UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549








FORM
10-K




(Mark
One)




x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the fiscal year ended December 31, 2008





o 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: 000-51553




PLATINUM
ENERGY RESOURCES, INC.


(Exact
name of registrant as specified in its charter)




Delaware
              
              14-1928384(State
      or other jurisdiction of incorporation or
                organization)
              
              (I.R.S.
      Employer Identification No.)




11490
      Westheimer Road, Suite 1000Houston,
      Texas
                  77077(Address
      of principal executive offices)
                  (zip
      code)Registrant’s
      telephone number, including area code
                  (281)
      649-4500




Securities
registered pursuant to Section 12(b) of the Act:




None




Securities
registered pursuant to Section 12(g) of the Act:




Units,
each consisting of one share of common stock, par value


$0.0001
per share, and one warrant




Common
Stock, par value $0.0001 per share




Warrants





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.   YesoNox





Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.   Yeso    Nox





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yesx   Noo





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).    YesoNo o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this Chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o





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





Large accelerated
filero    Accelerated filero     Non-accelerated filer (Do not check
if a smaller reporting company)oSmaller reporting
companyx




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





As
of June 30, 2008, the aggregate market value of the registrant’s common stock
held by non-affiliates of the registrant was $19,208,052 based on the closing
price as reported on the OTC Bulletin Board.





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Class
              
              Outstanding
      at May 15, 2009Common
      Stock, $0.0001 par value per share
              
              24,068,675  shares












PagePART
      IItem
      1.
                Business.
                
                4Item
      1A.
                Risk
      Factors.
                
                8Item
      1B.
                Unresolved
      Staff Comments.
                
                16Item
      2.
                Properties.
                
                16Item
      3.
                Legal
      Proceedings.
                
                20Item
      4.
                Submission
      of Matters to a Vote of Security Holders.
                
                21PART
      IIItem
      5.
                Market For Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases
      of Equity
      Securities.
                
                22Item
      6.
                Selected
      Financial Data.Item
      7.
                Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations.
                
                22Item 7A.
                Quantitative and Qualitative
      Disclosures About Market Risk.Item
      8.
                Financial Statements and
      Supplementary Data.
                
                34Item
      9.
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
                
                34Item 9A(T).
                Controls and
      Procedures.
                
                34Item 9B.
                Other
      Information.PART
      IIIItem
      10.
                Directors, Executive Officers
      and Corporate Governance.
                
                35Item
      11.
                Executive
      Compensation.
                
                38Item
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                
                43Item
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence.
                
                46Item
      14.
                Principal Accounting Fees and
      Services.
                
                46PART
      IVItem
      15.
                Exhibits,
      Financial Statement Schedules.
                
                48





2




SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
report, including the sections entitled “Risk Factors,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and “Business,”
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements relate to future events or our future
financial performance and involve known and unknown risks, uncertainties and
other factors that may cause our, or our industry’s actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by the forward-looking statements. These risks and other factors include
those listed under “Risk Factors” and elsewhere in this report. In some cases,
you can identify forward-looking statements by terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” or the negative of these terms
or other comparable terminology. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you
should specifically consider various factors, including the risks outlined under
“Risk Factors.” These factors may cause our actual results to differ materially
from any forward-looking statement.





Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You are
cautioned not to place undue reliance on these forward looking statements, which
speak on as of the date of this annual report on Form 10-K. We do not
intend to publicly update any of the forward-looking statements contained in
this annual report on Form 10-K.





3





PART
I




Item 1.    Business.





Platinum
Energy Resources, Inc. (which we refer to as “we,” “us,” “Platinum” or the
“Company”) is an independent oil and gas exploration and production ("E&P")
company. We have approximately 37,000 acres under lease in relatively long-lived
fields with well-established production histories.  Our properties are
concentrated primarily in the Gulf Coast region in Texas, the Permian Basin in
Texas and New Mexico, and the Fort Worth Basin in Texas.





Our
principal business strategy is to provide long-term growth in stockholder value
by drilling, developing and exploiting our oil and gas properties. We believe
there exists opportunities to exploit mature fields that may have substantial
remaining reserves. As the major, large independent oil and gas companies
focus on more costly and risky international and offshore prospects, the smaller
independents, such as Platinum, have an opportunity to take advantage
of the significant reserves left behind.




Our
exploration and production activities commenced in October 2007 upon our
acquisition of significantly all of the assets and liabilities of Tandem Energy
Corporation (“TEC”) including 21,000 acres under lease in Texas and New
Mexico.  Subsequent to the TEC acquisition we have completed a series
of low risk strategic acquisitions adding an additional 16,000 lease acres to
our portfolio, that we believe will complement our business plan.




Our
strategy also calls for the use of hedge financing to maximize profit and reduce
risk resulting from volatile energy markets. We believe that there is a gap in
value between oil and gas reserves and the price of energy commodities and that
profit can be captured by buying oil and gas companies or reserves, and selling
the underlying oil and gas commodity.




In
addition we provide engineering and project management services to the oil and
gas industry and others, through our wholly owned subsidiary Maverick
Engineering Inc. (“Maverick”), which we acquired on April 29,
2008.  Following the consummation of this acquisition, we moved our
corporate headquarters to Maverick’s Houston office.




Business
Strategy





Platinum’s
long term strategy is to provide growth in stockholder value by drilling,
developing and exploiting our oil and gas properties.  The Company
maintains a large inventory of drilling and optimization projects to achieve
organic growth from its capital development program.  In general, we
seek to be the operator of wells in which we have a working interest. As
operator, we design and manage the development of a well and supervise operation
and maintenance activities on a day-to-day basis.   As of
December 31, 2008, we operated properties representing approximately
91 percent of our proved reserves. As the operator, we are able to better
control expenses, capital allocation, and the timing of exploitation and
development activities on our properties.   The number, types and
location of wells drilled varies depending on the Company’s capital budget, the
cost of each well, anticipated production and the estimated recoverable reserves
attributable to each well.





Due to
the recent downturn in the global economy as well as the dramatic decrease in
oil and natural gas prices, we have chosen to significantly reduce our capital
expenditures and drilling activity in 2009. Our goal in 2009 will be to keep our
exploration and development capital expenditures within our cash flow from
operations, while maintaining our estimated proved reserve base and production,
protecting against lease expirations and non-consent penalties, and continuing
to focus on cost control.





4





Corporate
History





We
were incorporated in Delaware on April 25, 2005 as a blank check company for the
purpose of effecting a business combination with an unidentified operating
business in the global oil and natural gas industry. On October 28, 2005, we
consummated our IPO of 14,400,000 units with each unit consisting of one share
of our common stock, $0.0001 per share, and one warrant to purchase one share of
common stock at an exercise price of $6.00 per share. The units were sold at an
offering price of $8.00 per unit, generating gross proceeds of $115,200,000. In
October 2007, the Company acquired substantially all of the assets and assumed
all of the liabilities of TEC described below. Prior to the TEC
transaction, the Company had no operations other than conducting an initial
public offering and seeking a business combination. Effective on April 29, 2008,
Platinum acquired Maverick, an engineering services company.





Drilling,
Exploration and Production Activities





Platinum’s
exploration efforts are focused on discovering new reserves by drilling and
completing wells under our existing leases, as well as leases we may acquire in
the future. The investment associated with drilling a well and future
development of our leasehold acreage depends principally upon whether any
problems are encountered in drilling the wells, whether the wells, in the case
of gas wells, can be timely connected to existing infrastructure or will require
additional investment in infrastructure, and, if applicable, the amount of water
encountered in the wells.





Due to
the recent downturn in the global economy as well as the dramatic decrease in
oil and natural gas prices, we have chosen to significantly reduce our capital
expenditures and drilling activity in 2009. Our goal in 2009 will be to keep our
exploration and development capital expenditures within our cash flow from
operations, while maintaining our estimated proved reserve base and production,
protecting against lease expirations and non-consent penalties, and continuing
to focus on cost control.





Title
to Properties





We
believe that the title to our leasehold properties is good and defensible in
accordance with standards generally acceptable in the oil and gas industry,
subject to exceptions that are not material as to detract substantially from the
use of the properties. Our leasehold properties are subject to royalty,
overriding royalty and other outstanding interests customary in the industry.
The properties may be subject to burdens such as liens incident to operating
agreements and taxes, development obligations under oil and gas leases, and
other encumbrances, easements and restrictions. We do not believe any of these
burdens will materially interfere with our use of these properties. For a
description of our oil and gas leasehold properties, see “Properties
- Current Oil and Gas Activities”.




As is
customary in the oil and gas industry, only a preliminary title examination is
conducted at the time properties believed to be suitable for drilling operations
are acquired. We rely upon oil and gas landmen to conduct the title examination.
We intend to perform necessary curative work with respect to any significant
defects in title prior to proceeding with drilling operations.





Competition





The oil
and natural gas business is highly competitive. We compete with private and
public companies in all facets of the oil and gas business, including suppliers
of energy and fuel to industrial, commercial and individual customers. Numerous
independent oil and gas companies, oil and gas syndicates and major oil and gas
companies actively seek out and bid for oil and gas prospects and properties as
well as for the services of third-party providers, such as drilling companies,
upon which we rely. Many of these companies not only explore for, produce and
market oil and gas, but also carry out refining operations and market the
resultant products on a worldwide basis. A substantial number of our competitors
have longer operating histories and substantially greater financial and
personnel resources than us.





Competitive
conditions may be substantially affected by various forms of energy legislation
and regulation considered from time to time by the government of the United
States and the states in which we have operations, as well as factors that we
cannot control, including international political conditions, overall levels of
supply and demand for oil and gas, and the markets for synthetic fuels and
alternative energy sources. Intense competition occurs with respect to
marketing, particularly of natural gas.





5





Regulatory
Matters





General. The availability of
a ready market for oil and gas production depends upon numerous factors beyond
our control. These factors include local, state, federal and international
regulation of oil and gas production and transportation, as well as regulations
governing environmental quality and pollution control, state limits on allowable
rates of production by a well or proration unit, the amount of oil and gas
available for sale, the availability of adequate pipeline and other
transportation and processing facilities, and the marketing of competitive
fuels. For example, in the case of gas wells, a productive well may be “shut-in”
because of an over-supply of gas or lack of an available pipeline in the areas
in which we may conduct operations. State and federal regulations are generally
intended to prevent waste of oil and gas, protect rights to produce oil and gas
between owners in a common reservoir, and control contamination of the
environment. Pipelines and gas plants are also subject to the jurisdiction of
various federal, state and local agencies that may affect the rates at which
they are able to process or transport gas from our properties.





Applicable
legislation is under constant review for amendment or expansion. These efforts
frequently result in an increase in the regulatory burden on companies in the
oil and gas industry and a consequent increase in the cost of doing business and
decrease in profitability. Numerous federal and state departments and agencies
issue rules and regulations imposing additional burdens on the oil and gas
industry that are often costly to comply with and carry substantial penalties
for non-compliance. Our production operations may be affected by changing tax
and other laws relating to the petroleum industry, constantly changing
administrative regulations and possible interruptions or termination by
government authorities.





Sales of Oil and Natural Gas.
Sales of any oil that we produce will be affected by the availability, terms and
costs of transportation. The rates, terms and conditions applicable to the
interstate transportation of oil by pipelines are regulated by the Federal
Energy Regulatory Commission (“FERC”) under the Interstate Commerce Act. FERC
has implemented a simplified and generally applicable ratemaking methodology for
interstate oil pipelines to fulfill the requirements of Title VIII of the Energy
Policy Act of 1992 comprised of an indexing system to establish ceilings on
interstate oil pipeline rates. FERC has announced several important
transportation-related policy statements and rule changes, including a statement
of policy and final rule issued February 25, 2000, concerning alternatives to
its traditional cost-of-serve rate-making methodology to establish the rates
interstate pipelines may charge for their services. The final rule revises
FERC’s pricing policy and current regulatory framework to improve the efficiency
of the market and further enhance competition in natural gas
markets.





Sales of
any natural gas that we produce will be affected by the availability, terms and
costs of transportation. The rates, terms and conditions applicable to the
interstate transportation of gas by pipelines are regulated by FERC under the
Natural Gas Acts, as well as under Section 311 of the Natural Gas Policy Act.
Since 1985, the FERC has implemented regulations intended to increase
competition within the gas industry by making gas transportation more accessible
to gas buyers and sellers on an open-access, non-discriminatory
basis.





Pipelines. Pipelines that we
use to gather and transport our oil and gas are subject to regulation by the
Department of Transportation (“DOT”) under the Hazardous Liquids Pipeline Safety
Act of 1979, as amended (“HLPSA”), relating to the design, installation,
testing, construction, operation, replacement and management of pipeline
facilities. The HLPSA requires pipeline operators to comply with regulations
issued pursuant to HLPSA designed to permit access to and allowing copying of
records and to make certain reports and provide information as required by the
Secretary of Transportation.





State Restrictions. State
regulatory authorities have established rules and regulations requiring permits
for drilling operations, drilling bonds and reports concerning operations. Many
states have statutes and regulations governing various environmental and
conservation matters, including the unitization or pooling of oil and gas
properties and establishment of maximum rates of production from oil and gas
wells, and restricting production to the market demand for oil and gas. Such
statutes and regulations may limit the rate at which oil and gas could otherwise
be produced from our properties.





6





Most
states impose a production or severance tax with respect to the production and
sale of crude oil, natural gas and natural gas liquids within their respective
jurisdictions. State production taxes are generally applied as a percentage of
production or sales. In addition, in the event we conduct operations on federal
or state oil and gas leases, such operations must comply with numerous
regulatory restrictions, including various nondiscrimination statutes, royalty
and related valuation requirements, and certain of such operations must be
conducted pursuant to certain on-site security regulations and other appropriate
permits issued by the Bureau of Land Management or the Minerals Management
Service or other appropriate federal or state agencies.





Other. Oil and gas rights may
be held by individuals and corporations, and, in certain circumstances, by
governments having jurisdiction over the area in which such rights are located.
As a general rule, parties holding such rights grant licenses or leases to third
parties, such as us, to facilitate the exploration and development of these
rights. The terms of the licenses and leases are generally established to
require timely development. Notwithstanding the ownership of oil and gas rights,
the government of the jurisdiction in which the rights are located generally
retains authority over the manner of development of those rights.




Environmental
Matters





General. Our activities are
subject to local, state and federal laws and regulations governing environmental
quality and pollution control in the United States. The exploration, drilling
and production from wells, natural gas facilities, including the operation and
construction of pipelines, plants and other facilities for transporting,
processing, treating or storing natural gas and other products, are subject to
stringent environmental regulation by state and federal authorities, including
the Environmental Protection Agency (“EPA”). Such regulation can increase our
cost of planning, designing, installing and operating such
facilities.




Significant
fines and penalties may be imposed for the failure to comply with environmental
laws and regulations. Some environmental laws provide for joint and several
strict liability for remediation of releases of hazardous substances, rendering
a person liable for environmental damage without regard to negligence or fault
on the part of such person. In addition, we may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to hazardous
substances, such as oil and gas related products.





Waste Disposal. We may
generate wastes, including hazardous wastes, that are subject to the federal
Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes.
The EPA has limited the disposal options for certain wastes that are designated
as hazardous under RCRA (“Hazardous Wastes”). Furthermore, it is possible that
certain wastes generated by our oil and gas operations that are currently exempt
from treatment as Hazardous Wastes may in the future be designated as Hazardous
Wastes, and therefore be subject to more rigorous and costly operating and
disposal requirements.





CERCLA. The federal
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
also known as the “Superfund” law, generally imposes joint and several liability
for costs of investigation and remediation and for natural resource damages,
without regard to fault or the legality of the original conduct, on certain
classes of persons with respect to the release into the environment of
substances designated under CERCLA as hazardous substances (“Hazardous
Substances”). These classes of persons or so-called potentially responsible
parties include the current and certain past owners and operators of a facility
where there is or has been a release or threat of release of a Hazardous
Substance and persons who disposed of or arranged for the disposal of the
Hazardous Substances found at such a facility. CERCLA also authorizes the EPA
and, in some cases, third parties to take action in response to threats to the
public health or the environment and to seek to recover from the potentially
responsible parties the costs of such action. Although CERCLA generally exempts
petroleum from the definition of Hazardous Substances, we may have generated and
may generate wastes that fall within CERCLA’s definition of Hazardous
Substances.





7





Air Emissions. Our operations
may be subject to local, state and federal regulations for the control of
emissions of air pollution. Major sources of air pollutants are subject to more
stringent, federally imposed permitting requirements, including additional
permits. Producing wells may generate volatile organic compounds and nitrogen
oxides. If ozone problems are not resolved by the deadlines imposed by the
federal Clean Air Act, or on schedule to meet the standards, even more
restrictive requirements may be imposed, including financial penalties based
upon the quantity of ozone producing emissions. If we fail to comply strictly
with applicable air pollution regulations or permits, we may be subject to
monetary fines and be required to correct any identified deficiencies.
Alternatively, regulatory agencies could require us to forego construction,
modification or operation of certain air emission sources.




Based on
an internal health, safety and environmental assessment of a majority of our
properties, we believe that we are in substantial compliance with current
applicable environmental laws and regulations and that, absent the occurrence of
an extraordinary event, compliance with existing local, state, federal and
international laws, rules and regulations governing the release of materials in
the environment or otherwise relating to the protection of the environment will
not have a material effect upon our business, financial condition or results of
operations. However, since environmental costs and liabilities are inherent in
our operations and in the operations of companies engaged in similar businesses
and since regulatory requirements frequently change and may become more
stringent, there can be no assurance that material costs and liabilities will
not be incurred in the future. Such costs may result in increased costs of
operations and acquisitions and decreased production.





Engineering
Activities





Maverick
provides engineering and construction services primarily for three types of
clients: (1) upstream oil and gas, domestic oil and gas producers and pipeline
companies; (2) industrial, petrochemical and refining plants; and (3)
infrastructure, private and public sectors, including state municipalities,
cities, and port authorities. Most of the Company’s work is performed under time
and material projects. In accordance with industry practice, substantially all
of our contracts are subject to cancellation or termination at the discretion of
the client. In a situation where a client terminates a contract, we would
ordinarily be entitled to receive payment for work performed up to the date of
termination and, in certain instances, we may be entitled to allowable
termination and cancellation costs.





Employees





At
December 31, 2008, we had 259 full-time employees, none of whom were
subject to a collective bargaining agreement.





Website
Address





The
Company maintains an internet website at www.platenergy.com.  The
Company makes available, free of charge, on its website, its annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports, as soon as reasonably practicable after providing
such reports to the SEC.  The information contained in or incorporated
into its website is not part of this report.




Item 1A.  Risk Factors.





We
are subject to a high degree of risk. You should consider the risks described
below carefully and all of the information contained in this report. If any of
these risks, as well as other risks and uncertainties that are not currently
known to us or that we currently believe are not material, actually occur, our
business, financial condition and results of operations may suffer
significantly.





8





Since TandemEnergy Holdings, Inc.was a publicly-traded shell corporation,
our acquisition of all of the assets and substantially all liabilities ofits operating subsidiarymay subject us to successor
liability for the shell corporation’s known and unknown
liabilities.





On
October 26, 2007, we acquired substantially all of the assets and assumed
substantially all of the liabilities of Tandem Energy Corporation, a Colorado
corporation (“Old TEC”), a wholly owned subsidiary of Tandem Energy Holdings,
Inc. (“TEHI”).  TEHI was originally incorporated in Nevada as Las
Vegas Major League Sports, Inc. (“LVMS”) on July 22, 1993 with the plan of
engaging in certain business activities associated with the Canadian Football
League. In April 1994, it completed an initial public offering and began trading
under the symbol LVTD. In 1996, LVMS filed for bankruptcy protection and ceased
being a reporting company and also ceased operations and was considered to be a
“shell” corporation. In 1998, LVMS changed its name to Pacific Medical Group,
Inc. (“Pacific Medical”) in connection with a share exchange transaction with a
privately-held company whose business plan was to engage in the manufacture and
sale of medical products. To our knowledge, that business was unsuccessful and,
again, the company ceased operations and was considered to be a “shell”
corporation. In February, 2005, Pacific Medical Group changed its name to Tandem
Energy Holdings, Inc. and changed its trading symbol to TDYH.PK. In June, 2005,
Old TEC became a wholly-owned subsidiary of TEHI.





The risks
and uncertainties that were involved in the acquisition of Old TEC include that
we may be deemed to be a successor to TEHI, Old TEC’s parent, and thus subject
to the existing liabilities, including undisclosed liabilities, of the prior
shell corporation arising out of its prior business operations, financial
activities and equity dealings.  There is also a risk of litigation by
third parties or governmental investigations or proceedings. These risks and
uncertainties are generally greater when a corporation is used as a shell
vehicle more than once.





In
addition, TEHI was unable to locate corporate records and other material
agreements and documents relating to itself and its predecessors in name, LVTD
and Pacific Medical, for periods prior to mid-March 2005.   As a
result, no assurance can be given that successor liability claims will
not be made that actions taken by TEHI or its predecessors in name were
without proper corporate authorization.  Furthermore, no assurance can
be given that additional shares had not been issued by TEHI’s predecessors in
name and that therefore TEHI capitalization at the time of the acquisition was
accurate.  TEHI has been informed of a claim of ownership of 2.7
million shares of TEHI common stock.  These shares were not included
in the outstanding shares of TEHI at the time of the TEC acquisition and
are the subject of outstanding litigation against TEHI.  Such claim
could result in a successor liability claim against us.





The
volatility of oil and natural gas prices due to factors beyond our control
greatly affects our profitability.




Our
revenues, operating results, profitability, future rate of growth and the
carrying value of our oil and natural gas properties depend primarily upon the
prevailing prices for oil and natural gas. Historically, oil and natural gas
prices have been volatile and are subject to fluctuations in response to changes
in supply and demand, market uncertainty and a variety of additional factors
that are beyond our control. Any significant decline in the price of oil and
natural gas or any other unfavorable market conditions could have a material
adverse effect on our operations, financial condition and level of expenditures
for the development of our oil and natural gas reserves, and may result in write
downs of our investments as a result of our use of the full cost accounting
method.





