be cured and for which the Company need not give any opportunity to cure); or

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

(iii) Executive commits any act of fraud; or

(iv) Executive is indicted of, or pleads guilty or nolo contendere with respect to, theft, fraud, a crimeinvolving moral turpitude, or a felony under federal or applicable state law.

3.3.2 “Change of Control” shall mean the happening of any of the following:

(i) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act is or becomes the“Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Companyrepresenting more than 50% of the total voting power represented by the Company’s then outstanding voting securities without theapproval of not fewer than two-thirds of the Board of Directors of the Company voting on such matter, unless the Board of Directorsspecifically designates such acquisition to be a change of control;

(ii) A merger or consolidation of the Company whether or not approved by the Board of Directors of theCompany, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or by being converted or into voting securities of the survivingentity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstandingimmediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) As a result of the election of members to the Board of Directors, a majority of the Board of Directorsconsists of persons who are not members of the Board of Directors as of the Effective Date (including Executive as a member of theBoard of Directors as of the Effective Date), except in the event that such slate of directors is proposed by the Committee.


(iv) Notwithstanding the foregoing, if the definition of “Change of Control” in the Company’s StockIncentive Plans or Equity Compensation Plans (each as amended from time to time) is more favorable to the Executive, then suchdefinition shall be controlling for purposes of this Agreement.

3.3.3 “Good Reason” shall mean, in the context of a basis for termination by Executive of his employment with theCompany (a) without Executive’s consent, his position or duties are modified by the Company to such an extent that his duties are nolonger consistent with the position of CFO of the Company, (b) there has been a material breach by the Company of a material termof this Agreement or Employee reasonably believes that the Company is violating any law which would have a material adverse effecton the Company’s operations and such violation continues uncured following thirty (30) days after such breach and after noticethereof has been provided to the Company by the Executive, or (c) Executive’s compensation as set forth hereunder is reducedwithout Executive’s consent, or the Company fails to pay to Executive any compensation due to him hereunder upon five (5) dayswritten notice from Executive informing the Company of such failure.

3.3.4 “Termination Date” shall mean the date on which Executive’s employment with the Company hereunder isterminated.

3 . 4 . Effect of Termination. In the event that Executive’s employment hereunder is terminated in accordance with theprovisions of this Agreement, Executive shall be entitled to the following:

3.4.5 If Executive’s employment is terminated pursuant to Sections 3.1.1 (death), Section 3.1.2 (disability), Section3.1.3 (the end of the Initial Term if either Party has timely delivered a Non-Renewal Notice as provided in Section 1.1 or the end ofany Automatic Renewal Term pursuant to which either Party has timely delivered a Non-Renewal Notice as provided in Section 1.1),Section 3.1.4 (without Good Reason by the Executive), or Section 3.1.5 (by the Company for Cause), Executive shall be entitled tosalary accrued through the Termination Date and no other benefits other than as required under the terms of employee benefit plansin which Executive was participating as of Termination Date. Additionally, any unvested stock options or equity compensation held byExecutive shall immediately terminate and be forfeited (unless otherwise provided in the applicable award) and any previously vestedstock options (or if applicable equity compensation) shall be subject to terms and conditions set forth in the applicable Stock IncentivePlan or Equity Compensation Plan, or award agreement, as such may describe the rights and obligations upon termination ofemployment of Executive.

3.4.6 If Executive’s employment is terminated by Executive pursuant to Section 3.1.6 (Good Reason), or pursuantto Section 3.1.7 (without Cause by the Company), (a) Executive shall be entitled to continue to receive the salary at the rate in effectupon the Termination Date of employment for twelve (12) months following the Termination Date, payable in accordance with theCompany’s normal payroll practices and policies, as if Executive’s employment had not terminated; (b) Executive shall be entitled tothe pro rata amount of any Cash Bonus which would be payable to Executive had he remained employed for an additional twelve (12)months following the Termination Date; and (c) provided Executive elects to receive continued health insurance coverage throughCOBRA, the Company will pay Executive’s monthly COBRA contributions for health insurance coverage, as may be amended fromtime to time (less an amount equal to the premium contribution paid by active Company employees, if any) for twelve months (12)following the Termination Date; provided, however, that if at any time Executive is covered by a substantially similar level of healthinsurance through subsequent employment or otherwise, the Company’s health benefit obligations shall immediately cease, and theCompany shall have no further obligation to make COBRA contributions on Executive’s behalf. Additionally, unvested benefits(whether equity or cash benefits and bonuses (subject to this Section 3.4.2 in connection with the Cash Bonus)) will vest immediatelyupon such termination and any outstanding stock options previously granted to the Executive will vest immediately upon suchtermination and shall be exercisable by the Executive until the earlier of (A) one (1) year from the date of termination and (B) the latestdate upon which such stock options would have expired by their original terms under any circumstances. Executive shall be entitledto no other post-employment benefits except as provide for under this Section 3.4.2 and for benefits payable under applicable benefitplans in which Executive is entitled to


participate pursuant to Section 2.8 hereof through the Termination Date, subject to and in accordance with the terms of such plans.