Prices
for natural gas and crude oil fluctuate widely. These fluctuations in oil and
natural gas prices may result from relatively minor changes in the supply of and
demand for oil and natural gas, market uncertainty and other factors that are
beyond our control, including:





·
            worldwide
      and domestic supplies of oil and natural
gas;





·
            weather
      conditions;





·
            the
      level of consumer demand;





9





·
            the
      price and availability of alternative
fuels;





·
            the
      availability of drilling rigs and completion
  equipment;





·
            the
      proximity to, and capacity of transportation
  facilities;





·
            the
      price and level of foreign imports;





·
            the
      nature and extent of domestic and foreign governmental regulation and
      taxation;





·
            the
      ability of the members of the Organization of Petroleum Exporting
      Countries to agree to and maintain oil price and production
      controls;




·
            worldwide
      economic and political conditions;





·
            the
      effect of worldwide energy conservation
  measures;





·
            political
      instability or armed conflict in oil-producing regions;
  and





·
            the
      overall economic environment.





These
factors and the volatility of the energy markets make it extremely difficult to
predict future oil and natural gas price movements with any certainty. Declines
in oil and natural gas prices would not only reduce revenue, but could reduce
the amount of oil and natural gas that we can produce economically and, as a
result, could have a material adverse effect on our financial condition, results
of operations and reserves.





Oil and natural gas prices
could decline to a point where it would be uneconomic for us to sell our oil and
gas at those prices, which could result in a decision to shut in production
until the prices increase.





Our oil
and natural gas properties will become uneconomic when oil and natural prices
decline to the point at which our revenues are insufficient to recover our
lifting costs. For example, in 2008, our average lifting costs were
approximately $33.54 per Boe. A market price decline below our lifting costs
would result in our having to shut in certain production until prices
increase.





Hedging
activities may prevent us from benefiting from price increases and may expose us
to other risks.





Hedging
is a strategy that can help a company to mitigate the volatility of oil and gas
prices by limiting its losses if oil and gas prices decline; however, this
strategy may also limit the potential gains that a company could realize if oil
and gas prices increase. From time to time, we use derivative instruments
(primarily collars and price swaps) to hedge the impact of market fluctuations
on natural gas and crude oil prices and net income and cash flow. To the extent
that we engage in hedging activities, we may be prevented from realizing the
benefits of price increases above the levels of the hedges. Hedging activities
are subject to risks associated with differences in prices at different
locations, particularly where transportation constraints restrict a producer’s
ability to deliver oil and gas volumes to the delivery point to which the
hedging transaction is indexed. Additionally, hedging strategies are normally
more effective with companies with a certain volume of production, and our
current oil production levels may not be sufficient to be able to employ a
meaningful hedging strategy.





10





Our
ability to sell crude oil and natural gas production could be materially harmed
by failure to obtain adequate services such as transportation and
processing.





The sale
of crude oil and natural gas production depends on a number of factors beyond
our control, including the availability, proximity and capacity of pipelines,
natural gas gathering systems and processing facilities. Any significant change
in market factors affecting these infrastructure facilities or our failure to
obtain these services on acceptable terms could materially harm our business. We
deliver crude oil and natural gas through gathering systems and pipelines that
we do not own. These facilities may be temporarily unavailable due to market
conditions or mechanical reasons or may become unavailable in the
future.





Our
proved reserves will generally decline as reserves are produced and as such,
success will depend on acquiring or finding additional reserves.





Our
future success depends upon our ability to find, develop or acquire additional
oil and natural gas reserves that are economically recoverable. According to
reports of proved reserves prepared as of December 31, 2008 by Williamson
Petroleum Consultants Inc., independent petroleum consultants, and by our own
engineers, our proved reserves will decline at a significant rate as reserves
are produced and, except to the extent that we conduct successful exploration or
development activities or acquire properties containing proved reserves, or
both, such reserves will continue to decline. To increase reserves and
production, we must commence drilling, workover or acquisition activities. There
can be no assurance, however, that we will have sufficient resources to
undertake these actions, that our drilling and workover projects or other
replacement activities will result in significant additional reserves or that we
will have success drilling productive wells at low finding and development
costs. Furthermore, although our revenues may increase if prevailing oil and
natural gas prices increase significantly, our finding costs for additional
reserves may also increase.




Approximately 64%
of our proved reserves are classified as proved
undeveloped.





Approximately
64% of our reserves are classified as proved undeveloped reserves. The future
development of these undeveloped reserves into proved developed reserves is
highly dependent upon our ability to fund estimated total capital development
cost of approximately $26.4 million, of which $0, $15 million and $11 million
are expected to be incurred in 2009, 2010 and 2011, respectively. If such
development costs are not incurred or are substantially reduced, our proved
undeveloped and total proved reserves could be substantially reduced. The
reduction in such reserves could have a materially negative impact on our
ability to produce profitable future operations. The successful conversion of
these proved undeveloped reserves into proved developed reserves is dependent
upon the following:





·
            The
      funding of the estimated proved undeveloped capital development costs is
      highly dependent upon our ability to generate sufficient working capital
      through operating cash flows, and our ability to borrow funds and/or raise
      equity capital.





·
            Our
      ability to generate sufficient operating cash flows is highly dependent
      upon successful and profitable future operations and cash flows which
      could be negatively impacted by fluctuating oil and gas prices and
      increased operating costs. No assurance can be given that we will have
      successful and profitable future operations and positive future cash
      flows.





·
            Our
      ability to borrow funds in the future is dependent upon the terms of
      future loan agreements, borrowing base calculations and other lending and
      operating conditions. No assurance can be given that we will be able to
      secure future borrowings at competitive borrowing rates and conditions, if
      at all.








11





·
            Projections
      for proved undeveloped reserves are largely based on their analogy to
      similar producing properties and to volumetric calculations. Reserves
      projections based on analogy are subject to change due to subsequent
      changes in the analogous properties. Volumetric calculations are often
      based upon limited log and/or core analysis data and incomplete reservoir
      fluid and formation rock data. Since these limited data must frequently be
      extrapolated over an assumed drainage area, subsequent production
      performance trends or material balance calculations may cause the need for
      significant revisions to the estimates of
  reserves.





Estimates
of oil and natural gas depend on many assumptions that may vary substantially
from actual production.





There are
numerous uncertainties inherent in estimating quantities of proved reserves and
in projecting future rates of production and timing of expenditures, including
many factors beyond our control. The reserve information relating to proved
reserves set forth in this report represents only estimates based on reports of
proved reserves prepared as of December 31, 2008 by Williamson Petroleum
Consultants, independent petroleum engineers, and by our own engineers.
Williamson Petroleum Consultants was not engaged to evaluate and prepare reports
relating to the probable reserves on our properties and interests as these are
more uncertain than evaluations of proved reserves. Petroleum engineering is not
an exact science. Information relating to our proved oil and natural gas
reserves is based upon engineering estimates. Estimating quantities of proved
crude oil and natural gas reserves is a complex process. It requires
interpretations of available technical data and various assumptions, including
assumptions relating to economic factors. Any significant inaccuracies in these
interpretations or assumptions or changes of conditions could cause the
quantities of our reserves to be overstated.





To
prepare estimates of economically recoverable crude oil and natural gas reserves
and future net cash flows, engineers analyze many variable factors, such as
historical production from the area compared with production rates from other
producing areas. It is also necessary to analyze available geological,
geophysical, production and engineering data, and the extent, quality and
reliability of this data can vary. The process also involves economic
assumptions relating to commodity prices, production costs, severance and excise
taxes, capital expenditures and workover and remedial costs. For these reasons,
estimates of the economically recoverable quantities of oil and natural gas
attributable to any particular group of properties, classifications of such
reserves based on risk of recovery and estimates of the future net cash flows
expected there from prepared by different engineers or by the same engineers at
different times may vary substantially. Actual production, revenues and
expenditures with respect to our reserves will likely vary from estimates, and
such variations may be material.




Our
operations entail inherent casualty risks which may not be covered by adequate
insurance.





We must
continually acquire, explore and develop new oil and natural gas reserves to
replace those produced and sold. Our hydrocarbon reserves and revenues will
decline if we are not successful in our drilling, acquisition or exploration
activities. We hope to maintain our reserve base primarily through successful
exploration and production operations, but we may not be successful in this
regard. Casualty risks and other operating risks could cause reserves and
revenues to decline.





Although
many of our properties are located across Texas and southeast New Mexico and are
not confined to one geographic area, our Tomball field, the largest producer in
our current portfolio, and much of our Maverick business are located in the Gulf
Coast region of Texas, an area that may be subject to catastrophic weather and
natural disasters such as floods, earthquakes and hurricanes. If such disaster
were to occur, it could severely disrupt our operations in that area and results
of operations could be materially and adversely affected.  Our
operations are subject to inherent casualty risks such as fires, blowouts,
cratering and explosions. Other risks include pollution, the uncontrollable
flows of oil, natural gas, brine or well fluids. These risks may result in
injury or loss of life, suspension of operations, environmental damage or
property and equipment damage, all of which would cause us to experience
substantial financial loss.





12





Our
drilling operations involve risks from high pressures and from mechanical
difficulties such as stuck pipes, collapsed casings and separated cables. In
accordance with customary industry practice, we maintain insurance against some,
but not all, of these risks. There can be no assurance that any insurance will
be adequate to cover any losses or liabilities. We cannot predict the continued
availability of insurance, or its availability at premium levels that justify
its purchase. In addition, we may be liable for environmental damages caused by
previous owners of properties that we purchased, which liabilities would not be
covered by our insurance. We are currently unaware of any material liability we
may have for environmental damages caused by previous owners of properties
purchased by us.





Many
of our wells produce at very low production rates while producing waste water
many times that rate.





Many of
our wells produce at production rates as low as one Boe per day and produce
waste water at many times the rate of production. Even a modest decrease in oil
and gas prices may render these wells uneconomic to produce, when compared to
wells which produce at higher rates. Consequently, these uneconomic wells could
cause a downward revision in our oil and gas reserves.





Our
operations also entail significant operating risks.





Our
drilling activities involve risks, such as drilling non-productive wells or dry
holes, which are beyond our control. The cost of drilling and operating wells
and of installing production facilities and pipelines is uncertain. Cost
overruns are common risks that often make a project uneconomical. The decision
to purchase and to exploit a property depends on the evaluations made by reserve
engineers, the results of which are often inconclusive or subject to multiple
interpretations. We may also decide to reduce or cease its drilling operations
due to title problems, weather conditions, noncompliance with governmental
requirements or shortages and delays in the delivery or availability of
equipment or fabrication yards.





Our
operations are subject to various governmental regulations that require
compliance that can be burdensome and expensive.





Our oil
and natural gas operations are subject to extensive federal, state and local
governmental regulations that may be changed from time to time in response to
economic and political conditions. Matters subject to regulation relate to the
general population’s health and safety and are associated with compliance and
permitting obligations including regulations related to discharge from drilling
operations, use, storage, handling, emission and disposal, drilling bonds,
reports concerning operations, the spacing of wells, unitization and pooling of
properties and taxation. From time to time, regulatory agencies have imposed
price controls and limitations on production by restricting the rate of flow of
oil and natural gas wells below actual production capacity to conserve supplies
of oil and natural gas. In addition, the production, handling, storage,
transportation and disposal of oil and natural gas, by-products thereof and
other substances and materials produced or used in connection with oil and
natural gas operations are subject to regulation under federal, state and local
laws and regulations primarily relating to protection of human health and the
environment. These laws and regulations have continually imposed increasingly
strict requirements for water and air pollution control and solid waste
management, and compliance with these laws may cause delays in the additional
drilling and development of our properties. Significant expenditures may be
required to comply with governmental laws and regulations applicable to us. We
believe the trend of more expansive and stricter environmental legislation and
regulations will continue. While, historically, we have not experienced any
material adverse effect from regulatory delays, there can be no assurance that
such delays will not occur for us in the future.





Price
declines have resulted in and may in the future result in write-downs of our
asset carrying values.





Commodity
prices have a significant impact on the present value of our proved
reserves.  Recent declines in oil and gas prices have resulted in
material downward revisions in the estimated present value of our proved
reserves.  Accounting rules require us to write down, as a non-cash
charge to earnings, the carrying value of our oil and gas properties for
impairments.  We are required to perform impairment tests on our
assets periodically and whenever events or changes in circumstances warrant a
review of our assets.  To the extent such tests indicate a reduction
of the estimated useful life or estimated future cash flows of our assets, the
carrying value may not be recoverable and therefore requires a
write-down.  We recorded impairments of property and equipment
totaling $131.8 million in 2008 and we may incur impairment charges in the
future, which could have a material adverse effect on our results of operations
in the period incurred.





13





Our method of
accounting for investments in oil and natural gas properties may result in
impairment of asset value, which could affect our stockholder equity and net
profit or loss.





We follow
the full cost method of accounting for our crude oil and natural gas properties.
Under this method, all direct costs and certain directly related internal costs
associated with acquisition of properties and successful, as well as
unsuccessful, exploration and development activities are capitalized.
Depreciation, depletion and amortization of capitalized crude oil and natural
gas properties and estimated future development costs, excluding unproved
properties, are based on the unit-of-production method based on proved developed
reserves. Net capitalized costs of crude and natural gas properties, as adjusted
for asset retirement obligations, net of salvage value, are limited, by country,
to the lower of unamortized cost or the cost ceiling, defined as the sum of the
present value of estimated future net revenues from proved reserves based on
unescalated prices discounted at 10%, plus the cost of properties not being
amortized, if any, plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any, less related income
taxes. Excess costs are charged to proved property impairment expense. No gain
or loss is recognized upon sale or disposition of crude oil and natural gas
properties, except in unusual circumstances.




Properties
that we acquire may not produce as projected, and we may be unable to identify
liabilities associated with the properties or obtain protection from sellers
against them.





As part
of our business strategy, we continually seek acquisitions of oil and gas
properties. The successful acquisition of oil and natural gas properties
requires assessment of many factors, which are inherently inexact and may be
inaccurate, including the following:





·
            future
      oil and natural gas prices;





·
            the
      amount of recoverable reserves;





·
            future
      operating costs;





·
            future
      development costs;





·
            failure
      of titles to properties;





·
            costs
      and timing of plugging and abandoning wells;
and





·
            potential
      environmental and other
liabilities.





Our
assessment will not necessarily reveal all existing or potential problems, nor
will it permit us to become familiar enough with the properties to assess fully
their capabilities and deficiencies. With respect to properties on which there
is current production, we may not inspect every well location, every potential
well location, or pipeline in the course of our due diligence. Inspections may
not reveal structural and environmental problems such as pipeline corrosion or
groundwater contamination. We may not be able to obtain or recover on
contractual indemnities from the seller for liabilities that it created. We may
be required to assume the risk of the physical condition of the properties in
addition to the risk that the properties may not perform in accordance with our
expectations.


14




Oil
and gas drilling and producing operations can be hazardous and may expose us to
environmental liabilities.





Our oil
and gas operations will subject us to many risks, including well blowouts,
cratering and explosions, pipe failure, fires, formations with abnormal
pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and
other environmental hazards and risks. If any of these risks occur, we could
sustain substantial losses as a result of:





·
            injury
      or loss of life;





·
            severe
      damage to or destruction of property, natural resources and
      equipment;




·
            pollution
      or other environmental damage;





·
            clean-up
      responsibilities;





·
            regulatory
      investigations and penalties; and





·
            Suspension
      of operations.





Our
liability for environmental hazards could include those created either by the
previous owners of properties that we purchase or lease or by acquired companies
prior to the date we acquire them. We expect to maintain insurance against some,
but not all, of the risks described above. Our insurance may not be adequate to
cover casualty losses or liabilities. Also, we may not be able to obtain
insurance at premium levels that justify its purchase.





We
recently experienced a significant change in our senior management, including
the replacement of our Chief Executive Officer, and in the composition of our
board of directors. The new senior management and Board members will need to
integrate themselves into, and effectively manage, our business, including any
new strategies they may adopt.





On March
2, 2009, Al Rahmani was appointed our Interim Chief Executive Officer following
the removal of Barry Kostiner who had been our Chief Executive Officer since our
inception in 2005.  On March 2, 2009, our Bylaws were amended to
remove executive power previously granted to Tim Culp, our Chairman of the
Board.   On February 26, 2009, Norman Rosenberg, a member of our
board of directors resigned.  On February 18, 2009, three new board
members, Al Rahmani, William Blain and Roderick McLennan, were appointed to our
board of directors.  On December 3, 2008, Robert Kovar, the Company’s
former Chief Operating Officer, resigned.  Also on October 23, 2008,
Lisa Meier, our Chief Financial Officer, Treasurer and Secretary, delivered to
us a communication indicating her intention to resign her employment although on
November 13, 2008 Ms. Meier delivered to us a subsequent communication
indicating her election to remain in her current positions.





The
failure of our new senior management and directors to perform effectively could
have a significant negative impact on our business, financial condition and
results of operations.  In addition, our new senior management may
institute strategies that differ from those we are applying currently. If any
new strategies are adopted, it may take management and employees a significant
amount of time to fully implement such new strategies. If any new strategies are
unsuccessful or if we are unable to execute them successfully, there could be a
significant negative impact on our business, financial condition, and results of
operations.





Terrorist
activities and military and other actions could adversely affect our
business.





Terrorist
attacks and the threat of terrorist attacks, whether domestic or foreign, as
well as the military or other actions taken in response to these acts, cause
instability in the global financial and energy markets. The United States
government has issued public warnings that indicate that energy assets might be
specific targets of terrorist organizations. These actions could adversely
affect us, in unpredictable ways, including the disruption of fuel supplies and
markets, increased volatility in crude oil and natural gas prices, or the
possibility that the infrastructure on which we rely could be a direct target or
an indirect casualty of an act of terror.





15




Maverick,
our wholly owned subsidiary, is dependent upon a small number of customers for a
large portion of its net revenues, and a decline in sales to its major customers
could harm Maverick's results of operations.





During
2008, Maverick’s six largest customers, accounted for approximately 71% of net
revenues attributable to the engineering division excluding intercompany
revenues.  Maverick's customer concentration could increase or
decrease depending on future customer requirements, which will depend in large
part on business conditions in the market sectors in which Maverick's customers
participate. The loss of one or more major customers or a decline in sales to
Maverick’s major customers could significantly harm Maverick's business and
results of operations. If Maverick is not able to expand its customer base, it
will continue to depend upon a small number of customers for a significant
percentage of its sales. There can be no assurance that its current customers
will not reduce the amount of services for which Maverick is retained or
otherwise terminate their relationship with Maverick.




Item 1B.  Unresolved Staff
Comments.





Not
applicable.




Item 2.    Properties.




Platinum’s
principal executive offices are located at 11490 Westheimer Road, Suite 1000
Houston, Texas 77077.   We also maintain division offices in
Midland, Victoria, Corpus Christi and Yoakum, Texas.





Current
Oil and Gas Activities





We own
core producing and non-producing oil and natural gas properties in Texas and New
Mexico.  The following is a summary of our major operating
areas.





Tomball Field. We own an
interest in, and are operator of, oil and natural gas properties in the Tomball
Field, which is located in Harris County, Texas, and is approximately 30 miles
northwest of Houston, Texas. The Tomball Field contains multiple productive
formations ranging in depth from 1,000 to 9,000 feet, including the Yegua,
Cockfield, and Wilcox. Current operations consist of 19 producing wells and 6
water disposal wells. At December 31, 2008, we held 7,000 acres and had an
inventory of 3 proved undeveloped locations in the Tomball Field. We own a 100%
working interest and net revenue interests ranging from 84.5% to 87.5%. TEC
began operating the Tomball field in 1996, but it has been producing
continuously since 1930. The current daily net production from the field is
approximately 307 Bbls of oil and 452 Mcf of gas per day. The field is also
producing approximately 19,000 Bbls of water per day.




Ira Field. We own an interest
in, and are operator of, an oil production unit in the Ira Field, which is
located in Scurry County, Texas, and is approximately 75 miles northeast of
Midland, Texas. The Ira Field production is from the San Andres formation at
approximately 1,800 feet. Current operations consist of 150 producing wells and
75 water injection wells. At December 31, 2008, we held 3,600 acres and had an
inventory of 76 proved undeveloped locations in the Ira Field. We own an 88%
working interest and 72% net revenue interest. TEC, through it predecessor in
interest, began operating the IRA Field in 2004, but it has been producing
continuously since 1955. The current daily net production from the field is
approximately 128 Bbls of oil per day. The field is also producing approximately
3,000 Bbls of water per day.





16




Ball Field. We own an
interest in, and are operator of, oil and natural gas properties in the Ball
Field, which is located in Palo Pinto County, Texas, and is approximately 75
miles west of Fort Worth, Texas. The Ball Field contains multiple productive
formations ranging in depth from 3,000 to 3,800 feet, including the Big Saline,
Duffer, and Barnett Shale. Current operations consist of 17 producing wells and
1 water disposal well. At December 31, 2008, we held 4,900 acres and had an
inventory of 17 proved undeveloped locations in the Ball Field. We own working
interests ranging from 50% to 100%, and net revenue interests ranging from 40.3%
to 87.5%. TEC began operating the Ball Field in 1993, but it has been producing
continuously since 1930. The current daily net production from the field is
approximately 1 Bbl of oil and 428 Mcf of gas per day. The field is also
producing approximately 450 Bbls of water per day.   On December 28, 2007
we acquired an additional 50% working interest in the Barnett Shale acreage for
approximately $920,000. This acquisition increased our net acreage position by
2,300 net acres and gave us a 100% working interest in the Barnett. We have
completed a 3 D seismic program and plan to begin a horizontal drilling program
in the Barnett as soon as the economic climate improves.





Ballard Field. We own an
interest in, and are operator of, an oil production unit in the Ballard Field,
which is located in Eddy County, New Mexico, and is approximately 150 miles
northwest of Midland, Texas. The Ballard Field contains multiple productive
formations ranging in depth from 2,000 to 3,000 feet, including the Yates,
Grayburg, and San Andres. Current operations consist of 46 producing wells and
26 water injection wells. During 2008 we drilled and completed 6 proved
undeveloped locations.  All 6 wells are currently
producing.  At December 31, 2008, we held approximately 3,000 net
acres. We own an 86% working interest and 78.7% net revenue interest. TEC,
through its predecessor in interest, began operating the Ballard Field in 2004,
but it has been producing continuously since 1965. The current daily net
production from the field is approximately 101 Bbls of oil and 55 Mcf of gas per
day. The field is also producing approximately 1,300 Bbls of water per
day.





USM Field. We own an interest
in, and are operator of, oil and natural gas properties in the USM Field, which
is located in Pecos County, Texas, and is approximately 120 miles southwest of
Midland, Texas. The USM Field production is from the Yates and Queen formations
at approximately 3,200 feet. Current operations consist of 54 producing wells
and 4 water disposal wells. During 2008 we drilled and completed 4 proved
undeveloped locations.  All 4 wells are currently
producing.  At December 31, 2008, we held approximately 3,000 net
acres in the field. We own working interests ranging from 90% to 100%, and net
revenue interests ranging from 79.3% to 89.6%. TEC, through its predecessor in
interest, began operating the USM Field in 2004, but it has been producing
continuously since 1985. The current daily net production from the field is
approximately 60 Bbls of oil and 116 Mcf of gas per day. The field is also
producing approximately 150 Bbls of water per day.





Choate Field. We own an
interest in, and are operator of, oil and natural gas properties in the Choate
Field, which is located in Hardin County, Texas, and is approximately 35 miles
northwest of Beaumont, Texas. The Choate Field production is from sand lenses
flanking a salt dome ranging in depth from 1,000 to 2,500 feet. Current
operations consist of 23 producing wells. During 2008, we drilled 11 proved
undeveloped locations, 9 of which were successful and are currently
producing.  At December 31, 2008, we held 50 acres and had an
inventory of 6 proved undeveloped locations in the Choate Field. We own a 75%
working interest and 57% net revenue interest. TEC, through its predecessor in
interest, began operating the Choate Field in 2004, but it has been producing
continuously since 1960. The current daily net production from the field is
approximately 84 Bbls of oil per day. The field is also producing approximately
180 Bbls of water per day.




Lothian Properties. In
December 2007 we purchased, for $6.2 million plus customary closing adjustments,
approximately 200 producing wells from Lothian Oil and Gas, Inc. The Lothian
assets acquired consist of oil and gas properties located in Chavez, Lea and
Eddy counties, New Mexico and are adjacent to or near our Ballard Field. The
current net production is approximately 98 Bbls of oil and 119 Mcf of gas per
day.





Other. We own numerous small
mineral, royalty and non-operated working interests in various oil and natural
gas properties located in Texas, New Mexico, Louisiana, Montana, and North
Dakota.




Below is
a map indicating the locations of the Company’s significant operated properties
in Texas and New Mexico.





17










Proved
Reserves




As of
December 31, 2008, we had 5.0 million Boe of proved oil and natural gas
reserves, including 2.3 million barrels of oil and 16.0 million Mcf of natural
gas.  Using prices as of December 31, 2008, the estimated standardized
measure of discounted future net cash flows was $44.3 million.  The
following table sets forth a summary of our estimated net proved reserve
information as of December 31, 2008:





Proved
                    Developed
                    Producing
                  
                  
                  Proved
                    Developed
                    Non-
                    producing
                  
                  
                  Proved
                    Undeveloped
                  
                  
                  Total ProvedCrude
      oil (MBbl)
                  
                  
                  865
                  
                  
                  
                  51
                  
                  
                  
                  1,394
                  
                  
                  
                  2,310Natural
      gas (MMcf)
                  
                  
                  4,564
                  
                  
                  
                  769
                  
                  
                  
                  10,709
                  
                  
                  
                  16,042Barrel
      of oil equivalent (MBoe)
                  
                  
                  1,626
                  
                  
                  
                  179
                  
                  
                  
                  3,178
                  
                  
                  
                  4,983Undiscounted
      future net revenue  (before CapEx)
                  
                  $
                  23,058
                  
                  
                  $
                  4,073
                  
                  
                  $
                  87,109
                  
                  
                  $
                  114,240Estimated
      future capital expenditures
                  
                  
                  -
                  
                  
                  $
                  353
                  
                  
                  $
                  26,043
                  
                  
                  $
                  26,396Undiscounted
      future net revenue (net of CapEx)
                  
                  $
                  23,058
                  
                  
                  $
                  3,720
                  
                  
                  $
                  61,066
                  
                  
                  $
                  87,844Discounted
      future netRevenue
      (net of CapEx)
                  
                  $
                  15,559
                  
                  
                  $
                  1,994
                  
                  
                  $
                  26,793
                  
                  
                  $
                  44,346





18





A summary
of the total proved reserves by major field as of December 31, 2008 is as
follows (in thousands):





Proved
                                                      Producing
                                                    
                                                    Proved
      Non
                                                      Producing
                                                    
                                                    Proved
                                                      Undeveloped
                                                    
                                                    Total
      Proved
                                                      ReservesOil
                                                      (MBbls)
                                                    
                                                    Gas
                                                      (MMcf)
                                                    
                                                    Oil
                                                      (MBbls)
                                                    
                                                    Gas
                                                      (Mmcf)
                                                    
                                                    Oil
                                                      (MBbls)
                                                    
                                                    Gas
                                                      (Mmcf)
                                                    
                                                    Oil
                                                      (MBbls)
                                                    
                                                    Gas
                                                      (MMcf)Tomball
                                                    
                                                    
                                                    343
                                                    
                                                    2,029
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    7,873
                                                    
                                                    
                                                    343
                                                    
                                                    9,902Ira
                                                    
                                                    
                                                    139
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    1,369
                                                    
                                                    0
                                                    
                                                    
                                                    1,508
                                                    
                                                    0Ballard
                                                    
                                                    
                                                    122
                                                    
                                                    77
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    122
                                                    
                                                    77USM
                                                    
                                                    
                                                    40
                                                    
                                                    77
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    25
                                                    
                                                    51
                                                    
                                                    
                                                    65
                                                    
                                                    128Ball
                                                    
                                                    
                                                    0
                                                    
                                                    908
                                                    
                                                    
                                                    0
                                                    
                                                    769
                                                    
                                                    
                                                    0
                                                    
                                                    2,785
                                                    
                                                    
                                                    0
                                                    
                                                    4,462Choate
                                                    
                                                    
                                                    122
                                                    
                                                    0
                                                    
                                                    
                                                    51
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    173
                                                    
                                                    0Lothian
                                                    
                                                    
                                                    21
                                                    
                                                    6
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    21
                                                    
                                                    6Other
                                                    
                                                    
                                                    78
                                                    
                                                    1,467
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    0
                                                    
                                                    0
                                                    
                                                    
                                                    78
                                                    
                                                    1,467Total
                                                    
                                                    
                                                    865
                                                    
                                                    4,564
                                                    
                                                    
                                                    51
                                                    
                                                    769
                                                    
                                                    
                                                    1,394
                                                    
                                                    10,709
                                                    
                                                    
                                                    2,310
                                                    
                                                    16,042





Platinum’s
estimated recoverable proved reserves have been determined using standard
geological and engineering methods generally accepted by the petroleum industry
and in accordance with SEC financial accounting and reporting
standards.  The estimated present value of proved reserves does not
give effect to indirect expenses such as general and administrative expenses,
debt service and future income tax expense or to depletion, depreciation and
amortization, and does not include any economic impact that may result from our
hedging activities.





We
engaged Williamson Petroleum Consultants, Inc. ("WPC"), independent petroleum
engineers,  to estimate our net proved reserves, projected future
production, estimated future net revenue attributable to our proved reserves,
and the present value of such estimated future net revenue as of
December 31, 2008.  WPC’s estimates were based upon a review of
production histories and other geologic, economic, ownership and engineering
data, much of which is provided by the Company.   For example, we
provide to WPC the estimated amount and timing of future operating costs and
development costs which may in fact vary considerably from historical results.
In addition, as  various economic parameters change from year to year
the estimate of proved reserves also may change. In connection with questions
raised by Barry Kostiner, our former chief executive officer, regarding the
historical accuracy of the reserve estimate data provided to WPC, the Board
established a special committee of the board consisting of Bert Lang and Norman
Rosenberg, independent directors. The special committee engaged outside
consultants to evaluate the historical accuracy of the reserve estimate data
provided to WPC and determined that in 2006 and 2007 historical lease operating
expenses were higher than the projected lease operating expenses provided to WPC
to estimate proved reserves.  In according with Regulation S-X, proved oil
and gas reserves are the estimated quantities from known reservoirs under
existing economic and operating conditions, i.e., prices and costs as of the
date the estimate is made.  Although the Company believes the
previously provided estimates of forecasted lease operating expenses are
supportable and appropriate, we elected to review the effect of using historical
total lease operating expense for the subsequent years forecast to determine the
effect on the previously issued financial statements.  The Company
determined the change in estimated lease operating costs would not result in an
impairment of the oil and gas assets and accordingly a restatement of the
December 31, 2006 and 2007 financial statements was not
required.





In
accordance with applicable financial accounting and reporting standards of the
SEC, the estimates of our proved reserves and the present value of proved
reserves set forth herein are made using oil and gas sales prices estimated to
be in effect as of the date of such reserve estimates and are held constant
throughout the life of the properties. Estimated quantities of proved reserves
and their present value are affected by changes in oil and gas
prices.  The adjusted average prices utilized for the purposes of
estimating our proved reserves and the present value of proved reserves as of
December 31, 2008 were $41.92 per Bbl of oil and $5.29 per Mcf of gas, as
compared to $92.44 per Bbl of oil and $5.33 per Mcf of gas as of December 31,
2007.





The
reserve information shown is estimated.  The accuracy of any reserve
estimate is a function of the quality of available geological, geophysical,
engineering and economic data, the precision of the engineering and geological
interpretation and judgment.  The estimates of reserves, future cash
flows and present value are based on various assumptions, including those
prescribed by the SEC, and are inherently imprecise.  Although we
believe these estimates are reasonable, actual future production, cash flows,
taxes, development expenditures, operating expenses and quantities of
recoverable oil and natural gas reserves may vary substantially from these
estimates.  Also, the use of a 10% discount factor for reporting
purposes may not necessarily represent the most appropriate discount factor,
given actual interest rates and risks to which our business or the oil and
natural gas industry in general are subject.





Drilling
Activity




The
following table sets forth the number of gross development wells and net
development wells (based on our proportionate working interest) drilled in which
we participated during 2008 and during the period from the closing of the TEC
acquisition on October 26, 2007 through December 31, 2007. No exploratory wells
were drilled during the presented periods.





19





Developmental
      WellsGross
                        
                        
                        NetProductive
                        
                        
                        Dry
                        
                        
                        Total
                        
                        
                        Productive
                        
                        
                        Dry
                        
                        
                        Total2008
                        
                        
                        37.0
                        
                        
                        
                        2.0
                        
                        
                        
                        39.0
                        
                        
                        
                        17.8
                        
                        
                        
                        1.1
                        
                        
                        
                        18.910/27/07
      – 12/31/07
                        
                        
                        1.0
                        
                        
                        
                        0.0
                        
                        
                        
                        1.0
                        
                        
                        
                        1.0
                        
                        
                        
                        0.0
                        
                        
                        
                        1.0




The
information contained in the foregoing table should not be considered indicative
of our future drilling performance, nor should it be assumed that there is any
necessary correlation between the number of productive wells drilled and the
amount of oil and gas that may ultimately be recovered.





Volumes,
Prices and Production Costs





The
following table sets forth certain information regarding the production volumes,
average sales prices received, and average production costs associated with our
sales of oil and gas for the periods indicated.





For
      the Period2008
                      
                      
                      October 27, 2007
                        through
                        December
      31,
                        2007Oil
      and Gas Production Data:Oil
      (MBls)
                      
                      
                      281.4
                      
                      
                      
                      38.7Gas
      (MMcfs)
                      
                      
                      811.1
                      
                      
                      
                      125.8Total
      (MBoe)
                      
                      
                      416.6
                      
                      
                      
                      59.7Average
      Realized Prices (a):Oil
      ($/Bbl)
                      
                      $
                      97.14
                      
                      
                      $
                      85.24Gas
      ($/Mcf)
                      
                      $
                      8.40
                      
                      
                      $
                      8.03Average
      Production Costs:Production
      ($/Boe)
      (b)
                      
                      $
                      33.54
                      
                      
                      $
                      29.77
  (a)
                  No
      derivatives were designated as cash flow hedges in the table
      above.  All gains or losses on settled derivatives were included
      in change in fair value of
      commodity derivatives.
 (b)
                  Includes
      direct lifting costs (labor, repairs and maintenance, materials and
      supplies), workover costs, administrative costs of production offices,
      insurance and property and severance
taxes.





Item 3.    Legal
Proceedings.





On
January 16th, 2008, Exxon Mobil Corporation filed a petition in the 270th
District Court of Harris County, Texas, naming us as a defendant along with
Tandem Energy Corporation, a Colorado corporation, the
entity from which we acquired substantially all of its assets and liabilities in
October 2007. (“Old TEC”), and a third party, Merenco Realty, Inc.,
demanding environmental remediation of certain properties in Tomball, Texas. In
1996, pursuant to an assignment agreement, Exxon Mobil sold certain oil and gas
leasehold interests and real estate interests in Tomball, Texas to Old TEC’s
predecessor in interest, Merit Energy Corporation. In 1999, Old TEC assigned its
50% undivided interest in one of the tracts in the acquired property to Merenco,
an affiliate of Old TEC, owned 50% by our Chairman of the Board, Tim Culp. In
October 2007, the Texas Railroad Commission notified Exxon Mobil of an
environmental site assessment alleging soil and groundwater contamination for a
site in the area of Tomball, Texas. Exxon Mobil believes that the site is one
which was sold to Old TEC and claims that Old TEC is obligated to remediate the
site under the assignment agreement. Exxon Mobil has requested that the court
declare the defendants obligated to restore and remediate the properties and has
requested any actual damages arising from breach and attorneys’ fees. We believe
that Exxon Mobil’s claim that Old TEC is responsible for any remediation of such
site is without merit and we intend to vigorously defend ourselves against this
claim. However, no assurance can be given that we will prevail in this matter
and we estimate the possible loss could range from $60,000 to
$250,000.  Merenco was not acquired by us in the acquisition and our
Chairman, Tim Culp, continues to have a 50% ownership interest in
Merenco.





20





On
November 11, 2008, Mr. Miles Hyman, a former employee of KD Resources, an entity
owned by our affiliate, Braesridge Energy and James Dorman, our former Executive
Vice President, and in which Barry Kostiner, our director and former Chief
Executive Officer, had an equity interestfiled a claim against Platinum
Energy Resources, Inc., KD Resources, LLC, and Braesridge Energy, LLC
(“Respondents”) that he was discharged from KD Resources in retaliation for
informing a supervisor that an accounting employee had a prior conviction for
fraud and embezzlement, which he claims to be in violation of the Sarbanes-Oxley
Act of 2002, Section 806, Protection for Employees of Publicly Traded Companies
Who Provide Evidence of Fraud.  In December, 2008, the Department of
Labor (“DOL”) dismissed the complaint as not being timely filed.  On or
about January 8, 2009, Mr. Hyman appealed the ruling of the DOL. On January 16,
2009, the DOL filed an Order to Show Cause whereby Mr. Hyman must show why his
case should not have been dismissed. Mr. Hyman had 30 days to respond to the
Order to Show Cause.  On February 14, 2009, Mr. Hyman filed his response to
the Order to Show Cause stating that he failed to file within the required time
because he was engaged in negotiations with the Respondents.  On March 18,
2009, the Department of Labor dismissed Mr. Hyman’s claim for failure to file
within the 90-day filing period.   Mr. Hyman has filed a Petition for
Review of the Decision and Order Dismissing Complaint issued March 18,
2009.  A Notice of the Appeal was filed April 10, 2009.  Mr. Hyman has
until May 11, 2009 to file his initial brief.  We will then have the
opportunity to file a brief which must be submitted by June 10, 2009. 
It is our belief that Mr. Hyman was never an employee of Platinum Energy
Resources or any of its subsidiaries; as such we are not liable for any issues
between Mr. Hyman and his employer, KD Resources. We intend to vigorously
defend ourselves in this action.





On
December 3, 2008, Robert Kovar, the Company’s former Chief Operating Officer,
delivered his letter of resignation, effective on December 3, 2008, and filed a
lawsuit against us in the district court of Victoria County, Texas claiming that
he had Good Reason (as defined in his Employment Agreement) to terminate his
employment.  In the lawsuit Mr. Kovar is seeking declaratory relief
and claims he is entitled to a severance payment under his Employment Agreement,
accelerated vesting of his stock options and accelerated payment of the cash
flow note issued to him in connection with the purchase by the Company of
Maverick Engineering, Inc. in April 2008.   We believe that Mr.
Kovar did not have Good Reason to resign and that the lawsuit has no
merit.  We intend to vigorously defend ourselves in this action.
Additionally, we are seeking compensation from Mr. Kovar for damages the Company
has suffered as a result of Mr. Kovar’s breach of contract.





On
December 3, 2008, Mr. Lance Duncan filed a lawsuit against us in the district
court of Lubbock County, Texas claiming we breached our consulting agreement
with Mr. Duncan, entered into and breached an agreement to purchase a drilling
rig from Mr. Duncan, and failed to pay Mr. Duncan for aircraft transportation
services. Mr.
Duncan is seeking compensation for 515,713 shares of Platinum stock, $13,857 for
use of his private plane, and consummation of an agreement to purchase a
drilling rig for the sum of $2,478,000.We intend to vigorously defend
ourselves in this action.




On
April 16, 2009, the Company received a written notice of acceleration from
Robert L. Kovar Services, LLC, as the stockholder representative, claiming that
the Company failed to make timely mandatory prepayments in the amount of
$110,381 due under the terms of the Cash Flow Notes.  On April 29,
2009, Maverick received a notice of acceleration (the “Acceleration Letter”)
with respect to the Notes governed by a Loan Agreement and related Security
Agreement originally dated April 30, 2005 and April 29, 2005, respectively. The
Acceleration Letter alleges that Maverick failed to comply with certain
covenants under the terms of the Loan Agreement and that Maverick failed to make
payments due under the Notes. The outstanding principal, accrued interest and
late charges alleged to be owed by Maverick in the Acceleration Letter total
$4,659,227. The Acceleration Letter also contends that interest continues to
accrue at the default rate of 18% per annum. In a separate letter, dated May 1,
2009, Robert L. Kovar Services, LLC, as the stockholder representative for the
sellers, purported to terminate the revolving credit facility under the Loan
Agreement and demanded turnover of all collateral securing indebtedness under
the Loan Agreement, including the Notes. The Company and Maverick have asserted
claims in litigation against the holders of the Notes, Robert L. Kovar Services,
LLC, Robert L. Kovar, individually, and others. The litigation is in its early
stages and, accordingly, the Company cannot predict the outcome of these
matters.




Item 4.    Submission of Matters to a Vote of
Security Holders.




None.





21





PART
II




Item 5.    Market For Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.




Platinum
consummated its Initial Public Offering on October 28, 2005. In the Initial
Public Offering, we sold 14,400,000 units. Each unit consists of one share of
Platinum’s common stock and one redeemable common stock purchase warrant.
Platinum common stock, warrants and units are quoted on the OTCBB under the
symbols “PGRI”, “PGRIW” and “PGRIU”, respectively. Platinum’s units commenced
public trading on October 28, 2005 and its common stock and warrants commenced
separate public trading on December 9, 2005. The high and low bid prices of our
units, common stock and warrants as reported by the OTCBB for the
quarters in the past two fiscal years are set forth below. Such
inter-dealer quotations do not necessarily represent actual transactions and do
not reflect retail mark-ups, mark-downs or commissions:




Units
                    
                    
                    Common
      Stock
                    
                    
                    WarrantsHigh
                    
                    
                    Low
                    
                    
                    High
                    
                    
                    Low
                    
                    
                    High
                    
                    
                    Low2008:Fourth
      Quarter
                    
                    $
                    3.00
                    
                    
                    $
                    0.55
                    
                    
                    $
                    1.80
                    
                    
                    $
                    0.53
                    
                    
                    $
                    0.35
                    
                    
                    $
                    0.02Third
      Quarter
                    
                    $
                    6.39
                    
                    
                    $
                    3.00
                    
                    
                    $
                    4.70
                    
                    
                    $
                    1.65
                    
                    
                    $
                    0.96
                    
                    
                    $
                    0.20Second
      Quarter
                    
                    $
                    6.39
                    
                    
                    $
                    5.50
                    
                    
                    $
                    5.15
                    
                    
                    $
                    4.40
                    
                    
                    $
                    1.10
                    
                    
                    $
                    0.84First
      Quarter
                    
                    $
                    8.36
                    
                    
                    $
                    6.00
                    
                    
                    $
                    6.97
                    
                    
                    $
                    4.60
                    
                    
                    $
                    1.85
                    
                    
                    $
                    1.002007:Fourth
      Quarter
                    
                    $
                    10.00
                    
                    
                    $
                    8.19
                    
                    
                    $
                    7.99
                    
                    
                    $
                    6.60
                    
                    
                    $
                    2.21
                    
                    
                    $
                    0.63Third
      Quarter
                    
                    $
                    8.45
                    
                    
                    $
                    7.85
                    
                    
                    $
                    7.65
                    
                    
                    $
                    7.50
                    
                    
                    $
                    0.81
                    
                    
                    $
                    0.35Second
      Quarter
                    
                    $
                    8.25
                    
                    
                    $
                    7.83
                    
                    
                    $
                    7.60
                    
                    
                    $
                    7.40
                    
                    
                    $
                    0.74
                    
                    
                    $
                    0.31First
      Quarter
                    
                    $
                    7.95
                    
                    
                    $
                    7.60
                    
                    
                    $
                    7.41
                    
                    
                    $
                    7.26
                    
                    
                    $
                    0.57
                    
                    
                    $
                    0.43





Holders





As of
March 31, 2009, there was one holder of record of the units, eleven holders of
record of the common stock and one holder of record of the warrants. Platinum
believes that, as of this date, there were approximately 50 beneficial holders
of the units, 150 beneficial holders of the common stock and 200
beneficial holders of the warrants.




Share
Repurchase Program





In
November 2007, our Board approved a share repurchase program to repurchase
shares of Platinum common stock in open market transactions in an amount up to
$80 million, following the consummation of a business
combination.  The Company and affiliates repurchased 3,975,918 shares
of common stock and 2,554,500 warrants during fourth quarter of
2007.  No common stock or warrants were repurchased by the Company in
2008.





Dividends





Platinum
has not paid any cash dividends on its common stock to date. It is the present
intention of the board of directors to retain all earnings, if any, for use in
the business operations, and accordingly, the board does not anticipate
declaring any dividends in the foreseeable future. The payment of any dividends
will be within the discretion of the board of directors and will be contingent
upon our financial condition, results of operations, capital requirements and
other factors our board deems relevant.




Item 7.  Management’s Discussion and Analysis
of Financial Condition and Results of Operations




The
information and analyses should be read in conjunction with the financial
statements and the related notes.  These discussions and analyses may
contain forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially as a result of
various factors, including those set forth under “Risk Factors” or elsewhere in
this report.