3.4.7 As a condition to Executive’s right to receive any benefits pursuant to Section 3.4.2 of this Agreement, (A)Executive must execute and deliver to the Company a written release in form and substance satisfactory to the Company, of any andall claims against the Company and all directors and officers of the Company with respect to all matters arising out of Executive’semployment hereunder, or the termination thereof (other than claims for entitlements under the terms of this Agreement or plans orprograms of the Company in which Executive has accrued a benefit); and (B) Executive must not breach any of his covenants andagreements under Section 1.3 and ARTICLE IV of this Agreement, which shall continue following the Termination Date.

3.4.8 In the event of termination of Executive’s employment pursuant to Section 3.1.5 (by the Company for Cause),and subject to applicable law and regulations, the Company shall be entitled to offset against any payments due Executive the lossand damage, if any, which shall have been suffered by the Company as a result of the acts or omissions of Executive giving rise totermination. The foregoing shall not be construed to limit any cause of action, claim or other rights, which the Company may haveagainst Executive in connection with such acts or omissions.

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

3.4.10 Executive also agrees to keep the Company advised of his home and business address for a period of three(3) years after termination of Executive’s employment hereunder, so that the Company can contact Executive regarding hiscontinuing obligations provided by this Agreement. In the event that Executive’s employment hereunder is terminated, Executiveagrees to grant consent to notification by the Company to Executive’s new employer about his obligations under this Agreement.

3 .4 .11 Consulting. During the sixty day period following any termination of this Agreement pursuant to Section3.1.3, Section 3.1.4, Section 3.1.6, or Section 3.1.7, Executive shall be available, subject to his other reasonable commitments orobligations made or incurred in mitigation of the termination of his employment, by telephone, email or fax, as a consultant to theCompany, without further compensation, to consult with its officers and directors regarding projects and/or tasks as defined by theBoard.

ARTICLE IV.INVENTIONS; CONFIDENTIAL/TRADE SECRET INFORMATION

AND RESTRICTIVE COVENANTS

4 . 1 . Inventions. All processes, technologies and inventions relating to the business of the Company (collectively,“Inventions”), including new contributions, improvements, ideas, discoveries, trademarks and trade names, conceived, developed,invented, made or found by Executive, alone or with others, during his employment by the Company, whether or not patentable andwhether or not conceived, developed, invented, made or found on the Company’s time or with the use of the Company’s facilities ormaterials, shall be the property of the Company and shall be promptly and fully disclosed by Executive to the Company. Executiveshall perform all necessary acts (including, without limitation, executing and delivering


any confirmatory assignments, documents or instruments requested by the Company) to assign or otherwise to vest title to any suchInventions in the Company and to enable the Company, at its sole expense, to secure and maintain domestic and/or foreign patentsor any other rights for such Inventions.

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

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

4 . 2 . 6 Restriction on Use of Confidential/Trade Secret Information. Executive agrees that his/her use ofConfidential/Trade Secret Information is subject to the following restrictions for an indefinite period of time so long as theConfidential/Trade Secret Information has not become generally known to the public:

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

(ii) Non-Removal/Surrender. Executive agrees that he will not remove any Confidential/Trade Secret

Information from the offices of the Company or the premises of any facility in which the Company is performing services, exceptpursuant to his duties under this Agreement. Executive further agrees that he shall surrender to the Company all documents andmaterials in his possession or control which contain Confidential/Trade Secret Information and which are the property of the Companyupon the termination of his employment with the Company, and that he shall not thereafter retain any copies of any such materials.

4.2.7 Prohibition Against Unfair Competition/ Non-Solicitation of Customers. Executive agrees that at no time after

his employment with the Company will he engage in competition with the Company while making any use of the Confidential/TradeSecret Information, or otherwise exploit or make use of the Confidential/Trade Secret Information. Executive agrees that during thetwelve-month period following the Termination Date, he will not directly or indirectly accept or solicit, in any capacity, the business ofany customer of the Company with whom Executive worked or otherwise had access to the Confidential/Trade


Secret Information pertaining to the Company’s business with such customer during the last year of Executive’s employment with theCompany, or solicit, directly or indirectly, or encourage any of the Company’s customers or suppliers to terminate their businessrelationship with the Company, or otherwise interfere with such business relationships.

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

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

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

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

4 . 7 . Reasonable Restrictions. The Parties acknowledge that the foregoing restrictions, as well as the duration and theterritorial scope thereof as set forth in this ARTICLE IV, are under all of the circumstances reasonable and necessary for theprotection of the Company and its business.