22




Overview





On
October 26, 2007, we acquired substantially all of the assets and assumed
substantially all of the liabilities of TEC. Prior to that time, we were a
blank check company with no operations and no net revenues. Subsequent to the
acquisition of TEC, the Company made a series of oil and gas property
acquisitions and a well servicing company to expand its exploration and
production activities.





On April
29, 2008 we acquired 100% of the stock of Maverick, a full-service engineering
services company.





With the
consummation of the Maverick acquisition, we consider ourselves to be in two
lines of business - (i) an independent oil and gas exploration and production
company and (ii) an engineering services company.





i)
            In
      our oil and gas operations, we conduct oil and natural gas exploration,
      development, acquisition, and production. Our basic business model is to
      find and develop oil and gas reserves through development activities, and
      sell the production from those reserves at a profit. We sell substantially
      all of our crude oil production under short-term contracts based on prices
      quoted on the New York Mercantile Exchange (“NYMEX”) for spot West Texas
      Intermediate contracts, less agreed-upon deductions which vary by grade of
      crude oil. The majority of our natural gas production is sold under
      short-term contracts based on pricing formulas which are generally market
      responsive. From time to time, we may also sell a portion of the gas
      production under short-term contracts at fixed
  prices.





(ii)
            Through
      our wholly-owned Maverick operation, we provide engineering and
      construction services primarily for three types of clients: (1) upstream
      oil and gas, domestic oil and gas producers and pipeline companies; (2)
      industrial, petrochemical and refining plants; and (3) infrastructure,
      private and public sectors, including state municipalities, cities, and
      port authorities. The types of services provided include project
      management, engineering, procurement, and construction management services
      to both the public and private sectors, including the oil and gas business
      in which we are engaged as described above. Maverick is based in south
      Texas with offices in Corpus Christi, Victoria, and
    Houston.





For most
of 2008, the economic climate in the domestic oil and gas industry was suitable
for our business model.  During the third quarter of 2008, oil and gas
prices began trending downward, while drilling, completion and operating costs
remained high, resulting in lower than desired profit margins on most of our
previously planned drilling activities.  The effect of declining
product prices on our business is significant.  Lower product prices
reduce our cash flow from operations and diminish the present value of our oil
and gas reserves.  Both of these factors have an adverse affect on our
ability to access the capital resources we need to grow our reserve
base.  Lower product prices also offer us less incentive to assume the
drilling risks that are inherent in our business.  In response to
decreases in product prices and the resulting effect on our profit margins, we
plan to reduce capital spending during 2009.





23





Furthermore,
like all businesses engaged in the exploration and production of oil and natural
gas, we face the challenge of natural production declines. As initial reservoir
pressures are depleted, oil and natural gas production from a given well
decreases. Thus, an oil and natural gas exploration and production company
depletes part of its asset base with each unit of oil or natural gas it
produces. Consequently, key to our success is not only finding reserves through
developmental drilling and strategic acquisitions, but also by exploiting
opportunities related to our existing production.





From time
to time, we may make strategic acquisitions in our oil and natural gas business
if we believe the acquired assets offer us the potential for reserve growth
through additional developmental drilling activities. However, the successful
acquisition of oil and natural gas properties requires assessment of many
factors, which are inherently inexact and may be inaccurate, including future
oil and natural gas prices, the amount of recoverable reserves, future operating
costs, future development costs, failure of titles to properties, costs and
timing of plugging and abandoning wells and potential environmental and other
liabilities.





Results of
Operations




Set
forth below are:




(A)   A discussion of the results of operations
for Platinum for the year ended December 31, 2008 as compared to the year ended
December 31, 2007, including the results of operations of the oil and gas
properties we purchased, as well as the operations of Maverick, from their
respective dates of acquisition.




(B)
A comparison of certain summarized historical information of our oil and gas
subsidiaries for the year ended December 31, 2008 with the period from the date
of the TEC acquisition (October 26, 2007) through December 31, 2007, in order to
provide the reader with certain meaningful analytical data.




(C)
A discussion of the engineering services company (Maverick) for the period from
the date of acquisition (April 29, 2008) through December 31, 2008.




The
following discussion should be read in conjunction with our Consolidated
Financial Statements and related Notes thereto included elsewhere in this
report.




(A) - Results of
Operations - Platinum




For
the year ended December 31, 2008 and the year ended December 31,
2007




We were a
blank check company from inception through October 26, 2007. For the year ended
December 31, 2007 our results of operations included those of the oil and gas
entities acquired on and subsequent to October 26, 2007.  For the year
ended December 31, 2008 our results of operations include those of our
engineering services business, Maverick, from its date of acquisition on April
29, 2008 through December 31, 2008.




For the
year ended December 31, 2008, our revenue was $53.2 million, resulting
in a net loss of $80.8 million or $3.66 loss per share. The results
included non-cash asset impairment charges of $139.8 million related to oil and
gas properties and equipment, goodwill and intangible assets.  The
Company also recognized a non-cash unrealized gain on its commodity derivatives
of $17.3 million.  Excluding the non-cash impairment charges and
unrealized gain on commodity derivatives, the Company incurred a $2.5 million
pretax loss for the year ended December 31, 2008.   For the year
ended December 31, 2007, revenue was $4.3 million, and the net loss was
$0.4 million or $0.02 loss per share. In 2007 revenues consisted
exclusively of oil and gas sales.   The significant increase in
revenues is a result of a series of acquisitions including the TEC acquisition,
completed in the fourth quarter of 2007 and first half of 2008.




On
October 26, 2007, Platinum acquired substantially all the assets and liabilities
of TEC. The TEC assets consisted primarily of leases covering approximately
21,000 acres in relatively long-lived oil fields with well-established
production histories in the Gulf Coast region in Texas, the Permian Basin in
Texas and New Mexico, and the Fort Worth Basin in
Texas.  Consideration for the transaction consisted of the assumption
and satisfaction of $41.7 million of TEC indebtedness plus accrued interest, and
7.7 million shares of common stock of Platinum.  Subsequent to the TEC
acquisition the Company completed a series of smaller acquisitions for
approximately $23 million in total, expanding our total acreage from 21,000
acres to approximately 37,000 acres.




On April
29, 2008, the Company completed the acquisition of Maverick Engineering, Inc.
Maverick is a provider of project management, engineering, procurement, and
construction management services to both the public and private sectors,
including the oil and gas business in which the Company is engaged. The
aggregate consideration paid in the merger was $6 million in cash and $5 million
to be paid over the next 5 years pursuant to non-interest bearing cash flow
notes, subject to certain escrows, holdbacks and post-closing
adjustments.   The Company’s results of operations include
Maverick from April 29, 2008 through December 31, 2008.





24





Our
general and administrative expenses, other than those attributable to our oil
and natural gas assets and our engineering services business for the year ended
December 31, 2008 were $4.2 million as compared to $2.4 million in
2007.  The $1.8 million increase in corporate general and
administrative expenses for the year ended December 31, 2008 as compared to the
year ended December 31, 2007 is primarily attributable to a $1.1 million
increase in legal and accounting expense incurred in 2008 as compared to
2007.  The $1.1 million increase included an incremental $0.4 million
in external audit, $0.4 million in legal and $0.3 million in accounting
consulting expenses in 2008 as compared to 2007 as a result of acquisition
activities and an increase in the number and complexity of SEC
filings.  In addition officers’ and other salaries were $0.8 million
higher in 2008 compared to 2007 as a result of hiring a CEO, COO, CFO, in-house
legal counsel, controller and IT staff.





Results
of operations for the year ended December 31, 2008 included interest income of
$0.2 million as compared to $2.8 million in the preceding year. In 2007
substantial interest was earned on funds held in trust for the benefit of public
shareholders prior to the closing of the TEC Acquisition. The use of funds for
the TEC and other acquisitions, and towards operating expenses resulted in
a substantial decrease in cash during 2008 as compared to
2007.   Similarly, interest expense increased from $0.1 million
for the year ended December 31, 2007 to $0.9 million for the year ended December
31, 2008 as a result of a higher debt levels associated with acquisitions and
capital expenditure programs in 2008.  We incurred a non-cash charge
for interest expense of $0.2 million in 2008 related to the accretion of debt
discount on the cash flow notes issued in the Maverick acquisition (see Note
3).





We
also recorded net gains of  $17.3 million for the year ended
December 31, 2008  as compared to net losses of $1.5 million in
2007, due to an increase in the fair value of commodity derivatives. We have
experienced great volatility in the value of these derivative instruments as a
result of the great fluctuation in the price of crude oil.





(B)
- Results of Operations - Oil and Gas




For
the year ended December 31, 2008 and the period from the date of the TEC
acquisition (October 26, 2007) to December 31, 2007.




As
previously reported, our oil and gas operations commenced on October 26, 2007
with the purchase of the assets of TEC.  Accordingly, a comparison of
our results of operations for 2007 and 2008 would not be meaningful on
an annual basis.  The following discussion should provide relevant
information regarding our performance since the inception of our oil and gas
operations.





On a
Boe per day basis, average daily production increased 26% from 904 Boe per day
in the period
from the date of the TEC acquisition (October 27, 2007) to December 31, 2007
(the “2007 Period”)to 1,141 Boe per day in 2008.  Similarly,
average oil and gas prices increased from $85.24 and $8.03, respectively during
the 2007 Period, to $97.14 and $8.40, respectively during
2008.  Revenues increased 41% during 2008 on a daily Boe basis from
the 2007 Period, with the increased production contributing 63% of the increase
in revenues and increased prices contributing 37% of the
increase.





Production
on a Boe basis increased sequentially each quarter, until the fourth quarter of
2008, wherein we saw a slight decline in production.  The increases were in
large part due to an aggressive infill drilling program early in the
year.  The drilling program was significantly curtailed in the fourth
quarter of 2008 due to the combination of escalating drilling costs, and
a significant decline in commodity prices, which rendered the
economics of the drilling program marginal.  Although drilling
activity slowed in the fourth quarter, we have been able to mitigate the normal
production decline rates by re-working older well bores, and upgrading our
equipment and facilities.





Production
costs, consisting of lease operating expenses, production taxes and other
miscellaneous marketing costs, increased 13% in 2008 as compared to the 2007
Period on a Boe basis due primarily to the increase in production,
escalating oilfield service costs, and increased production taxes related to
higher commodity prices.   The increase in oilfield service costs
included higher rates for recurring services and higher activity levels for
repair and maintenance expenditures.  After giving effect to a 26%
increase in oil and gas production on a Boe basis, production costs per Boe
increased 13% from $29.77 per Boe in the 2007 Period to $33.54 in
2008.





Oil and
gas depletion expense on a Boe basis increased 31% from $20.55 in the 2007
Period to $26.87 in 2008.  The increase was due primarily to a
higher depletable cost basis in 2008 compared to the 2007
Period.  Depletion expense per Boe is an operating metric that is
indicative of our weighted average cost to find or acquire a unit of equivalent
production.





25





The
Company recorded a non-cash ceiling test impairment of oil and natural gas
properties of $130.1 million ($84.6 million, net of tax) during the
fourth quarter of 2008, as a result of the substantial decline in commodity
prices and negative revisions in the Company's proved undeveloped reserve
quantities from 6,440 MBoe at December 31, 2007 to 3,178 MBoe at December 31,
2008 with our USM and Tomball property being significantly revised
downward.   The negative revisions were principally related to
the decline in commodity prices which would make it uneconomical to invest in
development activities at the low commodity prices at December 31,
2008.  In accordance with SEC Staff Accounting Bulletin Topic 12- Oil
and Gas Producing Activities, the full cost ceiling limitation was computed
giving effect to the subsequent price changes for oil and gas. The computed
ceiling amount was approximately $5 million greater than the limitation
using the prices in effect at December 31, 2008 and, accordingly, the full
cost impairment charge for 2008 was determined using the recomputed ceiling
amount. In addition to the impairment of our oil and natural gas properties, we
recorded a $1.7 million non-cash impairment of our drilling rigs and
pulling units. The rigs were purchased in 2007, with the intention of securing
access to an appropriate rig and crew for our exploration efforts. Due to the
continued volatility in the prices of oil and natural gas, and its negative
effect on the drilling industry, we will continue to review this asset for
additional impairment.





General
and administrative costs related to the oil and gas entities increased
approximately 38% on a Boe basis from $9.23 in 2008 compared to $12.77 for the
2007 Period.   The increase was due primarily to acquisitions,
the ramp up of managerial and technical staff, and additional consulting costs
to accommodate a safety and environmental review of our
properties.





We
also incurred net gains of approximately $17.3 million for the year ended
December 31, 2008 as compared to approximately a $1.5 million in net losses
during the 2007 period on the increase in the value of certain hedge contracts
on crude oil and natural gas.




The
following information is intended to supplement the consolidated financial
statements included in this report with data that is not readily available from
those statements.





Three Months Ended
              
              
              Year Ended
              
              
              PeriodMarch 31, 2008
              
              
              June 30, 2008
              
              
              September
                30, 2008
              
              
              December
                31,
      2008
              
              
              December
                31, 2008
              
              
              October
      26,
                2007
                through
                December
                31,
      2007ProductionOil
      (Bls)
              
              
              58,707
              
              
              
              71,508
              
              
              
              73,554
              
              
              
              77,672
              
              
              
              281,441
              
              
              
              38,684Gas
      (Mcf)
              
              
              177,189
              
              
              
              175,936
              
              
              
              248,904
              
              
              
              209,057
              
              
              
              811,086
              
              
              
              125,849Boe
      (Bls)
              
              
              88,239
              
              
              
              100,831
              
              
              
              115,038
              
              
              
              112,515
              
              
              
              416,622
              
              
              
              59,659Average
      PricesOil
      ($/Bbl)
              
              $
              96.83
              
              
              $
              122.22
              
              
              $
              115.40
              
              
              $
              57.01
              
              
              $
              97.14
              
              
              $
              85.24Gas
      ($/Mcf)
              
              $
              8.19
              
              
              $
              11.11
              
              
              $
              9.53
              
              
              $
              4.97
              
              
              $
              8.40
              
              
              $
              8.03Average
      Lifting Cost per Boe (1)
              
              $
              27.53
              
              
              $
              28.68
              
              
              $
              36.25
              
              
              
              39.84
              
              
              $
              33.54
              
              
              $
              29.77








26





(C) –
Results of Operations – Engineering Services (Maverick)




For
the period from the date of the Maverick Acquisition (April 29, 2008) to
December 31, 2008




Revenues
for the period since the acquisition (April 29, 2008 – December 31, 2008)
were $18.3 million, generating gross margins of 12%.  Our industrial
division contributed approximately half, our oil and gas division contributed
approximately one-third and our infrastructure division contributed the
remainder of the total revenues for this segment.   Our
industrial division focused on maintenance capital projects for our traditional
refinery clients in South Texas.  In the fourth quarter, the
industrial division won a significant contract to assist a major oil company
client in repairing and restarting a Gulf Coast refinery that had been damaged
by Hurricane Ike.    This division was adversely impacted by
capital budget cuts in the refining market plus the decision by a key
customer to seek strategic alternatives for its Aruba refinery, with a
resulting deferral of some project work there. The oil and gas business focused
on gas processing, gas compression and gas storage projects in 2008 for key
customers including BP, DCP, and Shell.  Additionally, in the fourth
quarter, the oil & gas division kicked off a $4 million project involving a
new gas compression facility to be installed in Venezuela.  We have
seen a slowdown in work from some our traditional clients in this segment and
anticipate low commodity prices will continue to impact the level of activity in
this division.  All three of our divisions were negatively affected by
Hurricane Ike as a result of lost or deferred business and the continuation of
compensation to our employees during this period.




In
accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets the Company performed an analysis to
determine if the fair value of the Engineering Services reporting unit exceeded
its carrying amount.  Based on a combination of factors, including the
current economic environment and the historical performance of the segment, the
Company recorded a non-cash goodwill impairment charge of $7.8 million and
a $0.2 million impairment to intangible assets acquired, during the fourth
quarter ended December 31, 2008.   As a result of lower than
anticipated operating profit margins and the impairment of goodwill and
intangible assets, the Engineering Services division incurred a $8.9 million net
loss in 2008.




Management
has implemented significant cost reduction initiatives and will focus on
expanding its customer base internationally to improve profitability within this
segment.




Liquidity
and Capital Resources





On
October 28, 2005, we consummated our initial public offering of
14,400,000 units with each unit consisting of one share of our common stock,
$0.0001 per share, and one warrant to purchase one share of common stock at an
exercise price of $6.00 per share. The units were sold at an offering price of
$8.00 per unit, generating gross proceeds of $115 million.   Upon
the October 26, 2007 consummation of the TEC acquisition, the cash held in, or
attributable to, the trust approximated $112 million became available to us and
was applied as follows (i) payment to our stockholders exercising their
conversion rights; (ii) payment of TEC debt assumed pursuant to the acquisition
agreement; (iii) payment of certain fees and expenses relating to the
acquisition; and (iv) the remaining net proceeds became available for operations
and conduct of the business. This resulted in net proceeds to us approximating
$50,650,000, as follows:




Distribution
      of cash to shareholders exercising their conversion rights
                      
                      $
                      14,057,199Payment
      of TEC indebtedness, including interest
                      
                      
                      41,704,635Other
      payments
                      
                      
                      5,887,91161,649,745Available
      cash to Platinum upon consummation of the TEC acquisition
                      
                      
                      50,650,255Total
                      
                      $
                      112,300,000




As
part of our overall business strategy, we began our program of strategic
acquisitions and investment opportunities to complement our existing business.
In addition to the TEC acquisition, we made various acquisitions of oil and gas
properties, expending a total of approximately $23 million in the last quarter
of 2007 and first half of 2008, as follows:





Operating
                                        
                                        Price
                                        
                                        
                                        Working
                                        
                                        
                                        CurrentDate
                                        
                                        ProspectName
                                        
                                        Location
                                        
                                        Status
                                        
                                        (millions)
                                        
                                        
                                        Interest
                                        
                                        
                                        StatusNovember,
      2007
                                        
                                        N.
      Minnie Bock
                                        
                                        Nueces
      County, TX
                                        
                                        Non-operated
                                        
                                        $
                                        1.1
                                        
                                        
                                        
                                        12
                                        %
                                        
                                        ProducingDecember,
      2007
                                        
                                        La
      Rosa
                                        
                                        Refugio,
      TX
                                        
                                        Non-operated
                                        
                                        $
                                        5.3
                                        
                                        
                                        
                                        50
                                        %
                                        
                                        ProducingDecember,
      2007
                                        
                                        Lothian
                                        
                                        Lea,
      Chavez, Eddy, NM
                                        
                                        Operated
                                        
                                        $
                                        6.9
                                        
                                        
                                        
                                        100
                                        %
                                        
                                        ProducingDecember,
      2007
                                        
                                        Barnett Shale (1)
                                        
                                        Palo
      Pinto, TX
                                        
                                        Operated
                                        
                                        $
                                        0.9
                                        
                                        
                                        
                                        100
                                        %
                                        
                                        Non-producingDecember,
      2007
                                        
                                        Big
      Al
                                        
                                        Scurry,
      TX
                                        
                                        Operated
                                        
                                        $
                                        0.3
                                        
                                        
                                        
                                        100
                                        %
                                        
                                        ProducingJanuary,
      2008
                                        
                                        Pleasanton (2)
                                        
                                        Atascosa,
      TX
                                        
                                        Operated
                                        
                                        $
                                        6.7
                                        
                                        
                                        
                                        70
                                        %
                                        
                                        Non-producingApril,
      2008
                                        
                                        Pruitt/Davis
                                        
                                        Atascosa,
      TX
                                        
                                        Operated
                                        
                                        $
                                        0.8
                                        
                                        
                                        
                                        100
                                        %
                                        
                                        ProducingMay,
      2008
                                        
                                        Leike(3)
                                        
                                        Atascosa,
      TX
                                        
                                        Operated
                                        
                                        $
                                        0.6
                                        
                                        
                                        
                                        70
                                        %
                                        
                                        Non-producingJune,
      2008
                                        
                                        Lacy (4)
                                        
                                        Hidalgo,
      TX
                                        
                                        Non-operated
                                        
                                        $
                                        0.4
                                        
                                        
                                        
                                        25
                                        %
                                        
                                        Completed





27




(1)
            Acquisition
      of an additional 50% working interest in the Barnett Shale acreage within
      the Ball/Bird field.  This acquisition increased the Company’s
      net acreage position by 2,300 acres and gave us a 100% working interest in
      the Barnett Shale.  This acreage is held by production from
      existing operated wells in the
field.




(2)
            Purchase
      of non-producing leases to workover existing wells to complete them in the
      Edwards formation.  To date, the Company has expended
      approximately $400,000 on the workover program with limited
      results.  Further development is
  anticipated.




(3)
            Purchase
      of a non-producing lease to workover an existing well to complete in the
      Edwards formation.  To date, the Company has expended
      approximately $1.7 million with limited results.  Further
      development is anticipated.




(4)
            Purchase
      of non-producing acreage.  Operator has successfully completed a
      well at approximately 7,600 feet, and is in the process of equipping the
      well for production.  The Company’s share of the drilling and
      completion cost was approximately
$550,000.




Platinum
also purchased the outstanding stock of Red Iron Tool, Inc. (“Red Iron”) for
approximately $2.2 million in December 2007. Red Iron owns three pulling units
and other service equipment near our Ira field in Scurry County,
Texas.





On April
29, 2008, the Company completed the acquisition of Maverick, a provider of
project management, engineering, procurement, and construction management
services to both the public and private sectors, including the oil and gas
business in which the Company is engaged.  The aggregate consideration
paid in the merger was $6 million in cash and $5 million to be paid over the
next 5 years pursuant to non-interest bearing cash flow notes, subject to
certain escrows, holdbacks and post-closing adjustments. The cash flow notes
were reduced for a working capital post closing adjustment which was determined
by the Company to be $645,596. This amount may be subject to modification as may
be agreed between the parties. At the time the acquisition was completed, a
discount to present value in the amount of $1,320,404 was recorded and deducted
from the cash flow notes as these notes are non-interest bearing for the initial
5 years of their term. In addition, the sellers agreed to satisfy and assume
Maverick's bank indebtedness in the aggregate amount of $4,889,538 consisting of
a $2,960,155 revolving line of credit maturing April 2008, a $1,584,375 term
note due April 2011, and $345,008 oil and gas note due May 2009 (collectively
referred to as the “Notes”), using a portion of the cash received by them at
closing. Following the closing, the Company was indebted to the sellers for
these amounts under the identical terms of the bank loan agreements. On April
30, 2008, Maverick entered into extension and modification agreements with the
sellers pursuant to which sellers agreed to defer principal payments of the $1.6
million term loan for six months and extend the maturity date to April 2013. The
sellers also agreed to extend the maturity date of the revolving line of credit
to 2010. In addition, as of December 31, 2008, Maverick was not in compliance
with the debt service coverage ratio contained in the loan agreements. On August
14, 2008, the sellers waived the Company's obligation to maintain this ratio
through September 30, 2009.





28





On April
16, 2009, the Company received a written notice of acceleration from Robert L.
Kovar Services, LLC, as the stockholder representative, claiming that the
Company failed to make timely mandatory prepayments in the amount of $110,381
due under the terms of the cash flow notes.  The cash flow notes are
payable quarterly at the rate of 50% of pre-tax net income, as defined in the
merger agreement, generated by the Maverick business on a stand-alone basis in
the preceding quarter.  It is the Company’s position that Maverick
generated a pretax loss during the period April 29, 2008 through December 31,
2008 and the fourth quarter of 2008, and as such the Company was not obligated
to make a mandatory payment to the note holders.   Generally
Accepted Accounting Principles in the United States of America (“GAAP”) require
intangible assets to be amortized over their useful lives.  In
addition, goodwill and intangible assets are evaluated annually for potential
impairment.  The pretax income as calculated by Robert L. Kovar
Services, LLC, as the stockholder representative, did not include amortization
expense or impairment charges related to intangible assets and goodwill in
accordance with GAAP.





On April
29, 2009, Maverick received a notice of acceleration (the “Acceleration Letter”)
with respect to the Notes. The Acceleration Letter alleges that Maverick
failed to comply with certain covenants under the terms of the Loan Agreement
and that Maverick failed to make payments due under the Notes.  The
outstanding principal, accrued interest and late charges alleged to be owed by
Maverick in the Acceleration Letter total $4,659,227.  The
Acceleration Letter also contends that interest continues to accrue at the
default rate of 18% per annum.  In a separate letter, dated May 1,
2009, Robert L. Kovar Services, LLC, as the stockholder representative for the
sellers, purported to terminate the revolving credit facility under the Loan
Agreement and demanded turnover of all collateral securing indebtedness under
the Loan Agreement.





The
Company and Maverick have asserted claims in litigation against the holders of
the Notes, Robert L. Kovar Services, LLC, Robert L. Kovar, individually, and
others.  The litigation is in its early stages and, accordingly, the
Company cannot predict the outcome of these matters.





On March
14, 2008, TEC and PER Gulf Coast, Inc. (“Borrower”) which are wholly owned
subsidiaries of the Company, entered into a Senior Secured Revolving Credit
Facility (“Senior Credit Facility”) with Bank of Texas. The Senior Credit
Facility provided for a revolving credit facility up to the lesser of the
borrowing base and $100 million. The initial borrow base was set at $35
million.  On January 9, 2009, the Borrower reaffirmed the
borrowing base at $35 million and amended the Senior Credit Facility to change
the interest rate provisions. Under the amended loan agreement the outstanding
debt bears interest at LIBOR, plus a margin which varies with the ratio of the
Borrower’s outstanding borrowings against the defined borrowing base, ranging
from 2.0% to 2.75 % provided the interest rate does not fall below a floor rate
of 4% per annum.  In addition, the Borrower is obligated to the bank
for a monthly fee of any unused portion of the line of credit at the rate of
0.25% per annum. The facility is collateralized by substantially all of the
Company’s proved oil & gas assets.





Under the
terms of the revolving line of credit agreement, the Borrower must maintain
certain financial ratios, must repay any amounts due in excess of the borrowing
base, and may not declare any dividends or enter into any transactions resulting
in a change in control, without the bank’s consent. A
financial covenant under the credit facility requires us to maintain a ratio of
indebtedness to cash flow of no more than 3 to 1. As of December 31, 2008 we
were not in compliance with this covenant. The Company has formally
requested that the bank either amend the loan agreement, grant a waiver for this
period, or grant the company sufficient time to obtain additional capital
resources through alternative means. The bank has submitted the request to its
loan committee, but the Company has not received the waiver as the date of the
issuance of this report. Accordingly, the company has reclassed the amount of
outstanding indebtedness under the credit facility, approximately $12 million,
to the current liabilities section of the balance sheet.  If a
suitable arrangement cannot be reached with the bank, the bank could accelerate
the indebtedness and seek to foreclose on the pledged assets. However, the
Company believes it has sufficient liquidity in its derivative contracts to
liquidate some or all of its hedge positions in order to bring the company back
into compliance with the covenant, if required. The
Company, as the parent company, is not a co-borrower or guarantor of the line,
and transfers from the Borrower to the parent company are limited to (i) $1
million per fiscal year to the parent for management fees, and (ii) the
repayment of up to $2 million per fiscal year in subordinate indebtedness owed
to the parent. As of December 31, 2008 there was approximately $12 million
outstanding under the revolving line of credit, bearing interest at the bank’s
base rate, which was 4 %. Amounts drawn on the revolving line of credit in 2008
were used to fund our capital expenditure program.





29





Capital
Expenditures




The
timing of most of our capital expenditures is discretionary because we operate
the majority of our wells and we have no material long-term capital expenditure
commitments. Consequently, we have a significant degree of flexibility to adjust
the level of our capital expenditures as circumstances warrant. Our capital
expenditure program includes the following:





•
              cost
      of acquiring and maintaining our lease acreage position and our seismic
      resources;
 
 •
              cost
      of drilling and completing new oil and natural gas
  wells;
 
 •
              cost
      of installing new production
infrastructure;
 
 •
              cost
      of maintaining, repairing and enhancing existing oil and natural gas
      wells; and
 
 •
              cost
      of recompleting previously abandoned well
bores.





During
2008 we made approximately $20.7 million in capital expenditures related to our
oil and gas properties.  As a result of the dramatic downturn in
commodity prices and credit market crisis we elected to shut down all drilling
activity in the fourth quarter of 2008.  Approximately $4.3 million
related to capital workovers where we re-entered previously abandoned well
bores.  The Company ramped up an aggressive drilling and completion
program in 2008, drilling 23 gross wells, 21 of which generated
production.  The average cost per well was approximately $0.4 million,
which was financed out of existing cash flow and our bank credit
facility.  In addition, we spent approximately $1 million to upgrade
our salt water disposal system and install a new compressor at our Tomball
field.  In the Ira field, we began designing and planning for a
complete overhaul and expansion of the field’s water injection system which cost
approximately $0.5 million.





The
industry saw unprecedented increases in commodity prices during 2008 as we began
our drilling program.  The focus was to drill low cost, long lived
proved undeveloped locations within our existing
fields.  Unfortunately, as commodity prices escalated, the cost to
drill followed closely behind. Although we were able to utilize our own drilling
rigs in most cases, the rig itself comprises only a portion of the cost to drill
and complete a well.  Labor costs increased, the availability of
casing and tubing became scarce and expensive, and the availability of other
services in a demand driven environment became cost prohibitive. By the end of
the second quarter, the cost to drill had affected the economic parameters so
much, that we began to curtail drilling operations during the third
quarter.





In 2009,
the costs to drill have begun to fall, but with the current softness in
commodity prices, it is currently uneconomic to drill in these
areas.  There are no immediate plans to resume our in-fill drilling
program during 2009; however, the reserves associated with these potential
drilling locations remain in the ground, and we will continue to monitor the
economic environment necessary to resume a drilling program in the
future.




Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K promulgated under the Securities Exchange Act of
1934.





Critical
Accounting Policies





Use of Estimates. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





30




Full
Cost and Impairment of Assets





We
account for our oil and natural gas exploration and development activities using
the full cost method of accounting. Under this method, all costs incurred in the
acquisition, exploration and development of oil and natural gas properties are
capitalized. Costs of non-producing properties, wells in the process of being
drilled and significant development projects are excluded from depletion until
such time as the related project is developed and proved reserves are
established or impairment is determined. At the end of each quarter, the net
capitalized costs of our oil and natural gas properties, as adjusted for asset
retirement obligations, is limited to the lower of unamortized cost or a
ceiling, based on the present value of estimated future net revenues, net of
income tax effects, discounted at 10%, plus the lower of cost or fair market
value of our unproved properties. Revenues are measured at unescalated oil and
natural gas prices at the end of each quarter, with effect given to cash flow
hedge positions. If the net capitalized costs of oil and natural gas properties
exceed the ceiling, we are subject to a ceiling test write-down to the extent of
the excess. A ceiling test write-down is a non-cash charge to earnings. It
reduces earnings and impacts stockholders’ equity in the period of occurrence
and results in lower DD&A expense in future periods.  There is a
risk that we will be required to write down the carrying value of our oil and
natural gas properties if oil and natural gas prices decline
further.




Depletion





Provision
for depletion of oil and natural gas properties under the full cost method is
calculated using the unit of production method based upon estimates of proved
developed oil and natural gas reserves with oil and natural gas production being
converted to a common unit of measure based upon their relative energy content.
Investments in unproved properties and major development projects are not
amortized until proved reserves associated with the projects can be determined
or until impairment occurs. The cost of any impaired property is transferred to
the balance of oil and natural gas properties being depleted.





Significant
Estimates and Assumptions





Oil
and Gas Reserves





(1)
Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact manner. The
accuracy of a reserve estimate depends on the quality of available geological
and engineering data, the precision of the interpretation of that data, and
judgment based on experience and training. We have historically engaged an
independent petroleum engineering firm to evaluate our oil and gas reserves. As
a part of this process, our internal reservoir engineer and the independent
engineers exchange information and attempt to reconcile any material differences
in estimates and assumptions.





(2)
Reserves which can be produced economically through application of improved
recovery techniques (such as fluid injection) are included in the proved
classification when successful testing by a pilot project, or the operation of
an installed program in the reservoir, provides support for the engineering
analysis on which the project or program was based.





(3)
Estimates of proved reserves do not include the following: (A) oil that may
become available from known reservoirs but is classified separately as indicated
additional reserves; (B) crude oil, natural gas, and natural gas liquids, the
recovery of which is subject to reasonable doubt because of uncertainty as to
geology, reservoir characteristics, or economic factors; (C) crude oil, natural
gas, and natural gas liquids, that may occur in undrilled prospects; and (D)
crude oil, natural gas, and natural gas liquids, that may be recovered from oil
shales, coal and other such sources.




Valuation
of proved undeveloped properties





Placing a
fair market value on proved undeveloped properties, commonly referred to as
“PUDs” is very subjective since there is no quoted market for them. The
negotiated price of any PUD between a willing seller and willing buyer depends
on the specific facts regarding the PUD, including:




·
            the
      location of the PUD in relation to known fields and reservoirs, available
      markets and transportation systems for oil and gas production in the
      vicinity, and other critical
services;





31





·
            the
      nature and extent of geological and geophysical data on the
      PUD;





·
            the
      terms of the leases holding the acreage in the area, such as ownership
      interests, expiration terms, delay rental obligations, depth limitations,
      drilling and marketing restrictions, and similar
  terms;





·
            the
      PUDs risk-adjusted potential for return on investment, giving effect to
      such factors as potential reserves to be discovered, drilling and
      completion costs, prevailing commodity prices, and other economic factors;
      and





·
            the
      results of drilling activity in close proximity to the PUD that could
      either enhance or condemn the prospect ’s chances of
    success.




Provision
for Depreciation, Depletion and Amortization





We have
computed our provision for Depreciation, Depletion and Amortization
(“DD&A”) on a unit-of-production method. Each quarter, we use the
following formulas to compute the provision for DD&A.





·
            DD&A
      Rate = Current period production, divided by beginning proved
      reserves





·
            Provision
      for DD&A = DD&A Rate, times the un-depleted full cost pool of oil
      and gas properties





Reserve
estimates have a significant impact on the DD&A rate. If reserve estimates
for our properties are revised downward in future periods, the DD&A rate
will increase as a result of the revision. Alternatively, if reserve estimates
are revised upward, the DD&A rate will decrease.





Hedging
Activities





From time
to time, we utilize derivative instruments, consisting of swaps, floors and
collars, to attempt to reduce our exposure to changes in commodity prices and
interest rates. We account for our derivatives in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended. SFAS
No. 133 requires that all derivative instruments be recognized as assets or
liabilities in the balance sheet, measured at fair value. The accounting for
changes in the fair value of a derivative depends on both the intended purpose
and the formal designation of the derivative. Designation is established at the
inception of a derivative, but subsequent changes to the designation are
permitted. We have elected not to designate any of our derivative financial
contracts as accounting hedges and, accordingly, account for these derivative
financial contracts using mark-to-market accounting. Changes in fair value of
derivative instruments which are not designated as cash flow hedges are recorded
in other income (expense) as changes in fair value of derivatives. Hedging is a
strategy that can help a company to mitigate the volatility of oil and gas
prices by limiting its losses if oil and gas prices decline; however, this
strategy may also limit the potential gains that a company could realize if oil
and gas prices increase.





Asset
Retirement Obligation





We follow
the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations.
SFAS No. 143 requires us to recognize a liability for the present value of all
legal obligations associated with the retirement of tangible, long-lived assets
and capitalize an equal amount as a cost of the asset. The cost of the
abandonment obligations, less estimated salvage values, is included in the
computation of depreciation, depletion and amortization.





32





Recent
Accounting Pronouncements


In
February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at
fair value. SFAS 159's objective is to reduce both complexity in accounting for
financial instruments and the volatility in earnings caused by measuring related
assets and liabilities differently. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 requires companies to provide additional information that
will help investors and other users of financial statements to more easily
understand the effect of the company's choice to use fair value on its earnings.
It also requires entities to display the fair value of those assets and
liabilities for which the company has chosen to use fair value on the face of
the balance sheet. SFAS 159 is effective as of the beginning of an entity's
first fiscal year beginning after November 15, 2007. The implementation of SFAS
159 did not have a material effect on the Company’s consolidated financial
statements.
  In
December 2007, the FASB issued SFAS No. 141(Revised 2007), Business Combinations (“SFAS
141(R)”), which replaces SFAS No. 141, Business Combinations . SFAS
141(R) establishes principles and requirements for determining how an enterprise
recognizes and measures the fair value of certain assets and liabilities
acquired in a business combination, including non-controlling interests,
contingent consideration, and certain acquired contingencies. SFAS 141(R) also
requires acquisition-related transaction expenses and restructuring costs be
expensed as incurred rather than capitalized as a component of the business
combination. SFAS 141(R) will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. SFAS
141(R) would have an impact on the accounting for any businesses acquired by the
Company after the effective date of the pronouncement.
  In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements — An Amendment of ARB No. 51
(“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the
non-controlling interest in a subsidiary (previously referred to as minority
interests). SFAS 160 also requires that a retained non-controlling interest upon
the deconsolidation of a subsidiary be initially measured at its fair value.
Upon adoption of SFAS 160, the Company would be required to report any
non-controlling interests as a separate component of stockholders’ equity. The
Company would also be required to present any net income (loss) allocable to
non-controlling interests and net income (loss) attributable to the stockholders
of the Company separately in its consolidated statements of operations. SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption
of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS 160 shall be applied prospectively. SFAS 160
would have an impact on the presentation and disclosure of the non-controlling
interests of any non wholly-owned businesses acquired by the Company in the
future.
  In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement
No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance and cash flows. The guidance in SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. This
Statement encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The
adoption of SFAS 161 is not expected to have a material impact on the Company’s
consolidated financial statements.
  In
April 2008, the FASB issued FASB Staff Position SFAS 142-3, Determination of the Useful Life of
Intangible Assets (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other
Intangible Assets . The objective of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
142 and the period of expected cash flows used to measure the fair value of the
asset under SFAS 141(R) and other U.S. GAAP principles. FSP SFAS 142-3 is
effective for fiscal years beginning after December 15, 2008. The adoption of
FSP SFAS 142-3 is effective January 1, 2009 and is not expected to have a
material impact on the Company’s consolidated financial
statements.
  In
June 2008, the FASB ratified Emerging Issue Task Force (“EITF”) 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock (“EITF
07-5”). EITF 07-5 provides framework for determining whether an instrument is
indexed to an entity’s own stock. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The implementation of EITF 07-5 is not
expected to have a material effect on the Company’s consolidated financial
statements.
  In
October 2008, the FASB issued FASB Staff Position 157-3, Determining Fair Value of a
Financial Asset in a Market That is Not Active (“FSP 157-3”). FSP 157-3
classified the application of SFAS 157 in an inactive market. It demonstrated
how the fair value of a financial asset is determined when the market for that
financial asset is inactive. FSP 157-3 was effective upon issuance, including
prior periods for which financial statements had not been issued. The
implementation of FSP 157-3 did not have a material effect on the Company’s
consolidated financial statements.
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(“SFAS 157”). This Statement defines fair value, establishes a framework for
measuring fair value and expands disclosure of fair value measurements. SFAS 157
applies under other accounting pronouncements that require or permit fair value
measurements and accordingly, does not require any new fair value measurements.
The Company adopted SFAS 157 as of January 1, 2008. In February 2008, the FASB
issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No.
157 , which provides a one year deferral of the effective date of SFAS
157 for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. Therefore, the Company has adopted the provisions of SFAS 157 with
respect to its financial assets and liabilities only. The adoption of SFAS 157
did not have a material effect on the Company’s consolidated financial
statements.
  In
December 2008, the FASB issued FASB Staff Position FIN 48-3, Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises (“FSP FIN 48-3”),
which was effective upon issuance. Management has determined that this
pronouncement does not apply to any of the Company’s
transactions.
  In
December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets (“FSP 132(R)-1”). FSP 132(R)-1
provides guidance on disclosure of plan assets of defined benefit pensions or
other postretirement plans and is effective for fiscal years ending after
December 15, 2009. Management has determined that this pronouncement does not
apply to any of the Company’s transactions.
  In
January 2009, the FASB issued FASB Staff Position EITF 99-20-1, Amendments to the Impairment
Guidance of EITF Issue No. 99-20 (“FSP EITF 99-20”). FSP EITF 99-20 deals
with securitized financial assets and other than temporary impairment. FSP EITF
99-20 is effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. Management has
determined that this pronouncement does not apply to any of the Company’s
transactions.




SEC
Rulemaking




On
December 31, 2008, the SEC published the final rules and interpretations
updating its oil and gas reporting requirements. Many of the revisions are
updates to definitions in the existing oil and gas rules to make them consistent
with the petroleum resource management system, which is a widely accepted
standard for the management of petroleum resources that was developed by several
industry organizations. Key revisions include the ability to include
nontraditional resources in reserves, the use of new technology for determining
reserves, permitting disclosure of probable and possible reserves, and changes
to the pricing used to determine reserves in that companies must use a 12-month
average price. The average is calculated using the first-day-of-the-month price
for each of the 12 months that make up the reporting period. The SEC will
require companies to comply with the amended disclosure requirements for
registration statements filed after January 1, 2010, and for annual reports
for fiscal years ending on or after December 15, 2009. Early adoption is
not permitted. We are currently assessing the impact that the adoption will have
on our disclosures, operating results, financial position and cash
flows.





33




Item 8.    Financial Statements and
Supplementary Data.




Our
Consolidated Financial Statements and supplementary financial data are included
in this annual report on Form 10-K beginning on page F-1 and are incorporated
herein by reference.




Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure.




None.




Item 9A(T).  Controls and
Procedures.




Disclosure
Controls and Procedures
  The
Company’s management has evaluated, with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer, the effectiveness of the
Company’s disclosure controls and procedures, as of the end of the period
covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, the Company’s Chief Executive Officer, along with the Company’s
Chief Financial Officer, concluded that the Company’s disclosure controls and
procedures were not effective as a result of material weaknesses in internal
controls as of December 31, 2008.
  (a)
Management’s Annual Report on
Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining internal control over
financial reporting (ICFR). Our internal control system was designed to provide
reasonable assurance to the Company’s management and Board of Directors
regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have
inherent limitations, and therefore can only provide reasonable assurance with
respect to financial statement preparation and presentation.
  An
internal control material weakness is a significant deficiency, or combination
of significant deficiencies, that results in more than a remote likelihood that
a material misstatement of the financial statements would not be prevented or
detected on a timely basis by employees in the normal course of their work. Our
management’s assessment is that the Company did not maintain effective ICFR as
of December 31, 2008 within the context of the framework established by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on our ICFR as designed, documented and tested, we identified multiple material
weaknesses primarily related to maintaining an adequate control environment. The
material weaknesses in our internal controls related to inadequate staffing
within our accounting department and upper management, the assignment of
authority and responsibility, lack of consistent policies and procedures,
inadequate monitoring controls, inadequate disclosure controls and significant
turnover among the directors and officers of the Company.
  This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
  (b)
Changes in Internal Control
Over Financial Reporting
  We
have evaluated our internal control over financial reporting as of the end of
our fourth fiscal quarter. There were no changes in our internal control over
financial reporting, identified in connection with the evaluation of such
internal control, that occurred during the fourth quarter of our last fiscal
year that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
  This
management report on internal control over financial reporting shall not be
deemed to be filed for purposes of Section 18 of the Securities Exchange Act of
1934, as amended or otherwise subject to the liabilities of that
Section.





34





PART
III





Item
10.  Directors, Executive Officers and Corporate Governance.




The
current Board of Directors and Executive Officers of Platinum are as
follows:




Name
            
            Age
      (1)
            
            Position
            
            Director
                Since
            
            Director
                ClassTim
      G. Culp
            
            50
            
            Chairman
      of the Board
            
            2007
            
            Class
      CAl
      Rahmani
            
            62
            
            Interim
      Chief Executive Officer and Director
            
            2009
            
            Class
      ALisa
      Meier
            
            36
            
            Chief
      Financial Officer and Treasurer
            
            -
            
            -William
      C. Glass
            
            38
            
            President
      and Director
            
            2005
            
            Class
      BBarry
      Kostiner
            
            37
            
            Director
            
            2005
            
            Class
      CBernard
      Albert Lang
            
            72
            
            Director
            
            2008
            
            Class
      ARoderick
      McLennan
            
            73
            
            Director
            
            2009
            
            Class
      AWilliam
      Blain
            
            47
            
            Director
            
            2009
            
            Class
      A








Tim G.
Culp has been our Chairman of the Board and President and Chief Executive
Officer of New TEC since the TEC acquisition in October 2007.  From
June 2005 through October 2007, Mr. Culp was President and Chief Executive
Officer of Tandem, Old TEC’s parent entity.  Prior to this, Mr. Culp
was a co-founder, senior officer and principal stockholder of Old TEC's and
Shamrock Energy Corporation and its operating affiliate, Arrowhead Operating,
Inc. Prior to forming TEC, Mr. Culp was a Vice President with Adobe Resources
Corporation. During Mr. Culp’s tenure, Adobe, TEC and Shamrock acquired over
$140 million in oil and gas properties. Mr. Culp has over twenty-five years of
oil and gas industry experience with over twenty years of experience in property
acquisitions and development. Prior to joining Adobe, Mr. Culp was a manager for
the public accounting firm of KPMG Peat Marwick. Mr. Culp received his Bachelor
of Business Administration degree in Accounting from Texas Tech University in
1981.