4 . 8 . Specific Performance. Executive acknowledges and agrees that the Company’s remedies at law for a breach orthreatened breach of any of the provisions of Section 1.3, Section 4.2, Section 4.3 or Section 4.4 hereof would be inadequate and, inrecognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law,the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporaryrestraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

ARTICLE V.INDEMNIFICATION

5.1. The Company agrees to indemnify Executive and hold Executive harmless from and against any and all losses, claims,

damages, liabilities and costs (and all actions in respect thereof and any legal or other expenses in giving testimony or furnishingdocuments in response to a subpoena or otherwise), including, without limitation, the costs of investigating, preparing or defendingany such action or claim, whether or not in connection with litigation in which Executive is a party, as and when incurred, directly orindirectly caused by, relating to, based upon or arising out of any work performed by Executive in connection with this Agreement tothe full extent permitted by the Nevada Revised Statutes, and by the Articles of Incorporation and Bylaws of the Company, as may beamended from time to time, and pursuant to any indemnification agreement between Executive and the Company.


5.2. The indemnification provision of this ARTICLE V shall be in addition to any liability which the Company may otherwisehave to Executive.

5.3. If any action, proceeding or investigation is commenced as to which Executive proposes to demand such

indemnification, Executive shall notify the Company with reasonable promptness. Executive shall have the right to retain counsel ofExecutive’s own choice to represent Executive and the Company shall pay all reasonable fees and expenses of such counsel; andsuch counsel shall, to the fullest extent consistent with such counsel’s professional responsibilities, cooperate with the Company andany counsel designated by the Company. The Company shall be liable for any settlement of any claim against Executive made withthe Company’s written consent, which consent shall not be unreasonably withheld or delayed, to the fullest extent permitted by theNevada Revised Statutes and the Articles of Incorporation and Bylaws of the Company, as may be amended from time to time.

ARTICLE VI.ARBITRATION

6.1. Scope. To the fullest extent permitted by law, Executive and the Company agree to the binding arbitration of any and all

controversies, claims or disputes between them arising out of or in any way related to this Agreement, the employment relationshipbetween the Company and Executive and any disputes upon termination of employment, including but not limited to breach ofcontract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medicalleave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute,regulation or ordinance or common law. For the purpose of this agreement to arbitrate, references to “Company” include allsubsidiaries or related entities and their respective executives, supervisors, officers, directors, agents, pension or benefit plans,pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and thisagreement to arbitrate shall apply to them to the extent Executive’s claims arise out of or relate to their actions on behalf of theCompany.

6 . 2 . Arbitration Procedure. To commence any such arbitration proceeding, the Party commencing the arbitration mustprovide the other Party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the otherParty of the substance of such claims. In no event shall this notice for arbitration be made after the date when institution of legal orequitable proceedings based on such claims would be barred by the applicable statute of limitations. The arbitration will beconducted in Houston, Texas, by a single neutral arbitrator and in accordance with the then-current rules for resolution of employmentdisputes of the American Arbitration Association (“AAA”). The Arbitrator is to be selected by the mutual agreement of the Parties. Ifthe Parties cannot agree, the Superior Court will select the arbitrator. The Parties are entitled to representation by an attorney orother representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of thetrial court of the State of Texas, and only such power, and shall follow the law. The award shall be binding and the Parties agree toabide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein state theessential findings and conclusions on which the award is based. Judgment on the award may be entered in any court havingjurisdiction thereof. The losing Party in the arbitration hearing shall bear the costs of the arbitration filing and hearing fees and the costof the arbitrator.

ARTICLE VII.MISCELLANEOUS

7 . 1 . Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and theirrespective legal representatives, heirs, successors and assigns. Executive may not assign any of his rights or obligations under thisAgreement. The Company may assign its rights and obligations under this Agreement to any successor entity.


7.2. Notices. Any notice provided for herein shall be in writing and shall be deemed to have been given or made (a) whenpersonally delivered or (b) when sent by telecopier and confirmed within 48 hours by letter mailed or delivered to the Party to benotified at its or his address set forth herein; or three (3) days after being sent by registered or certified mail, return receipt requested(or by equivalent currier with delivery documentation such as FEDEX or UPS) to the address of the other Party set forth or to suchother address as may be specified by notice given in accordance with this Section 7.2:

If to the Company: Vertex Energy, Inc.1331 Gemini, Suite 250Houston, Texas 77058Telephone: (866) 660-8156Attention: Secretary

If to the Executive: Chris Carlson(Address and contact information on file)

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

7 .4 . Waiver. No waiver by a Party of a breach or default hereunder by the other Party shall be considered valid, unlessexpressed in a writing signed by such first Party, and no such waiver shall be deemed a waiver of any subsequent breach or defaultof the same or any other nature.

7 . 5 . Entire Agreement. This Agreement sets forth the entire agreement between the Parties with respect to the subjectmatter hereof, and supersedes any and all prior agreements between the Company and Executive, whether written or oral, relating toany or all matters covered by and contained or otherwise dealt with in this Agreement. This Agreement does not constitute acommitment of the Company with regard to Executive’s employment, express or implied, other than to the extent expressly providedfor herein.

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

7 . 7 . Authority. The Parties each represent and warrant that it/he has the power, authority and right to enter into thisAgreement and to carry out and perform the terms, covenants and conditions hereof.

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

7.9. Construction. When used in this Agreement, unless a contrary intention appears: (i) a term has the meaning assignedto it; (ii) “or” is not exclusive; (iii) “including” means including without limitation; (iv) words in the singular include the plural and wordsin the plural include the singular, and words importing


the masculine gender include the feminine and neuter genders; (v) any agreement, instrument or statute defined or referred to hereinor in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to timeamended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments theretoand instruments incorporated therein; (vi) the words “hereof”, “herein” and “hereunder” and words of similar import when used in thisAgreement shall refer to this Agreement as a whole and not to any particular provision hereof; (vii) references contained herein toArticle, Section, Schedule and Exhibit, as applicable, are references to Articles, Sections, Schedules and Exhibits in this Agreementunless otherwise specified; (viii) references to “writing” include printing, typing, lithography and other means of reproducing words ina visible form, including, but not limited to email; (ix) references to “dollars”, “Dollars” or “$” in this Agreement shall mean UnitedStates dollars; (x) reference to a particular statute, regulation or Law means such statute, regulation or Law as amended or otherwisemodified from time to time; (xi) any definition of or reference to any agreement, instrument or other document herein shall beconstrued as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwisemodified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (xii) unless otherwisestated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means“from and including” and the words “to” and “until” each mean “to but excluding”; (xiii) references to “days” shall mean calendardays; and (xiv) the paragraph headings contained in this Agreement are for convenience only, and shall in no manner be construedas part of this Agreement.

7.10. Governing Law. This Agreement, and all of the rights and obligations of the Parties in connection with the employmentrelationship established hereby, shall be governed by and construed in accordance with the substantive laws of the State of Texaswithout giving effect to principles relating to conflicts of law.

7.11. Survival. The termination of Executive’s employment with the Company pursuant to the provisions of this Agreementshall not affect Executive’s obligations to the Company hereunder which by the nature thereof are intended to survive any suchtermination, including, without limitation, Executive’s obligations under Section 1.3 and ARTICLE IV of this Agreement.

7.12. Section 280G Safe Harbor Cap. In the event it shall be determined that any payment or distribution or any part thereofof any type to or for the benefit of Executive whether pursuant to the Agreement or any other agreement between Executive and theCompany, or any person or entity that acquires ownership or effective control the Company or ownership of a substantial portion ofthe Company’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and the regulationsthereunder (the “Code”)) whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or any otheragreement, (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”),then the Total Payments shall be reduced to the maximum amount that could be paid to Executive without giving rise to the ExciseTax (the “Safe Harbor Cap”), if the net after-tax payment to Executive after reducing Executive’s Total Payments to the Safe HarborCap is greater than the net after-tax (including the Excise Tax) payment to Executive without such reduction. The reduction of theamounts payable hereunder, if applicable, shall be made by reducing first the payment made pursuant to the Agreement and then toany other agreement that triggers such Excise Tax, unless an alternative method of reduction is elected by Executive. Allmathematical determinations, and all determinations as to whether any of the Total Payments are “parachute payments” (within themeaning of Section 280G of the Code), that are required to be made under ARTICLE III, including determinations as to whether theTotal Payments to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be utilized in arriving at suchdeterminations, shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”). If theAccounting Firm determines that the Total Payments to Executive shall be reduced to the Safe Harbor Cap (the “Cutback Payment”)and it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which hasbeen finally and conclusively resolved, that the Cutback Payment is in excess of the limitations provided in this Section 7.12(hereinafter referred to as an “Excess Payment”), such Excess Payment shall be deemed for all purposes to be an overpayment toExecutive made on the date such Executive received the Excess Payment and Executive shall repay the Excess


Payment to the Company on demand; provided, however, if Executive shall be required to pay an Excise Tax by reason of receivingsuch Excess Payment (regardless of the obligation to repay the Company), Executive shall not be required to repay the ExcessPayment (if Executive has already repaid such amount, the Company shall refund the amount to the Executive), and the Companyshall pay Executive an amount equal to the difference between the Total Payments and the Safe Harbor Cap (provided that suchamount has previously been repaid by the Executive or not previously paid by the Company).

7.13. Section 409A and 457A Compliance. To the extent applicable, this Agreement is intended to meet the requirements ofSection 409A and 457A of the Code, and shall be interpreted and construed consistent with that intent. For purposes of thisAgreement, each payment under this Agreement shall be considered a “separate payment” and not as part of a series of paymentsfor purposes of Section 409A.