Al Rahmani
has been a member of our board of directors since his appointment on February
18, 2009.  The Board appointed Mr. Rahmani to Interim Chief Executive
Officer on March 2, 2009, replacing Mr. Kostiner as Chief Executive
Officer.  Prior to joining the Company, Mr. Rahmani held the position
of Senior Vice President of Engineering and Development for Triple Five
Worldwide Organization, LLC., and served as a Managing Director of A.R.
Development Inc., a technical engineering and financial services consulting firm
between 1995 and December 2008. In addition, Mr. Rahmani received a B.S. in
civil engineering and a M.S. in civil/environmental engineering from the
University of Massachusetts.




Lisa Meier
has been our Chief Financial Officer and Treasurer since August 11, 2008. Ms.
Meier is a certified public accountant, and prior to joining the Company served
from April 2004 to August 2008 as Chief Financial Officer of Flotek
Industries, Inc., a New York Stock Exchange listed company based in Houston,
Texas, specializing in innovative production chemicals and down-hole drilling
and production equipment. Previously, Ms. Meier served as Supervisor of SEC
Financial Reporting for Service Corporation International from 2003 to 2004.
Prior to that time, Ms. Meier held various accounting, finance, and risk
management positions at several Fortune 500 companies and served in the energy
audit practice at PricewaterhouseCoopers. Ms. Meier earned a Bachelor of
Business Administration (BBA) from the University of Texas at Austin and a
Master of Professional Accountancy (MPA) from the University of Texas at Austin
in 1996. Ms. Meier also currently serves on the board of directors of Northern
Oil and Gas, Inc., an American Stock Exchange listed company. Northern Oil and
Gas, Inc. is an exploration and production company focused in the Bakken
formation and throughout the Rocky Mountain region. She serves as chairman of
its audit committee and compensation committee.





35





William C.
Glass has been our President and a member of our board of directors since
inception. Mr. Glass has worked in the energy industry and energy financial
derivatives markets since 1996. Mr. Glass has been an independent energy trader
and consultant since December 2003. From July 2000 to December 2003, Mr. Glass
was Vice president of Marubeni Energy Incorporated’s North American Natural gas
division. He was responsible for all natural gas transactions, transportation,
marketing, trading, and operations. From February 1997 to July 2000, Mr. Glass
was a senior trader at Southern Company Energy marketing. His responsibilities
included managing the financial gas daily desk as well as trading gulf coast,
northeast, and mid west financial products. From October 1995 to February 1997,
Mr. Glass worked at Enron as part of the risk management team. Mr. Glass holds a
bachelor’s in Finance and Accounting from Texas A&M University.




Barry
Kostiner has been a member of our board of directors since inception. Mr.
Kostiner was also our chief executive officer until March 2, 2009 when the Board
removed him from such position.  Mr. Kostiner has been involved in
energy trading and structuring since 1992. Mr. Kostiner has negotiated
structured transactions and built trading desks in electricity, natural gas
options and physical gas. Mr. Kostiner was formerly a manager and principal of
KD Resources, LLC, a privately-owned Delaware limited liability company engaged
in the oil and gas exploration and production industry.  Mr. Kostiner
was the manager of Braesridge Energy LLC, which invests in energy companies,
including ours, from its inception on July 19, 2007
through February 14, 2008. From March 2003 through 2005, he
was a principal of Ellipse Energy LLC, a consulting and private equity
firm. From March 2001 to January 2003, he was a managing director at Allegheny
Energy, an energy trading and generation asset management company. At Allegheny,
as a managing director, he was responsible for the physical gas trading desk
that controlled fuel supply and risk management for 2,800 MW of natural gas
fired generation, with an acquisition value of over $2 billion. He also was
involved in initiating the coal trading group, the E&P asset acquisition and
European trading businesses. From January 1999 until March 2001, he was a vice
president at Merrill Lynch in its energy trading group which was subsequently
sold to Allegheny Energy. From October 1995 until January 1999, he was an
associate at Goldman Sachs in its energy origination group. Mr. Kostiner was a
founding employee involved in business development, strategy and management for
the joint venture between Goldman Sachs and Constellation Energy. He received a
BS in Electrical Engineering and MS in applied mathematics from MIT. His
master’s thesis jointly supervised by Harvard’s Kennedy School of Government was
on mathematics applied to deregulated electricity markets.




Bernard Albert
Lang has been a member of our board of directors since his appointment on
July 15, 2008. Mr. Lang is currently President of Bert Lang and Associates, a
megaproject and energy consulting firm. Mr. Lang was Executive Vice
President, Project Execution for Synenco Energy Inc., until it was acquired
by Total in August 2008. Mr. Lang is also currently a director for Exall
Energy Corporation, a Canadian based oil and gas E&P company. Prior to
joining Synenco, Mr. Lang was a Partner of Techna West Engineering, an Edmonton,
Alberta-based firm that specializes in petroleum-based engineering services,
where he acted as the Vice President, Client Relations from November 2002 to
January 2006. From July 2001 to November 2002, Mr. Lang was President &
Chief Operating Officer (Contract) and the Vice Chairman of the Board of
Directors for Exall Resources Ltd. Slovakia. There, Mr. Lang was responsible for
the restructuring and reorganization of Novácke Chemické Závody a.s., a
subsidiary of Exall Resources that produces organic and inorganic chemicals,
technical gases, polymers, PVC emulsions and suspensions along with other
products.  Prior to that, Mr. Lang held various executive management
positions with Suncor Energy Inc. from June 1982 to July 2001. During this time
Mr. Lang directed an award winning changeover project of an upgrader control
room from manual to computer control and a $210 million flue gas
desulphurization plant. From 1997 to 2001, Mr. Lang served as Vice-President,
Millennium Project where he was accountable for a $3.4 billion oil sands
expansion. Suncor is one of Canada’s largest petroleum recovery and refining
operations, mining vast heavy oil and natural gas reserves in northern Alberta
and throughout western Canada.




Roderick
McLennan has been a member of our board of directors since his
appointment on February 18, 2009.  Mr. McLennan is a founder and
former Managing Partner of and now Counsel to the law firm of McLennan Ross LLP.
He is one of Alberta's most senior counsel having practiced for more than 45
years, including the areas of commercial litigation, construction and land
development. Mr. McLennan has lectured for a number of years at the University
of Alberta, Faculty of Law in advocacy. He served as Chairman of the Second
Quadrennial Judicial Compensation and Benefits Commission of Canada and has been
a Fellow of the American College of Trial Lawyers since 1985 where he has served
as Chair of the Judiciary Committee. He has been recognized on numerous
occasions in the Lexpert guide as a leading litigator. He is the President and
Chief Executive Officer of Partridge Holdings Ltd., a private holding and
investing company. Mr. McLennan obtained his Bachelor of Laws degree from the
University of Alberta and was subsequently admitted to the law societies of
Alberta (1959) and the Northwest Territories (1961).





36





William
Blain has been a member of our board of directors since his appointment
on February 18, 2009.  Mr. Blain is currently the senior partner in
the law firm of Blain Law providing legal services to First Nations and
corporate entities doing business with First Nations in the area of oil and gas
and mining on reserve, traditional and Treaty lands.  He has worked as
in house counsel to Revenue Canada, and as litigation counsel with the Canadian
Federal Department of Justice. Mr. Blain has also served as in-house counsel to
Indian Oil and Gas Canada providing legal advice regarding the interpretation
and application of Federal and Provincial environmental and oil and gas
legislation in British Columbia, Alberta and Saskatchewan. Mr. Blain spent five
years as the General Manager of the Land Division of Indian Oil and Gas Canada
(IOGC) during which time he was responsible for all oil and gas and surface
dispositions, negotiations, surface and mineral title, pooling, drafting
contractual agreements and administering and enforcing those contracts. Mr.
Blain completed his undergraduate general studies at the University of Calgary,
Alberta, and received his Bachelor of Laws degree from the University of Alberta
in 1991.




Board
Composition





Our board
of directors is divided into three classes with only one class of directors
being elected in each year and each class serving a three-year term. The term of
office of the first class of directors (Class A), currently consisting of
Bernard Lang, Al Rahmani, Roderick McLennan and William Blain will expire at our
first annual meeting of stockholders. The term of office of the second class of
directors (Class B), consisting of William C. Glass, will expire at the second
annual meeting. The term of office of the third class of directors (Class C),
currently consisting of Tim G. Culp and Barry Kostiner, will expire at the third
annual meeting. Pursuant to the TEC acquisition agreement, Platinum has agreed
that, for so long as Mr. Culp owns at least one percent (1%) of the outstanding
shares of Platinum, to the extent permitted by applicable law and corporate
governance rules, it shall: (i) cause Mr. Culp to be nominated to the board as a
Class C director and submitted for election by the stockholders of Platinum; and
(ii) cause an individual recommended by Mr. Culp to be nominated to the board as
a Class A director (which individual shall be “independent” within the meaning
of the NASDAQ corporate governance rules) and submitted for election by the
shareholders of Platinum.  Mr. Culp has not yet recommended any
individual to be nominated to the board.




Board
Committees





Audit
Committee





We do not
have an audit committee of our board of directors, nor do we have an audit
committee financial expert. Our entire Board performs the functions of an audit
committee and because our equity securities are not listed on an exchange or
automated quotation system, we are not required to appoint an audit
committee.  We believe that the members of our board of directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial
reporting.  Accordingly, we do not have an audit committee financial
expert.




We have
added three board members in 2008 and 2009 that are considered “independent”
under the Nasdaq listing standards and plan to establish an audit committee that
will consist of all or some of these directors in the future.




Compensation
Committee





We do not
have a compensation committee. As such, the entire board of directors performs
the function of a compensation committee.





37





Nominating
Committee





We do not
have a nominating committee. As such, the entire board of directors performs the
function of a nominating committee. The board will consider director candidates
who have relevant business experience, are accomplished in their respective
fields and who possess the skills and expertise to make a significant
contribution to the board of directors, the Company and its
shareholders.  If a shareholder wishes to suggest a proposed name for
board consideration, the name of that nominee and related personal information
should be forwarded to the Chairman of the Board.





Code
of Ethics





We have
adopted a Code of Business Conduct and Ethics that applies to our principal
executive officer, principal financial officer, or persons performing similar
functions, as well as to all our directors, officers and employees. Our Code of
Conduct and Ethics is posted on our Internet website. Our Internet website is
www.platenergy.com. We intend to satisfy the disclosure requirements under Item
5.05 on Form 8-K regarding an amendment to, or waiver from, a provision of our
Code of Business Conduct and Ethics by posting such information on our
website.




Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires Platinum
directors, officers and persons owning more than 10% of Platinum’s common stock
to file reports of ownership and changes of ownership with the Securities and
Exchange Commission. Based on its review of the copies of such reports furnished
to Platinum, or representations from certain reporting persons that no other
reports were required, Platinum believes that all applicable filing requirements
were complied with during the fiscal year ended December 31, 2008 except as
follows:  Braesridge Energy LLC filed a late Form 4 reporting nineteen
purchases of warrants; Braesridge Energy LLC and Syd Ghermezian filed three late
Forms 4 reporting a purchase of common stock purchase warrants owned by
Braesridge Energy LLC; Syd Ghermezian filed a late Form 3; and Mr. Rogers filed
a late Form 4 reporting the purchase of common
stock.   Additionally, subsequent to December 31, 2008, Messrs.
Lang and Rosenberg each filed a late Form 4 reporting the acquisition of a stock
options.




Item
11.  Executive Compensation.





Summary
Compensation Table





The
following table sets forth the aggregate compensation awarded to, earned by or
paid to our named executive officers in 2008 and 2007.





38





Name and Principal Position
                
                Year
                
                Salary
                    ($)
                
                Bonus
                    ($)
                
                Stock
                    Awards
                    ($)
                
                Option
                    Awards
                    (1) ($)
                
                Non-Equity
                    Incentive Plan
                    Compensation
                    ($)
                Nonqualified
                    Deferred
                    Compensation
                    Earnings
                
                All Other
                    Compensation
                    (2) ($)
                
                
                Total($)Tim
      Culp
                
                2008
                
                
                188,760
                
                
                
                
                
                
                
                
                
                
                
                12,000
                
                
                
                200,000Chairman
      of the Board(3)
                
                2007
                
                
                177,700
                
                
                
                
                
                
                
                
                
                
                
                —
                
                
                
                177,700Barry
      Kostiner
                
                2008
                
                
                188,760
                
                
                2,750
                
                
                
                
                
                
                
                
                
                
                
                
                
                191,510Former Chief
                  Executive
      Officer(4)
                
                2007
                
                
                30,000
                
                
                10,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                40,000Lisa
      Meier
                
                2008
                
                
                93,750
                
                
                2,750
                
                
                
                
                12,104
                
                
                
                
                
                5,000
                
                
                
                113,604Chief
      Financial Officer andTreasurer(5)Robert
      L. Kovar
                
                2008
                
                
                125,510
                
                
                
                
                
                
                
                19,494
                
                
                
                
                
                
                
                
                
                145,004Former
      Chief Operating Officer(6)




(1)
            Represents
      the dollar amount recognized for financial statement reporting purposes
      for the year ended December 31, 2008 in accordance with Financial
      Accounting Standards Board Statement of Financial Accounting Standards No.
      123 (revised 2004), “Share-Based Payment” as modified or supplemented
      (“SFAS 123R”).  See Note 9 – Equity and Stock Plans, for a
      description of the assumptions used in the calculation of stock option
      expense. Ms. Meier and Mr. Kovar each received an option to purchase
      50,000 shares of common stock.  Ms. Meier’s stock options have
      an exercise price of $3.90 per share, the closing price of the common
      stock on August 11, 2008, the date of grant, and are subject to a four
      year vesting schedule, with one-quarter of such options vesting on each
      anniversary of the date of grant, beginning August 11,
      2009.  Mr. Kovar’s options had an exercise price of $5.15 per
      share, the closing price on the date of grant, and were subject to a five
      year vesting schedule, with one-fifth of such options to vest on each
      anniversary of the date of grant, beginning April 29,
      2009.




(2)
            Represents
      auto allowances.




(3)
            From
      January 1, 2007 until the completion of the TEC acquisition on
      October 26, 2007, Mr. Culp received compensation from TEC as an
      officer of TEC.  As of March 2, 2009, the position of Chairman
      of the Board is no longer an executive position with the
      Company.




(4)
            Mr.
      Kostiner did not receive any compensation from Platinum until the
      completion of the TEC acquisition on October 26, 2007.  Mr.
      Kostiner was removed from the position of Chief Executive Officer on March
      2, 2009.




(5)
            Mrs.
      Meier was hired August 11, 2008.  See “Employment
      Agreements-Lisa Meier” below.




(6)
            Mr.
      Kovar was hired April 29, 2008 upon completion of the acquisition of
      Maverick Engineering, Inc. See “Employment Agreements-Robert L. Kovar”
      below.  On December 3, 2008, Mr. Kovar resigned from his
      position of Chief Operating
Officer.




On  February
18, 2009, Mr. Al Rahmani was appointed to our board of directors and on March 2,
2009 Mr. Rahmani was appointed as our Interim Chief Executive
Officer.  On April 13, 2009, the board of directors approved an annual
salary for Mr. Rahmani of $185,000, retroactive to January 1,
2009.




Equity
Awards





During
2008, to promote our long-term objectives, equity awards were made under the
2006 Long Term Incentive Plan to directors, executive and other employees who
were in a position to make a significant contribution to our long-term success.
Our 2006 Long Term Incentive Plan provides for different types of equity awards,
including non-qualified and incentive stock options, shares of common stock,
restricted stock and stock appreciation rights. Since equity awards may vest and
grow in value over time, this component of our compensation plan is designed to
reward performance over a sustained period.  Stock options represent
rights to purchase shares of our stock at a set price at some date in the
future, not to exceed ten years from the date of grant. Stock options are
granted with an exercise price equal to the closing stock price on the business
day immediately preceding the date of grant.  A total of 172,000
options have been made or committed to be made by the Company as May 15, 2009.
See “Employment Agreements” and “Director Compensation” for information on
option grants made to certain named executive officers and
directors.




39


Employment
Agreements





Lisa Meier.  On
August 11, 2008, the Company entered into a five year employment agreement with
Lisa Meier pursuant to which Ms. Meier was appointed as Chief Financial Officer
and Treasurer of the Company. Pursuant to the terms of the employment agreement,
Ms. Meier will be paid a $250,000 base annual salary, increasing by 5% annually.
Ms. Meier will be eligible for an annual bonus as determined by the Board or a
compensation committee of the Board which, in the event the Company has positive
cash flow, will be at least $50,000. In addition, Ms. Meier will be eligible for
a performance bonus based on certain predetermined budgeted goals. The target
bonus for this purpose will be 50% of base salary. In addition, pursuant to the
employment agreement, Ms. Meier was granted 50,000 incentive stock options to
purchase shares of the Company’s common stock with an exercise price of $3.90,
the closing price on August 11, 2008, the date of grant, and will be granted an
additional 50,000 stock options each year thereafter during the term of her
employment. The granted stock options are subject to a four year vesting
schedule, with one-quarter of such options vesting on each anniversary of the
date of grant, beginning August 11, 2009. Upon a change in control of the
Company, the employment agreement provides that all options granted to Ms. Meier
will immediately vest. Pursuant to the employment agreement, if Ms. Meier’s
employment is terminated by the Company without cause or Ms. Meier terminates
her employment for good reason, she will receive an 18 month severance package.
If, however, Ms. Meier’s employment is terminated by the Company for cause or
Ms. Meier terminates her employment without good reason, she will receive no
severance package. Ms. Meier has also agreed that during the term of her
employment with the Company and for an 18 month period thereafter, she will not
compete with the Company nor solicit employees of the Company. If Ms. Meier
breaches any of these obligations, she would forfeit her right to any severance
payments and benefits to which she otherwise would be entitled.




Pursuant
to the Employment Agreement, Ms. Meier was also appointed President of Platinum
Energy Services and Infrastructure (“PSI”), a proposed new business that Ms.
Meier will help develop in the oilfield services industry.  PSI is a
subsidiary of Platinum.  PSI has entered into a Restricted Stock
Agreement with Ms. Meier pursuant to which Ms. Meier was issued 50 restricted
shares of PSI’s common stock, representing 5% of the outstanding shares of PSI
common stock.  Under the agreement, the shares are subject to a
vesting schedule, with one-quarter of such shares to be vested immediately and
one-quarter on each anniversary thereafter until all of the shares are
vested.   All shares will be released from restriction upon a
sale of the PSI business.  To date, PSI has not acquired any assets or
begun operations and no value has been assigned to the shares.




Robert L.
Kovar.  In connection with the acquisition of Maverick on April
29, 2008, the Company entered into an employment agreement with Robert Kovar
pursuant to which Mr. Kovar was appointed as Chief Operating Officer of the
Company and President of Maverick, a wholly-owned subsidiary. Mr. Kovar was
Maverick’s founder and its president and chief executive officer prior to the
acquisition. The employment agreement provided for an initial term of five
years. Pursuant to the terms of the employment agreement, Mr. Kovar was to be
paid a $200,000 base annual salary and was to be eligible for annual performance
bonuses in such amount and at such times as determined by the Board or the
compensation committee, in their sole discretion. In addition, pursuant to the
employment agreement, Mr. Kovar was granted 50,000 options to purchase shares of
Platinum’s common stock with an exercise price of $5.15 per share, the closing
price on the date of grant, and was to be granted an additional 50,000 stock
options on each of the four succeeding anniversaries of the effective date of
the employment agreement at the closing price on each anniversary date. The
options were subject to a 5 year vesting schedule, with one-fifth of such
options vesting on each anniversary of the date of grant, beginning April 29,
2009. Upon a change in control of the Company, the employment agreement provided
that all options granted to Mr. Kovar would immediately
vest.  Pursuant to the employment agreement, if Mr. Kovar’s employment
was terminated by the Company without cause or Mr. Kovar terminated his
employment for good reason, he would have received an 18 month severance package
and his cash flow note would have become immediately due and payable. If,
however, Mr. Kovar’s employment was terminated for cause or Mr. Kovar terminated
his employment without good reason, he would receive no severance package and
his cash flow note would be cancelled. Mr. Kovar also agreed that during the
term of his employment with the Company and for an 18 month period thereafter,
he would not compete with nor solicit employees of the Company.  If
Mr. Kovar breaches any of these obligations, he forfeits his right to any
severance payments and benefits to which he otherwise would be
entitled.  Mr. Kovar delivered a letter of resignation, effective on
December 3, 2008.  Accordingly, Mr. Kovar’s employment agreement was
terminated on December 3, 2008.   On December 3, 2008 Mr. Kovar
filed a lawsuit against us claiming that he had good reason to terminate his
employment and claims he is entitled to a severance payment under his employment
agreement, accelerated vesting of his stock options and accelerated payment of
the cash flow note issued to him in connection with our purchase of Maverick in
April 2008.   We believe that Mr. Kovar did not have good reason
to resign and that upon his resignation, his options were forfeited and
cancelled.  See “Legal Proceedings.”




40


Long-Term
Incentive Compensation Plan





Platinum’s
2006 Long-Term Incentive Plan (the “2006 Plan”) has been approved by our board
of directors and our stockholders at the special meeting of stockholders held on
October 26, 2007, in connection with the consummation of the TEC
acquisition.  The purposes of the 2006 Plan are to create incentives
designed to motivate our employees to significantly contribute toward our growth
and profitability, to provide our executives, directors and other employees, and
persons who, by their position, ability and diligence, are able to make
important contributions to our growth and profitability, with an incentive to
assist us in achieving our long-term corporate objectives, to attract and retain
executives and other employees of outstanding competence, and to provide such
persons with an opportunity to acquire an equity interest in us.




We may
grant incentive and non-qualified stock options, stock appreciation rights,
performance units, restricted stock awards and performance bonuses, or
collectively, awards, to our officers and key employees, and those of our
subsidiaries. In addition, the Plan authorizes the grant of non-qualified stock
options and restricted stock awards to our directors and to any independent
contractors and consultants who by their position, ability and diligence are
able to make important contributions to our future growth and profitability.
Generally, all classes of our employees are eligible to participate in our
Plan.  As of May 15, 2009, options to purchase 172,000 shares of our
common stock have been granted under the 2006 Plan.




We have
reserved a maximum of 4 million shares of our authorized common stock, subject
to adjustment, for issuance upon the exercise of awards to be granted pursuant
to the 2006 Plan.




We do not
have a compensation committee. As such, the entire board of directors performs
the function of a compensation committee including administration of the
Plan.




The
2006 Plan permits the board to grant the following types of
awards:




Stock Options.  The
2006 Plan provides that the stock options may either be Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or Non-Qualified Options, which are stock options other than Incentive
Stock Options within the meaning of Sections 422 of the
Code.  Incentive Stock Options may be granted only to our employees or
employees of our subsidiaries, and must be granted at a per share option price
not less than the fair market value of our common stock on the date the
Incentive Stock Option is granted.  The maximum number of shares
subject to stock options that may be awarded in any fiscal year to any employee
may not exceed 100,000 and the number of shares subject to stock options that
may be awarded in any fiscal year to any director may not exceed
10,000.




41


The
exercise price for each stock option granted under the 2006 Plan will be
determined by our board of directors or a committee of the board at the time of
the grant, but will not be less than fair market value on the date of the grant
(not less than 110% of the fair market value of one share of our common stock on
the date the Incentive Stock Option is granted if the grantee is a 10% or
greater stockholder of the total combined voting power of all of our outstanding
stock of all classes entitled to vote in the election of directors). Our board
of directors or a committee of the board will also determine the duration of
each option; however, no option may be exercisable more than ten years after the
date the option is granted (no more than five years if the grantee is a 10% or
greater stockholder of the total combined voting power of all of our outstanding
stock of all classes entitled to vote in the election of
directors).  Options granted under our Plan will vest at rates
specified in the option agreement at the time of grant; however, all options
granted under our Plan will vest upon the occurrence of a change of control, as
defined in the Plan. The 2006 Plan also contains provisions for our board of
directors or a committee of the board to provide in the participants’ option
award agreements for accelerating the right of an individual employee to
exercise his or her stock option or restricted stock award in the event of
retirement or other termination of employment.  The exercise price of
stock options may be paid in cash, in whole shares of our common stock, in a
combination of cash and our common stock, or in such other form of consideration
as our board of directors or the committee of the board may determine, equal in
value to the exercise price. However, only shares of our common stock which the
option holder has held for at least six months on the date of the exercise may
be surrendered in payment of the exercise price for the options.




Stock Appreciation Rights.
Stock appreciation rights may or may not be granted in connection with the grant
of an option. The exercise price of stock appreciation rights granted under the
2006 Plan will be determined by the board of directors or a committee of the
board; provided, however, that such exercise price cannot be less than the fair
market value of a share of common stock on a date the stock appreciation right
is granted (subject to adjustments). A stock appreciation right may be exercised
in whole or in such installments and at such times as determined by the board of
directors or a committee of the board.




Restricted Stock. Restricted
shares of our common stock may be granted under our Plan subject to such terms
and conditions, including forfeiture and vesting provisions, and restrictions
against sale, transfer or other disposition as the board of directors or a
committee of the board may determine to be appropriate at the time of making the
award.  The board of directors or a committee of the board, in its
discretion, may provide in the award agreement for a modification or
acceleration of shares of restricted stock in the event of permanent disability,
retirement or other termination of employment or business relationship with the
grantee. The maximum number of restricted shares that may be awarded under the
Plan to any employee may not exceed 100,000 shares and the number of restricted
shares that may be awarded in any fiscal year to any director may not exceed
10,000 shares.




Performance Units. The 2006
Plan permits grants of performance units, which are rights to receive cash
payments equal to the difference (if any) between the fair market value of our
common stock on the date of grant and its fair market value on the date of
exercise of the award, except to the extent otherwise provided by the board of
directors or a committee of the board or required by law. Such awards are
subject to the fulfillment of conditions that may be established by the board of
directors or a committee of the board including, without limitation, the
achievement of performance targets based upon the factors described above
relating to restricted stock awards.




Performance Bonus. The 2006
Plan permits grants of performance bonuses, which may be paid in cash, common
stock or combination thereof as determined by the board of directors or a
committee of the board.  The performance targets will be determined by
the board of directors or a committee of the board based upon the factors
described above relating to restricted stock awards.  Following the
end of the performance period, the board of directors or a committee of the
board will determine the achievement of the performance targets for such
performance period.  An employee’s receipt of cash, common stock or
combination thereof will be contingent upon achievement of performance targets
during the performance period.  Any payment made in shares of common
stock will be based upon the fair market value of the common stock on the
payment date. The maximum amount of any performance bonus payable to a
participant in any calendar year is $500,000.




The 2006
Plan provides for the acceleration of any unvested portion of any outstanding
awards under the 2006 Plan upon a change of control event.




Awards
granted under the 2006 Plan that have not vested will generally terminate
immediately upon the grantee’s termination of employment or business
relationship with us or any of our subsidiaries for any reason other than
retirement with our consent, disability or death.




42


Outstanding
Equity Awards at Fiscal Year-End 2008




The following table sets forth
information concerning unexercised options outstanding as of December 31,
2008 for each named executive officer.





Option AwardsName
                
                Number of
                    Securities
                    Underlying
                    Unexercised
                    Options #
                    Exercisable
                
                
                Number of
                    Securities
                    Underlying
                    Unexercised
                    Options #
                    Unexercisable
                
                
                Option
                    Exercise
                    Price ($)
                
                Option
                    Expiration
                    DateLisa
      Meier (1)
                
                
                50,000
                
                
                
                —
                
                
                
                3.90
                
                August 11, 2018Robert
      L. Kovar (2)
                
                
                50,000
                
                
                
                —
                
                
                
                5.15
                
                April 29, 2018





(1) The
stock options are subject to a four year vesting schedule, with one-quarter of
such options vesting on each anniversary of the date of grant, beginning August
11, 2009.


(2) The
options were subject to a five year vesting schedule, with one-fifth of
such options vesting on each anniversary of the date of grant, beginning April
29, 2009.




Director
Compensation




The
following table sets forth information concerning the compensation earned by
non-employee directors during the fiscal year ended December 31,
2008.  Other than Mr. Glass, none of our employee directors received
compensation for their services as a director on our Board.
  Name
              
              Option
      Awards($)(1)
              
              
              Total($)Bernard
      Albert Lang(2)
              
              
              1,146
              
              
              
              1,146Norman
      Rosenberg(3)
              
              
              1,146
              
              
              
              1,146William
      Glass
              
              
              0
              
              
              
              0
 _______________
 (1)  Represents
      the dollar amount recognized for financial statement reporting purposes
      for the fiscal year ended December 31, 2008 in accordance with SFAS 123R
      disregarding the estimate of forfeitures.  See Part II, Item 8 –
      Notes to the Consolidated Financial Statements for the years ended
      December 31, 2008 and 2007, Note 9 – Equity and Stock Plans, for a
      description of the assumptions used in the calculation of stock option
      expense.
  (2)  As
      of December 31, 2008, Mr. Lang held options to purchase 5,000 shares of
      common stock, none of which were
exercisable.
  (3)  As
      of December 31, 2008, Mr. Rosenberg held options to purchase 5,000 shares
      of common stock, none of which were exercisable.  Mr. Rosenberg
      resigned from our board of directors in March 2009.  Upon his
      resignation from the board, all of his options were forfeited and
      cancelled.


Messrs.
Lang and Rosenberg each received options to purchase 5,000 shares of common
stock on July 16, 2008 with an exercise price of $3.90 per share, the closing
price on the date of grants.  The options are subject to a five year
vesting schedule, with one-fifth of such options vesting on each anniversary of
the date of grant, beginning July 16, 2009.  In addition, each of
Messrs. Lang and Rosenberg received options to purchase 16,000 shares of common
stock on January 1, 2009 with an exercise price of $0.61 per share, the closing
price on the date of grants.  The options vest on the first
anniversary of the date of grant, January 1, 2010.  Upon his
resignation from our board of directors in March 2009, all of Mr. Rosenberg’s
options were forfeited and cancelled.




On
February 10, 2009, Messrs. Glass, Lang and Rosenberg were each paid $15,000 for
their services on our board of directors in 2008.




Beginning
in 2009, independent directors will receive a $25,000 annual stipend and an
annual grant of stock options to purchase up to 5,000 shares of our common stock
for their services on our board.  Independentdirectors are also
reimbursed for their expenses for attending board meetings.




Compensation
Committee Interlocks and Insider Participation





We do not
have a compensation committee.  The full board of directors performs
the duties of a compensation committee.  For the year ended December
31, 2008, our board of directors consisted of  Messrs. Culp, Glass,
Kostiner, Lang and Rosenberg.  No person who served as a member of the
board of directors during the fiscal year ended December 31, 2008 was a current
or former officer or employee or engaged in certain transactions with us,
required to be disclosed by regulations of the SEC.  There were no
compensation committee “interlocks” during the fiscal year ended December 31,
2008, which generally means that none of our executive officers served as a
director or member of the compensation committee of another entity, one of whose
executive officers served as one of our directors.




Item
12.  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.





The
following table sets forth information regarding the beneficial ownership of our
common stock as of May 15, 2009:


43


·
            each
      person known by us to be the beneficial owner of more than 5% of our
      outstanding shares of common stock;




·
            each
      named executive officer and director;
and




·
            all
      our officers and directors as a
group.




Name and Address of Beneficial Owner(1)
              
              Amount and
                  Nature of
                  Beneficial
                  Ownership
              
              
              Approximate
                Percentage of
                Outstanding
                Common
                Stock**Jackie
      Alan Chambers(2)
              
              
              1,410,650
              
              
              
              5.9
              %J.
      David Rogers (3)
              
              
              5,634,519
              
              
              
              23.4
              %D.B.
      Zwirn Special Opportunities Fund, L.P.(4)
              
              
              1,625,000
              
              
              
              6.8
              %D.B.
      Zwirn Special Opportunities Fund, Ltd.(4)HCM/Z
      Special Opportunities LLC(4)QVT
      Financial LP (5)
              
              
              1,650,983
              
              
              
              6.9
              %QVT
      Financial GP LLC (5)QVT
      Fund LP (5)QVT
      Associates GP LLC (5)Syd
      Ghermezian(6)
              
              
              9,737,821
              
              
              
              40.5
              %Regent
      Venture V LLC(6)Braesridge
      Energy LLC (6)Mark
      Nordlicht (7)
              
              
              2,151,000
              
              
              
              8.9
              %Tim
      G. Culp
              
              
              2,115,976
              
              
              
              8.8
              %Barry
      Kostiner
              
              
              968,130
              
              
              
              4.0
              %William
      C. Glass
              
              
              270,000
              
              
              
              1.1
              %Bernard
      Albert Lang
              
              
              -
              
              
              
              -
              %Lisa
      Meier
              
              
              -
              
              
              
              -
              %William
      Blain
              
              
              -
              
              
              
              -
              %Roderick
      McLennan
              
              
              -
              
              
              
              -
              %Al
      Rahmani
              
              
              -
              
              
              
              -
              %All
      directors and executive officers as a group (8
      individuals)
              
              
              3,354,106
              
              
              
              13.9
              %





*
            Denotes
      percentages of less than 1%.




**
            Percentage
      of outstanding common stock based on 24,068,675 shares of our common stock
      outstanding as of May 15, 2009




(1)
            Unless
      otherwise indicated, the business address of each of the individuals 11490
      Westheimer Rd., Suite 1000, Houston Texas,
77077




(2)
            Based
      on a Schedule 13D filed with the SEC on July 8, 2008 by Jackie Alan
      Chambers.  Mr. Chamber’s address is 5713 Hillcrest Place,
      Midland, Texas 79707.




(3)
            Based
      upon a Statement on Schedule 13D filed with the SEC on July 22, 2008 by J.
      David Rogers.  Mr. Rogers is the managing member of JD Capital
      Management LLC, which is the investment manager of Tempo Master Fund LP
      and Tempo Fund LLC and, by virtue of such status, may be deemed to be
      the beneficial owner of 1,892,400 shares of common stock and 3,694,200
      shares of common stock underlying common stock purchase warrants presently
      exercisable owned by Tempo as well as 25,000 shares held by Mr. Rogers
      personally. The address of Mr. Rogers is Two Greenwich Plaza, 2nd
      Floor, Greenwich, Connecticut
06830.




44


(4)
            Based
      upon a Statement on Schedule 13G dated September 5, 2006 filed by D.B.
      Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings, LLC, Daniel B. Zwirn,
      D.B. Zwirn Special Opportunities Fund, L.P. (“Fund L.P.”), D.B. Zwirn
      Special Opportunities Fund, Ltd. (“Fund Ltd.”) and HCM/Z Special
      Opportunities LLC (“Opportunities LLC”), D.B. Zwirn & Co., L.P., DBZ
      GP, LLC, Zwirn Holdings, LLC, and Daniel B. Zwirn may each be deemed the
      beneficial owner of (i) 573,750 shares of common stock owned by Fund,
      L.P., (ii) 932,500 shares of common stock owned by Fund, Ltd. and (iii)
      118,750 shares of common stock owned by Opportunities LLC. D.B. Zwirn
      & Co., L.P. is the manager of each of Fund L.P., Fund Ltd. and
      Opportunities LLC, and, consequently, has voting control and investment
      discretion over the shares of common stock held by each of the Funds.
      Furthermore, Daniel B. Zwirn is the managing member of, and thereby
      controls, Zwirn Holdings, LLC, which in turn is the managing member of
      and, thereby, controls DBZ GP, LLC, which in turn is the general partner
      of and thereby controls D.B. Zwirn & Co., L.P. The address of each of
      the parties is 745 Fifth Avenue, 18th Floor, New York, NY 10151, except
      for Fund Ltd. which has an address at P.O. Box 896, George Town, Harbour
      Centre, 2nd Floor, Grand Cayman, Cayman Islands, British West Indies and
      Opportunities LLC which has an address at Seven Mile Beach, Grand Cayman,
      Cayman Islands, British West
Indies.




(5)
            Based
      upon a Statement on Schedule 13G (Amendment No. 5) filed with the SEC on
      February 3, 2009 by QVT Financial LP, QVT Financial GP LLC, QVT Fund LP,
      and QVT Associates GP LLC. QVT Financial LP is the investment manager for
      QVT Fund LP, which beneficially owns 1,274,404 shares of common stock
      consisting of 783,639 shares of common stock and 490,766 shares of common
      stock underlying common stock purchase warrants and for Quintessence Fund
      L.P. which beneficially owns 141,923 shares of common stock consisting of
      86,568 shares of common stock and 55,355 shares of common stock underlying
      common stock purchase warrants. QVT Financial LP is also the investment
      manager for a separate discretionary account, which holds 234,656 shares
      of common stock consisting of 127,377 shares of common stock and 107,279
      shares of common stock underlying common stock purchase warrants. QVT
      Financial LP has the power to direct the vote and disposition of the
      common stock held by each of the QVT Fund LP, Quintessence Fund L.P. and
      the separate discretionary account. Accordingly, QVT Financial LP may be
      deemed to be the beneficial owner of an aggregate amount of 1,650,983
      shares of common stock. QVT Financial GP LLC is the general partner of QVT
      Financial LP and may be deemed to beneficially own the shares of common
      stock that may be deemed to be beneficially owned by QVT Financial
      LP.  QVT Associates GP LLC is the general partner of the QVT
      Fund LP and Quintessence Fund L.P. and may be deemed to beneficially own
      the shares of common stock that may be deemed to be beneficially owned by
      QVT Fund LP and Quintessence Fund L.P.  Each of QVT Financial LP
      and QVT Financial GP LLC disclaims beneficial ownership of the shares of
      common stock owned by QVT Fund LP, Quintessence Fund L.P. and the separate
      discretionary account.  QVT Associates GP LLC disclaims
      beneficial ownership of all shares of common stock owned by QVT Fund LP
      and Quintessence Fund L.P., except to the extent of its pecuniary interest
      therein. The address of each of the parties is 1177 Avenue of the
      Americas, 9th Floor New York, New York 10036, except QVT Fund LP whose
      address is Walkers SPV, Walkers House, Mary Street, George Town, Grand
      Cayman, KYI-9002 Cayman Islands.




(6)
            Based
      on a Statement on Schedule 13D (Amendment No. 12) filed with the SEC on
      November 24, 2008, by Syd Ghermezian, Regent Venture V LLC and Braesridge
      Group LLC.  The 9,737,821 shares listed include (i)
      3,696,120 shares of common stock held by Braesridge Group
      LLC,  (ii) 5,544,300 shares underlying common stock
      purchase warrants presently exercisable held by Braesridge Group LLC and
      (iii) 497,400 shares of common stock held by Regent Venture V LLC. Regent
      Venture V LLC wholly-owns Braesridge Engery LLC.  Mr. Ghermezian
      is manager of both Regent Venture V LLC and Braesridge Engery LLC. Syd
      Ghermezian’s address is 9440 West Sahara, Suite 240, Las Vegas, Nevada
      89117.




(7)
            Includes
      21,000 shares owned directly by Mr. Nordlicht and 2,130,000 shares held by
      Platinum Management (NY) LLC, a limited liability company controlled by
      Mr. Nordlicht. The address of Mr. Nordlicht and Platinum Management (NY)
      LLC is 152 West 57th Street, New York, New York
  10019.




45


Securities
Authorized for Issuance Under Our Long-Term Incentive Compensation
Plan





The
following chart reflects the status of securities authorized under our Long-Term
Incentive Compensation Plan as of December 31, 2008:




Equity
Compensation Plan Information





Plan Category
              
              Number of securities
                  to be issued upon
                  exercise of outstanding
                  options, warrants and
                  rights
              
              
              Weighted-average
                  exercise price of
                  outstanding
                  options, warrants and
                  rights
              
              
              Number of securities
                  remaining available
                  for future issuance
                  under equity
                  compensation plansEquity
      compensation plans approved by security holders
              
              
              140,000
              
              
              $
              3.86
              
              
              
              3,860,000Equity
      compensation plans not approved by security holders
              
              
              N/A
              
              
              
              N/A
              
              
              
              0Total
              
              
              140,000
              
              
              $
              3.86
              
              
              
              3,860,000





Item
13.  Certain Relationships and Related Transactions, Director
Independence





Director
Independence


The Board
has adopted the Nasdaq listing standards’ definition of “independence” to assist
the Board in its determination of whether a director is deemed to be independent
of the Company. Accordingly, after review of any relevant transactions or
relationships involving any director, or any of his or her family members, our
senior management, independent registered public accounting firm, or any of our
significant customers, partners or vendors the Board affirmatively has
determined that, Messrs. Lang, McLennan and Blain are independent. In making
this determination, the Board found that none of these directors has a direct or
indirect material or other disqualifying relationship with us, which, in the
opinion of the Board, would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director.




Item
14.  Principal Accounting Fees and Services





The firm
of Marcum & Kleigman LLP acts as our independent registered accounting firm.
The following is a summary of fees paid to Marcum & Kleigman LLP for
services rendered in the years ended December 31, 2008 and 2007.




Type
      of Fees
                
                2008
                
                
                2007Audit
      fees
                
                $
                307,000
                
                
                $
                117,500Audit-related
      fees
                
                $
                105,500
                
                
                $
                126,000Tax
      fees
                
                $
                –
                
                
                $
                7,500All
      other fees
                
                $
                –
                
                
                $
                –





Audit
Fees


During
the year ended December 31, 2008, the fees for our principal accountant were
$307,000 for the review of our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2008, June 30, 2008 and September 30, 2008 and the audits of our
financial statements to be included in our Annual Reports on Form 10-K for
the years ended December 31, 2008 and December 31, 2007.





During
the year ended December 31, 2007, the fees for our principal accountant were
$117,500 for the review of our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2007, June 30, 2007 and September 30, 2007 and the audits of our
financial statements to be included in our Annual Reports on Form 10-K for the
years ended December 31, 2006 and December 31, 2007.




46


Audit
Related Fees




During
the fiscal year ended December 31, 2008, the audit related fees for our
principal accountant were $105,500 in connection with the Company’s Form S-1 and
S-1/A filings made with the SEC and Form 8-K filing made with the SEC on the
Maverick acquisition. During the fiscal year ended December 31, 2007, the audit
related fees for our principal accountant were $126,000 in connection with the
acquisition of TEC (financial statements included in the definitive proxy
statement).





Tax
Fees





Our
principal accountant rendered no services with respect to tax advice and tax
planning in 2008 or 2007.





During
fiscal year 2007, our principal accountant rendered services to us for tax
compliance in the amount of $7,500.





All
Other Fees





In 2008
and 2007, there were no fees billed for services provided by the principal
accountant other than those set forth above.





Audit
Committee Approval





We
currently do not have an audit committee. Our chairman of the board of directors
approved the engagement of Marcum & Kleigman LLP as our independent
registered public accounting firm on December 23, 2008.




47




PART
IV




Item 15.Exhibits, Financial Statement
Schedules




a)
              Financial
      Statements.







Our
financial statements as set forth in the Index to Financial Statements attached
hereto commencing on page F-1 are hereby incorporated by
reference.




(b)
              Exhibits.