7.14. Clawback. Notwithstanding any provision in this Agreement to the contrary, any portion of the payments and benefitsprovided under this Agreement, as well as any other payments and benefits which the Executive receives pursuant to a Companyplan or other arrangement, shall be subject to a clawback to the extent necessary to comply with the requirements of the Dodd-FrankWall Street Reform and Consumer Protection Act or any Securities and Exchange Commission rule.

7.15. Legal Counsel. Executive acknowledges and warrants that (A) he has been advised that Executive’s interests may bedifferent from the Company’s interests, (B) he has been afforded a reasonable opportunity to review this Agreement, to understand itsterms and to discuss it with an attorney and/or financial advisor of his choice and (C) he knowingly and voluntarily entered into thisAgreement. The Company and Executive shall each bear their own costs and expenses in connection with the negotiation andexecution of this Agreement.

7.16. Counterparts, Effect of Facsimile, Emailed and Photocopied Signatures. This Agreement and any signed agreementor instrument entered into in connection with this Agreement, and any amendments hereto or thereto, may be executed in one ormore counterparts, all of which shall constitute one and the same instrument. Any such counterpart, to the extent delivered by meansof a facsimile machine or by .pdf, .tif, .gif, .peg or similar attachment to electronic mail (any such delivery, an “Electronic Delivery”)shall be treated in all manners and respects as an original executed counterpart and shall be considered to have the same bindinglegal effect as if it were the original signed version thereof delivered in person. At the request of any Party, each other Party shall reexecute the original form of this Agreement and deliver such form to all other Parties. No Party shall raise the use of ElectronicDelivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated throughthe use of Electronic Delivery as a defense to the formation of a contract, and each such Party forever waives any such defense,except to the extent such defense relates to lack of authenticity.

[Remainder of page left intentionally blank. Signature page follows]


This Agreement contains provisions requiring binding arbitration of disputes. By signing this Agreement, Executiveacknowledges that he (i) has read and understood the entire Agreement; (ii) has received a copy of it (iii) has had theopportunity to ask questions and consult counsel or other advisors about its terms; and (iv) agrees to be bound by it.

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

“COMPANY”VERTEX ENERGY, INC.a Nevada corporation By: /s/ Benjamin P. Cowart_Name: Benjamin P. CowartTitle: Chief Executive Officer

“EXECUTIVE”/s/ Chris Carlson_Chris Carlson


AT‑WILL EMPLOYMENT, CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT

AND ARBITRATION AGREEMENT

As a condition of my employment with Vertex Energy, Inc., a Nevada corporation, and/or any of its subsidiaries, affiliates,partners, successors or assigns (together the “Company”), and in consideration of my employment with the Company, ten dollars($10) and other good and valuable consideration, which I confirm receipt and sufficiency of, and my receipt of the compensation nowand hereafter paid to me by the Company, I (the “Employee”) agree to the following:

1. At-Will Employment.

I understand and acknowledge that, notwithstanding the terms of any employment agreement or understanding betweenmyself and the Company, my employment with the Company constitutes “at-will” employment. I also understand that anyrepresentation to the contrary is unauthorized and not valid unless obtained in writing and signed by an authorized corporaterepresentative of the Company. I acknowledge that this employment relationship may be terminated at any time, with or without goodcause or for any or no cause, at the option either of the Company or myself, with or without notice, pursuant to where applicable, theterms and provisions of any employment agreement or understanding between myself and the Company.

2. Confidential Information.

A. Company Information. I agree at all times during the term of my employment and thereafter, to holdin strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation withoutwritten authorization of the Board of Directors of the Company, any Confidential Information of the Company, except under a non-disclosure agreement duly authorized and executed by the Company. I understand that “Confidential Information” means any non-public information that relates to the actual or anticipated business or research and development of the Company, technical data,trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Company’sproducts or services and markets therefor, customer lists and customers (including, but not limited to, customers of the Company onwhom I called or with whom I became acquainted during the term of my employment), software, developments, inventions,processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or otherbusiness information. I further understand that Confidential Information does not include any of the foregoing items which havebecome publicly known and made generally available through no wrongful act of mine or of others who were under confidentialityobligations as to the item or items involved or improvements or new versions thereof.

B . Former Employer Information. I agree that I will not, during my employment with the Company,improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entityand that I will not bring onto the premises of the Company any unpublished document or proprietary information belonging to anysuch employer, person or entity unless consented to in writing by such employer, person or entity.

C . Third Party Information. I recognize that the Company has received and in the future will receive fromthird parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of suchinformation and to use it only for certain limited purposes. I agree to hold all such confidential or proprietary information in the strictestconfidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for theCompany consistent with the Company’s agreement with such third party.


3. Inventions.

A . Inventions Retained and Licensed. I have attached hereto, as Exhibit A, a list describing all inventions,original works of authorship, developments, improvements, and trade secrets which were made by me prior to my employment withthe Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to the Company’s proposed business,products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, Irepresent that there are no such Prior Inventions. If in the course of my employment with the Company, I incorporate into a Companyproduct, process or service a Prior Invention owned by me or in which I have an interest, I hereby grant to the Company anonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell suchPrior Invention as part of or in connection with such product, process or service, and to practice any method related thereto.

B . Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company, willhold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title, andinterest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries,ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely orjointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the entireperiod of time I am in the employ of the Company (whether before or after the execution of this Agreement) (collectively referred to as“Inventions”). I further acknowledge that all original works of authorship which are made by me (solely or jointly with others) withinthe scope of and during the period of my employment with the Company (whether before or after the execution of this Agreement)and which are protectible by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.Employee understands that this means that the Company will have the right to undertake any of the actions set forth in section 106 ofthe United States Copyright Act (17 U.S.C. § 106) with respect to such copyrightable works prepared by Employee within the scopeof Employee’s employment. Employee understands that this includes, without limitation, the right to sell, license, use, reproduce andhave reproduced, create derivative works of, distribute, display, transmit and otherwise commercially exploit such copyrightableworks by all means without further compensating the Employee. I understand and agree that the decision whether or not tocommercialize or market any invention developed by me solely or jointly with others is within the Company’s sole discretion and forthe Company’s sole benefit and that no royalty will be due to me as a result of the Company’s efforts to commercialize or market anysuch invention.

C . Assignment of Other Rights. In addition to the foregoing assignment of Inventions to the Company,Employee hereby irrevocably transfers and assigns to the Company: (i) all worldwide patents, patent applications, copyrights, maskworks, trade secrets and other intellectual property rights in any Assigned Inventions; and (ii) any and all “Moral Rights” (as definedbelow) that Employee may have in or with respect to any Inventions. Employee also hereby forever waives and agrees never toassert any and all Moral Rights Employee may have in or with respect to any Inventions, even after termination of Employee’s workon behalf of the Company. “Moral Rights” means any rights to claim authorship of any Inventions, to object to or prevent themodification of any Inventions, or to withdraw from circulation or control the publication or distribution of any Inventions, and anysimilar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not suchright is denominated or generally referred to as a “moral right”.

D. Inventions Assigned to the United States. I agree to assign to the United States government all my right,title, and interest in and to any and all Inventions whenever such full title is required to be in the United States by a contract betweenthe Company and the United States or any of its agencies.

E . Maintenance of Records. I agree to keep and maintain adequate and current written records of allInventions made by me (solely or jointly with others) during the term of my employment with the Company. The records will be in theform of notes, sketches, drawings, and any other


format that may be specified by the Company. The records will be available to and remain the sole property of the Company at alltimes.

F . Patent and Copyright Registrations. I agree to assist the Company, or its designee, at the Company’sexpense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, mask work rights orother intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinentinformation and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all otherinstruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and conveyto the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, andany copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation toexecute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the terminationof this Agreement. If the Company is unable because of my mental or physical incapacity or for any other reason to secure mysignature to apply for or to pursue any application for any United States or foreign patents or copyright registrations coveringInventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint theCompany and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to executeand file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent orcopyright registrations thereon with the same legal force and effect as if executed by me.

4 . Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage inany other employment, occupation or consulting directly related to the business in which the Company is now involved or becomesinvolved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.

5 . Returning Company Documents. I agree that, at the time of leaving the employ of the Company, I will deliver tothe Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes,reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents orproperty, or reproductions of any aforementioned items developed by me pursuant to my employment with the Company or otherwisebelonging to the Company, its successors or assigns, including, without limitation, those records maintained pursuant to Section 3.E.In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification” attached hereto asExhibit B.

6 . Notification of New Employer. In the event that I leave the employ of the Company, I hereby grant consent tonotification by the Company to my new employer about my rights and obligations under this Agreement.

7. Solicitation of Employees. I agree that for a period of twelve (12) months immediately following the termination ofmy relationship with the Company for any reason, whether with or without cause, I will not either directly or indirectly solicit, induce,recruit or encourage any of the Company’s employees to leave their employment or the Company’s customers to remove or reducetheir business with the Company, or take away such employees or customers, or attempt to solicit, induce, recruit, encourage or takeaway employees or customers of the Company, either for myself or for any other person or entity.

8 . Conflict of Interest Guidelines. I agree to diligently adhere to the Conflict of Interest Guidelines attached asExhibit C hereto.

9 . Representations. I agree to execute any proper oath or verify any proper document required to carry out theterms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep inconfidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I herebyrepresent and warrant that I have not entered into, and I will not enter into, any oral or written agreement in conflict herewith.


10. Arbitration and Equitable Relief.

A . Arbitration. In consideration of my employment with the Company, its promise to arbitrate allemployment-related disputes and my receipt of the compensation, pay raises and other benefits paid to me by the Company, atpresent and in the future, I agree that any and all controversies, claims, or disputes with anyone (including the Company and anyemployee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relatingto, or resulting from my employment with the Company or the termination of my employment with the Company, including any breachof this Agreement, will be subject to binding arbitration, to the fullest extent permitted by law. Disputes which I agree to arbitrate, andthereby agree to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to,claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination inEmployment Act of 1967, the Older Workers Benefit Protection Act, claims of harassment, discrimination or wrongful termination andany statutory claims. I further understand that this agreement to arbitrate also applies to any disputes that the Company may havewith me.

B . Procedure. I agree that any arbitration will be administered by the American Arbitration Association(“AAA”) and that the neutral arbitrator will be selected in a manner consistent with its national rules for the resolution of employmentdisputes. I agree that the arbitrator will have the power to decide any motions brought by any party to the arbitration, includingmotions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. I alsoagree that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicablelaw. I understand the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that I will paythe first $200.00 of any filing fees associated with any arbitration I initiate. I agree that the arbitrator will administer and conduct anyarbitration in a manner consistent with AAA’s national rules, to the extent that the AAA’s national rules for the resolution ofemployment disputes do not conflict with applicable law. I agree that the decision of the arbitrator will be in writing. Any procedure forremedying disputes as set forth in any employment agreement or understanding between myself and the Company shall supersedeand take precedence over the Procedure set forth in this Section 10.B.

C. Remedy. Except as provided by law and this Agreement (or provided for in any employment agreementor understanding between myself and the Company), arbitration will be the sole, exclusive and final remedy for any dispute betweenme and the Company. Accordingly, except as provided for by law and this Agreement, neither I nor the Company will be permitted topursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority todisregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policynot otherwise required by law which the Company has not adopted.

D . Availability of Injunctive Relief. In addition to any right under applicable law that the Company or I mayhave to petition a court of competent jurisdiction for provisional relief, I agree that any party may also petition the arbitrator forprovisional injunctive relief where either party alleges or claims a violation of the employment, confidential information, inventionassignment agreement between me and the Company or any other agreement regarding trade secrets, confidential information, ornon-solicitation. I understand that any breach or threatened breach of such an agreement will cause irreparable injury and that moneydamages will not provide an adequate remedy therefor and both parties hereby consent to the issuance of an injunction. In the eventeither party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys’ fees.

E . Administrative Relief. I understand that this Agreement does not prohibit me from pursuing anadministrative claim with a local, state or federal administrative body. This Agreement does, however, preclude me from pursuingcourt action regarding any such claim.

F. Voluntary Nature of Agreement. I acknowledge and agree that I am executing this Agreement voluntarilyand without any duress or undue influence by the Company or anyone


else. I further acknowledge and agree that I have carefully read this Agreement and that I have asked any questions needed for me tounderstand the terms, consequences and binding effect of this Agreement and fully understand it, including that I AM WAIVING MYRIGHT TO A JURY TRIAL. Finally, I agree that I have been provided an opportunity to seek the advice of an attorney of my choicebefore signing this Agreement.

11. General Provisions.

A . Governing Law, Consent to Personal Jurisdiction. This Agreement will be governed by the laws of theState of Texas. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Texas for any lawsuitfiled there against me by the Company arising from or relating to this Agreement.

B . Entire Agreement. This Agreement, along with my offer letter of employment (if any), employmentagreement or understanding, sets forth the entire agreement and understanding between the Company and me relating to the subjectmatter herein and supersedes all prior discussions or representations between us including, but not limited to, any representationsmade during my interview(s) or relocation negotiations, whether written or oral. No modification of or amendment to this Agreement,nor any waiver of any rights under this Agreement, will be effective unless in writing signed by an authorized officer of the Company(other than me) and me. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scopeof this Agreement. This Agreement prevails and supersedes in the event there is any inconsistency between this Agreement and anyother offer letter, unless the offer letter expressly provides otherwise. The terms of this Agreement shall supersede and amend,effective as of the date hereof, any prior At Will Employment, Confidential Information, Invention Assignment and ArbitrationAgreement entered into by the Employee in favor of the Company, provided that such prior At Will Employment, ConfidentialInformation, Invention Assignment and Arbitration Agreement shall continue to bind the Employee and be enforceable by theCompany against the Employee for all actions, events, occurrences and other matters between the date hereof through the date ofthis Agreement below. The terms of any employment agreement or understanding between myself and the Company shall prevailsand supersede, where and to the extent applicable, in the event there is any inconsistency between this Agreement and suchemployment agreement or understanding, unless the employment agreement or understanding expressly provides otherwise.

C . Severability. If one or more of the provisions in this Agreement are deemed void by law, then theremaining provisions will continue in full force and effect.

D . Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators andother legal representatives and will be for the benefit of the Company, its successors, and its assigns.

Date: August 7, 2015 /S/ Chris Carlson SignatureChris Carlson Name of Employee (typed orprinted)


EXHIBIT A

LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP

Title DateIdentifying Number or Brief Description

No inventions or improvements Additional Sheets Attached

Signature of Employee:

Print Name of Employee: Chris Carlson

Date:


EXHIBIT B

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports,proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property,or reproductions of any aforementioned items belonging to Vertex Energy, Inc., a Nevada corporation, and/or its subsidiaries,affiliates, partners, predecessors, successors or assigns (together, the “Company”).

I further certify that I have complied with all the terms of the Company’s At‑Will Employment, Confidential Information,Invention Assignment and Arbitration Agreement signed by me, including the reporting of any inventions and original works ofauthorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the At-Will Employment, Confidential Information, Invention Assignment, andArbitration Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary informationrelating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases,other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to anybusiness of the Company or any of its employees, clients, consultants or licensees.

I agree that for a period of twelve (12) months immediately following the termination of my relationship with the Company forany reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of theCompany’s employees to leave their employment or customers to remove or reduce their business with, or take away suchemployees or customers, or attempt to solicit, induce, recruit, encourage or take away employees or customers of the Company,either for myself or for any other person or entity.

Date:

(Employee’s Signature)

Chris Carlson (Type/Print Employee’s Name)


EXHIBIT C

CONFLICT OF INTEREST GUIDELINES

It is the policy of Vertex Energy, Inc., a Nevada corporation (the “Company”) to conduct its affairs in strict compliance withthe letter and spirit of the law and to adhere to the highest principles of business ethics. Accordingly, all officers, employees andindependent contractors must avoid activities which are in conflict, or give the appearance of being in conflict, with these principlesand with the interests of the Company. The following are potentially compromising situations which must be avoided. Any exceptionsmust be reported to an authorized officer of the Company (other than me) and written approval for continuation must be obtained.

1. Revealing confidential information to outsiders or misusing confidential information. Unauthorized divulging ofinformation is a violation of this policy whether or not for personal gain and whether or not harm to the Company is intended. (TheAt‑Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement elaborates on this principle and isbinding).

2. Accepting or offering substantial gifts, excessive entertainment, favors or payments which may be deemed to constituteundue influence or otherwise be improper or embarrassing to the Company.

3. Participating in civic or professional organizations that might involve divulging confidential information of the Company.

4. Initiating or approving personnel actions affecting reward or punishment of employees or applicants where there is afamily relationship or is or appears to be a personal or social involvement.

5. Initiating or approving any form of personal or social harassment of employees.

6. Investing or holding outside directorship in suppliers, customers, or competing companies, including financialspeculations, where such investment or directorship might influence in any manner a decision or course of action of the Company.

7. Borrowing from or lending to employees, customers or suppliers.

8. Acquiring real estate of interest to the Company.

9. Improperly using or disclosing to the Company any proprietary information or trade secrets of any former or concurrentemployer or other person or entity with whom obligations of confidentiality exist.

10. Unlawfully discussing prices, costs, customers, sales or markets with competing companies or their employees.

11. Making any unlawful agreement with distributors with respect to prices.

12. Improperly using or authorizing the use of any inventions which are the subject of patent claims of any other person orentity.

13. Engaging in any conduct which is not in the best interest of the Company.


Each officer, employee and independent contractor must take every necessary action to ensure compliance with theseguidelines and to bring problem areas to the attention of higher management for review. Violations of this conflict of interest policymay result in discharge without warning.


EXHIBIT 31.1

CERTIFICATION PURSUANT TOSECTION 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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented 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 ExchangeAct 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 madeknown 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of a Quarterly Report) that hasmaterially 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 financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing theequivalent 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 financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting.

Date: August 10, 2015 By: /s/ Benjamin P. Cowart Benjamin P. Cowart

Chief Executive Officer(Principal Executive Officer)


EXHIBIT 31.2

CERTIFICATION PURSUANT TOSECTION 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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented 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 ExchangeAct 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 madeknown 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of a Quarterly Report) that hasmaterially 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 financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing theequivalent 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 financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting.

Date: August 10, 2015 By: /s/ Chris Carlson Chris Carlson

Chief Financial Officer(Principal Accounting Officer)


EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SS. 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended June 30,2015, as filed with the Securities and Exchange Commission (the "Report"), I, Benjamin P. Cowart, Principal Executive Officer of theCompany, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to myknowledge:

(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 ofoperations of the Company.

Date: August 10, 2015 By: /s/ Benjamin P. Cowart Benjamin P. Cowart

Chief Executive Officer(Principal Executive Officer)


EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SS. 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

In connection with the Quarterly Report of Vertex Energy, Inc. (the "Company") on Form 10-Q for the period ended June 30,2015, as filed with the Securities and Exchange Commission (the "Report"), I, Chris Carlson, Principal Accounting Officer of theCompany, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to myknowledge:

(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 ofoperations of the Company.

Date: August 10, 2015 By: /s/ Chris Carlson Chris Carlson

Chief Financial Officer(Principal Accounting Officer)