The
following exhibits, which are numbered in accordance with Item 601of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:




Exhibit
                  Number
                
                Exhibit
      Description2.1
                
                Asset
      Acquisition Agreement and Plan of Reorganization dated October 4, 2006 by
      and among Platinum, Tandem Energy Corporation, a Colorado corporation, and
      PER Acquisition Corporation, a Delaware corporation and wholly owned
      subsidiary of the Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.2
                
                Amendment
      No. 1 to the Asset Acquisition Agreement and Plan of Reorganization dated
      December 6, 2006 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.3
                
                Amendment
      No. 2 to the Asset Acquisition Agreement and Plan of Reorganization dated
      February 9, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.4
                
                Amendment
      No. 3 to the Asset Acquisition Agreement and Plan of Reorganization dated
      March 29, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.5
                
                Amendment
      No. 4 to the Asset Acquisition Agreement and Plan of Reorganization dated
      June 1, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.6
                
                Amendment
      No. 5 to the Asset Acquisition Agreement and Plan of Reorganization dated
      July 18, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)2.7
                
                Amendment
      No. 6 to the Asset Acquisition Agreement and Plan of Reorganization dated
      September 4, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (included as Annex A of the Definitive Proxy
      Statement (File No. 000-51553), filed October 17, 2007 and incorporated by
      reference herein)




48




2.8
              
              Amendment
      No. 7 to the Asset Acquisition Agreement and Plan of Reorganization dated
      October 26, 2007 by and among Platinum, Tandem Energy Corporation and PER
      Acquisition Corporation (incorporated by reference from Exhibit 2.8 to
      Platinum’s Current Report on Form 8-K filed November 1,
    2007)2.9
              
              Agreement
      and Plan of Merger among Platinum Energy Resources, Inc., PERMSub, Inc.,
      Maverick Engineering, Inc. and Robert L. Kovar Services, LLC as
      Stockholder Representative entered into as of March 18, 2008 (incorporated
      by reference from Exhibit 2.1 to Platinum’s Current Report on Form 8-K
      filed March 20, 2008)3.1
              
              Amended
      and Restated Certificate of Incorporation of Platinum (incorporated by
      reference from Exhibit 3.1 to Platinum’s Current Report on Form 8-K filed
      November 1, 2007)3.2
              
              Amended
      and Restated Bylaws of Platinum (incorporated by reference from Exhibit
      3.2 to Platinum’s Current Report on Form 8-K filed November 1,
      2007)4.1
              
              Specimen
      Unit Certificate (incorporated by reference from Exhibit 4.1 to Platinum’s
      Registration Statement on Form S-1 (File No. 333-125687) on June 10,
      2005)4.2
              
              Specimen
      Common Stock Certificate (incorporated by reference from Exhibit 4.2 to
      Platinum’s Registration Statement on Form S-1 (File No. 333-125687) on
      June 10, 2005)4.3
              
              Specimen
      Warrant Certificate (incorporated by reference from Exhibit 4.3 to
      Platinum’s Registration Statement on Form S-1 (File No. 333-125687) on
      June 10, 2005)4.4
              
              Form
      of Warrant Agreement between American Stock Transfer & Trust Company
      and the Registrant (incorporated by reference from Exhibit 4.4 to
      Platinum’s Registration Statement on Form S-1 (File No. 333-125687) on
      June 10, 2005)4.5
              
              Form
      of Unit Purchase Option to be granted to Representative (incorporated by
      reference from Exhibit 4.5 to Platinum’s Registration Statement on Form
      S-1 (File No. 333-125687) on June 10, 2005)4.6
              
              Warrant
      Clarification and Confirmation Agreement, dated as of November 3, 2006,
      between Platinum Resources, Inc. and American Stock Transfer and Trust
      Company (incorporated by reference from Exhibit 4.1 to Platinum’s Current
      Report on Form 8-K filed November 9, 2006)4.7
              
              Amendment
      to Unit Purchase Options, dated as of November 3, 2006, among Platinum
      Energy Resources, Inc. and the holders of Unit Purchase Options
      (incorporated by reference from Exhibit 4.2 to Platinum’s Current Report
      on Form 8-K filed November 9, 2006)10.1
              
              Credit
      Agreement among Tandem Energy Corporation, PER Gulf Coast, Inc. and Bank
      of Texas, N.A. entered into as of March 14, 2008 (incorporated by
      reference from Exhibit 10.1 to Platinum’s Current Report on Form 8-K filed
      March 20, 2008)10.2
              
              Credit
      Agreement, effective as of June 8, 2005, between Tandem Energy
      Corporation and Guaranty Bank, FSB (incorporated by reference from
      Exhibit 10.1 to Platinum’s Current Report on Form 8-K filed November 1,
      2007)




49





10.3
              
              First
      Amendment to Credit Agreement, effective as of October 21, 2005, between
      TEC and Guaranty Bank, FSB (incorporated by reference from Exhibit 10.2 to
      Platinum’s Current Report on Form 8-K filed November 1,
    2007)10.4
              
              Waiver
      and Second Amendment to Credit Agreement, effective as of February 15,
      2006, between TEC and Guaranty Bank, FSB (incorporated by reference from
      Exhibit 10.3 to Platinum’s Current Report on Form 8-K filed November 1,
      2007)10.5
              
              Assignment,
      Waiver and Third Amendment to Credit Agreement, effective as of October
      26, 2007, among TEC, New TEC and Guaranty Bank, FSB (incorporated by
      reference from Exhibit 10.4 to Platinum’s Current Report on Form 8-K filed
      November 1, 2007)10.6
              
              Platinum’s
      2006 Long-Term Incentive Compensation Plan (incorporated by reference from
      Exhibit 10.5 to Platinum’s Current Report on Form 8-K filed November 1,
      2007)10.7
              
              Office
      Lease Agreement executed July 28, 2006 by and between Loraine at Texas
      Office Tower, Ltd. dba Centennial Tower, Ltd. and TEC (incorporated by
      reference from Exhibit 10.6 to Platinum’s Current Report on Form 8-K filed
      November 1, 2007)10.8
              
              Form
      of Stock Escrow Agreement between the Registrant, American Stock Transfer
      & Trust Company and the Initial Stockholders (incorporated by
      reference from Exhibit 10.10 to Platinum’s Registration Statement on Form
      S-1 (File No. 333-125687) on June 10, 2005)10.9
              
              Form
      of Registration Rights Agreement among the Registrant and the Initial
      Stockholders (incorporated by reference from Exhibit 10.13 to Platinum’s
      Registration Statement on Form S-1 (File No. 333-125687) on June 10,
      2005)10.10
              
              Purchase
      and Sale Agreement, dated December 18, 2007 entered into between Tandem
      Energy Corporation and Lothian Oil, Inc. (incorporated by reference from
      Exhibit 10.1 to Platinum’s Current Report on Form 8-K filed on January 3,
      2008)10.11
              
              Amendment,
      dated December 27, 2007 to Purchase and Sale Agreement, dated December 18,
      2007 entered into between Tandem Energy Corporation and Lothian Oil, Inc.
      (incorporated by reference from Exhibit 10.2 to Platinum’s Current Report
      on Form 8-K filed on January 3, 2008)14
              
              Code
      of Conduct and Ethics (incorporated by reference from Exhibit 14 to
      Platinum’s Annual Report on Form 10-K for the fiscal year ended December
      31, 2005 filed on March 24, 2006)21
              
              Subsidiaries
      of Platinum (incorporated by reference from Exhibit 21 to Platinum’s
      Annual Report on Form 10-K for the fiscal year ended December 31, 2007
      filed on April 1, 2008)23
              
              Consent
      of independent petroleum consultants.31.1
              
              Section
      302 Certification of Principal Executive
Officer




50





31.2
              
              Section
      302 Certification of Principal Financial Officer32.1
              
              Section
      906 Certification of Principal Executive Officer32.2
              
              Section
      906 Certification of Principal Financial
Officer


51


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunder duly authorized, as of May 29,
2009.




PLATINUM
      ENERGY RESOURCES, INC.By
              /s/
      AL RAHMANIAl
      RahmaniInterim
      Chief Executive Officer and
Director




Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons on behalf of the Registrant and in the capacity indicated have signed
this report below as of May 29, 2009.




/s/ AL RAHMANI
              
              Interim
      Chief Executive Officer, DirectorAl
      Rahmani
              
              (Principal
      Executive Officer)/s/ LISA MEIER
              
              Chief
      Financial Officer, TreasurerLisa
      Meier
              
              (Principal
      Financial and Accounting Officer)/s/ TIM G. CULP
              
              Chairman
      of the BoardTim
      G. Culp/s/ WILLIAM C. GLASS
              
              President,
      DirectorWilliam
      C. GlassDirectorBarry
      Kostiner/s/ BERNARD A. LANG
              
              DirectorBernard
      A. Lang/s/ RODERICK
McLENNAN
              
              DirectorRoderick
      McLennanDirectorWilliam
      Blain


52




PLATINUM
ENERGY RESOURCES, INC.




INDEX
TO FINANCIAL STATEMENTS




PageReports
      of Independent Registered Public Accounting Firm
                
                
                F-2Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                
                
                F-3Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      2007
                
                
                F-4Consolidated
      Statements of Stockholders’ Equity for the Years Ended December 31,
      2008 and 2007
                
                
                F-5Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      2007
                
                
                F-6Notes
      to the Consolidated Financial Statements
                
                
                F-7Supplemental
      Oil and Gas Information (Unaudited)
                
                
                F-30


F-1






REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Shareholders
 of
Platinum Energy Resources, Inc. and Subsidiaries
 
 We
have audited the accompanying consolidated balance sheets of Platinum Energy
Resources, Inc. and Subsidiaries (the “Company”) as of December 31, 2008 and
2007, and the related consolidated statements of operations, stockholders’
equity and cash flows for the years then ended.  These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.  An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Platinum Energy
Resources, Inc. and Subsidiaries, as of December 31, 2008 and 2007, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
 
 
 
 /s/
Marcum & Kliegman LLP
 
 
 New
York, New York
 May
29, 2009


F-2





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS





December
      31,2008
                                    
                                    
                                    2007ASSETSCURRENT ASSETSCash
      and cash equivalents
                                    
                                    $
                                    3,668,092
                                    
                                    
                                    $
                                    16,429,619Accounts
      receivable, net of $164,392 and $100,000 allowance for doubtful accounts
      as of December 31, 2008 and 2007, respectivelyOil
      and gas sales
                                    
                                    
                                    1,629,931
                                    
                                    
                                    
                                    2,619,363Service
                                    
                                    
                                    5,255,041
                                    
                                    
                                    
                                    668,216Inventory
                                    
                                    
                                    436,477
                                    
                                    
                                    
                                    88,556Fair
      value of commodity derivatives - current
                                    
                                    
                                    1,968,186
                                    
                                    
                                    
                                    —Prepaid
      expenses and other current assets
                                    
                                    
                                    747,225
                                    
                                    
                                    
                                    299,445Total
      Current Assets
                                    
                                    
                                    13,704,952
                                    
                                    
                                    
                                    20,105,199Property
      and equipment, at costOil
      and gas properties, full cost method
                                    
                                    
                                    204,372,437
                                    
                                    
                                    
                                    170,571,663Other
                                    
                                    
                                    5,492,072
                                    
                                    
                                    
                                    3,293,108Less
      accumulated depreciation, depletion, amortization and
      impairment
                                    
                                    
                                    (145,016,531
                                    )
                                    
                                    
                                    (1,253,026
                                    )Property
      and equipment, net
                                    
                                    
                                    64,847,978
                                    
                                    
                                    
                                    172,611,745Other
      assetsIntangible
      assets, net
                                    
                                    
                                    5,061,066
                                    
                                    
                                    
                                    376,164Fair
      value of commodity derivatives
                                    
                                    
                                    18,562,702
                                    
                                    
                                    
                                    73,446Advance
      payment and costs, acquisition transactions
                                    
                                    
                                    —
                                    
                                    
                                    
                                    2,522,639Real
      estate held for development
                                    
                                    
                                    2,700,000
                                    
                                    
                                    
                                    2,700,000Total
      Assets
                                    
                                    $
                                    104,876,698
                                    
                                    
                                    $
                                    198,389,193LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payableTrade
                                    
                                    $
                                    2,551,808
                                    
                                    
                                    $
                                    1,132,725Oil
      and gas sales
                                    
                                    
                                    1,115,114
                                    
                                    
                                    
                                    1,074,222Fair
      value of commodity derivatives - current
                                    
                                    
                                    —
                                    
                                    
                                    
                                    3,116,542Accrued
      liabilities and other
                                    
                                    
                                    4,437,995
                                    
                                    
                                    
                                    181,430Income
      taxes payable
                                    
                                    
                                    119,770
                                    
                                    
                                    
                                    254,960Current
      maturities of long-term debt, capital lease obligations and notes
      payable
                                    
                                    
                                    13,403,731
                                    
                                    
                                    
                                    —Total
      Current Liabilities
                                    
                                    
                                    21,628,418
                                    
                                    
                                    
                                    5,759,879Long-term
      debt and capital lease obligations, net of current
    portion
                                    
                                    
                                    4,687,423
                                    
                                    
                                    
                                    —Notes
      payable - acquisitions
                                    
                                    
                                    3,231,959
                                    
                                    
                                    
                                    —Other
      accrued liabilities
                                    
                                    
                                    148,458
                                    
                                    
                                    
                                    —Asset
      retirement obligation
                                    
                                    
                                    4,537,243
                                    
                                    
                                    
                                    3,576,639Deferred
      income taxes
                                    
                                    
                                    10,459,000
                                    
                                    
                                    
                                    48,085,215Total
      Long-term Liabilities
                                    
                                    
                                    23,064,083
                                    
                                    
                                    
                                    51,661,854COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'  EQUITYPreferred
      stock, $.0001 par value, 1,000,000 authorized, 0
issued
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Common
      stock, $.0001 par value; 75,000,000 shares authorized; 24,068,675 issued
      and 22,070,762 outstanding in each period,
respectively
                                    
                                    
                                    2,407
                                    
                                    
                                    
                                    2,407Additional
      paid-in capital
                                    
                                    
                                    155,100,474
                                    
                                    
                                    
                                    155,064,142Retained
      earnings (accumulated deficit)
                                    
                                    
                                    (79,257,220
                                    )
                                    
                                    
                                    1,562,375Treasury
      stock - 1,997,913 shares, at cost
                                    
                                    
                                    (15,661,464
                                    )
                                    
                                    
                                    (15,661,464
                                    )Total
      Stockholders' Equity
                                    
                                    
                                    60,184,197
                                    
                                    
                                    
                                    140,967,460Total
      Liabilities and Stockholders' Equity
                                    
                                    $
                                    104,876,698
                                    
                                    
                                    $
                                    198,389,193




The
accompanying notes are an integral part of these consolidated financial
statements.


F-3





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS





Year Ended December 31,2008
                
                
                2007RevenuesOil
      and gas sales
                
                $
                34,156,974
                
                
                $
                4,308,184Service
      revenues
                
                
                19,025,921
                
                
                
                —53,182,895
                
                
                
                4,308,184Costs
      and expensesLease
      and other operating expense
                
                
                13,972,725
                
                
                
                1,776,247Cost
      of service revenues
                
                
                16,698,860
                
                
                
                —Marketing,
      general and administrative expense
                
                
                11,369,994
                
                
                
                2,769,250Depreciation,
      depletion and amortization expense
                
                
                12,608,072
                
                
                
                1,253,026Impairment
      of oil and gas properties and equipment
                
                
                131,795,087
                
                
                
                —Impairment
      of goodwill and intangible assets
                
                
                8,040,179
                
                
                
                —Accretion
      of abandonment obligations
                
                
                266,054
                
                
                
                38,358Total
      costs and expenses
                
                
                194,750,971
                
                
                
                5,836,881Operating
      (loss)
                
                
                (141,568,076
                )
                
                
                (1,528,697
                )OTHER
      INCOME (EXPENSES)Interest
      income
                
                
                199,162
                
                
                
                2,799,229Interest
      expense
                
                
                (924,520
                )
                
                
                (59,580
                )Change
      in fair value of commodity derivatives
                
                
                17,309,196
                
                
                
                (1,472,522
                )Other
                
                
                (6,117
                )
                
                
                (23,462
                )Total
      other income
                
                
                16,577,721
                
                
                
                1,243,665(Loss)
      Before Income Taxes
                
                
                (124,990,355
                )
                
                
                (285,032
                )Provision
      (Benefit) For Income Taxes
                
                
                (44,170,760
                )
                
                
                88,000Net
      (Loss)
                
                $
                (80,819,595
                )
                
                $
                (373,032
                )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES:Basic
                
                
                22,070,762
                
                
                
                18,876,347Diluted
                
                
                22,070,762
                
                
                
                18,876,347NET
      (LOSS) PER COMMON SHARE:Basic
                
                $
                (3.66
                )
                
                $
                (0.02
                )Diluted
                
                $
                (3.66
                )
                
                $
                (0.02
                )




The
accompanying notes are an integral part of these consolidated financial
statements.


F-4





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENT OF  STOCKHOLDERS’ EQUITY





Common
      stock
                                            
                                            
                                            
                                            
                                            
                                            Treasury
      stockAdditional
      paid-
                                            
                                            Retained
                                              earnings
                                            
                                            
                                            
                                            
                                            
                                            
                                            Total
                                              stockholders'Shares
                                            
                                            Amount
                                            
                                            in
      capital
                                            
                                            (deficit)
                                            
                                            Shares
                                            
                                            Amount
                                            
                                            
                                            equityBalance
      at January 1, 2007
                                            
                                            
                                            15,121,440
                                            
                                            
                                            1,512
                                            
                                            
                                            85,424,242
                                            
                                            
                                            1,935,407
                                            
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            87,361,161Reclassification
      of shares to equity upon consumation of acquisition of
    TEC
                                            
                                            
                                            1,076,355
                                            
                                            
                                            108
                                            
                                            
                                            8,390,687
                                            
                                            
                                            —
                                            
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            8,390,795Issaunce
      of shares in connection with acquisition
    of  TEC
                                            
                                            
                                            7,692,308
                                            
                                            
                                            769
                                            
                                            
                                            59,999,231
                                            
                                            
                                            —
                                            
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            60,000,000Shares
      issued to consultant for services
                                            
                                            
                                            178,572
                                            
                                            
                                            18
                                            
                                            
                                            1,249,982
                                            
                                            
                                            —
                                            
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            1,250,000Treasury
      shares purchased
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            (1,997,913
                                            )
                                            
                                            (15,661,464
                                            )
                                            
                                            
                                            (15,661,464
                                            )Net
      (loss), for the year ended December
31,  2007
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            (373,032
                                            )
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (373,032
                                            )Balance
      at January 1, 2008
                                            
                                            
                                            24,068,675
                                            
                                            $
                                            2,407
                                            
                                            $
                                            155,064,142
                                            
                                            $
                                            1,562,375
                                            
                                            
                                            (1,997,913
                                            )
                                            $
                                            (15,661,464
                                            )
                                            
                                            $
                                            140,967,460Stock
      based compensation
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            36,332
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            36,332Net
      (loss), for the year ended December
31,  2008
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            (80,819,595
                                            )
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (80,819,595
                                            )Balance
      at December 31, 2008
                                            
                                            
                                            24,068,675
                                            
                                            $
                                            2,407
                                            
                                            $
                                            155,100,474
                                            
                                            $
                                            (79,257,220
                                            )
                                            
                                            (1,997,913
                                            )
                                            $
                                            (15,661,464
                                            )
                                            
                                            $
                                            60,184,197




The
accompanying notes are an integral part of these consolidated financial
statements.


F-5





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS







Year Ended December
    31,2008
                      
                      
                      2007Cash
      Flows From Operating ActivitiesNet
      (loss)
                      
                      $
                      (80,819,595
                      )
                      
                      $
                      (373,032
                      )Adjustments
      to reconcile net (loss) to net cash provided (used in) by operating
      activities:Depreciation,
      depletion and amortization
                      
                      
                      12,608,072
                      
                      
                      
                      1,253,026Impairment
      of oil and gas properties and equipment
                      
                      
                      131,795,087
                      
                      
                      
                      —Impairment
      of goodwill and intangible assets
                      
                      
                      8,040,179
                      
                      
                      
                      —Accretion
      of asset retirement obligation and debt discount
                      
                      
                      415,837
                      
                      
                      
                      38,358Amortization/write-off
      of bank loan fees
                      
                      
                      —
                      
                      
                      
                      25,000Stock
      based compensation
                      
                      
                      36,332
                      
                      
                      
                      1,250,000Deferred
      income taxes
                      
                      
                      (44,199,003
                      )
                      
                      
                      —Unrealized
      (gain)/loss on commodity derivatives
                      
                      
                      (22,565,418
                      )
                      
                      
                      1,472,522Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      698,640
                      
                      
                      
                      (1,114,095
                      )Inventory
                      
                      
                      (347,921
                      )
                      
                      
                      (2,974
                      )Prepaid
      expenses and other current assets
                      
                      
                      (290,477
                      )
                      
                      
                      10,905Accounts
      payable
                      
                      
                      824,990
                      
                      
                      
                      119,215Accrued
      liabilities and other
                      
                      
                      2,063,455
                      
                      
                      
                      (177,695
                      )Due
      to related party
                      
                      
                      —
                      
                      
                      
                      (85,585
                      )Income
      taxes payable
                      
                      
                      (135,190
                      )
                      
                      
                      108,655Commodity
      derivatives
                      
                      
                      (1,008,566
                      )
                      
                      
                      (2,636,855
                      )Net
      cash provided by (used in) operating activities
                      
                      
                      7,116,423
                      
                      
                      
                      (112,555
                      )Cash
      Flows From Investing ActivitiesDeposits
      to trust fund
                      
                      
                      —
                      
                      
                      
                      (3,082,629
                      )Release
      of cash held in trust fund
                      
                      
                      —
                      
                      
                      
                      112,296,121Additions
      to property and equipment
                      
                      
                      (20,663,083
                      )
                      
                      
                      (1,713,819
                      )Acquisition
      of business of TEC, net of cash acquired
      of  $2,959,773
                      
                      
                      —
                      
                      
                      
                      (41,744,861
                      )Acquisition
      of other businesses - oil and gas properties
                      
                      
                      (7,939,139
                      )
                      
                      
                      (15,518,501
                      )Acquisition
      of Maverick, net of cash of $ 621,518
                      
                      
                      (5,640,601
                      )
                      
                      
                      —Advance
      payment and costs, Pleasanton transaction
                      
                      
                      2,522,639
                      
                      
                      
                      (2,522,639
                      )Deferred
      acquisition  costs
                      
                      
                      —
                      
                      
                      
                      (1,994,052
                      )Net
      cash provided by (used in) investing activities
                      
                      
                      (31,720,184
                      )
                      
                      
                      45,719,620Cash
      Flows From Financing ActivitiesProceeds
      of revolving credit facility
                      
                      
                      12,008,767
                      
                      
                      
                      —Payments,
      long-term debt and capital leases
                      
                      
                      (166,533
                      )
                      
                      
                      —Interest
      on cash held in trust allocated to common stock subject to possible
      redemption
                      
                      
                      —
                      
                      
                      
                      616,217Proceeds
      from notes payable - stockholder
                      
                      
                      —
                      
                      
                      
                      1,032,000Repayment
      of note payable - stockholder
                      
                      
                      —
                      
                      
                      
                      (1,107,000
                      )Payments
      to redeeming shareholders
                      
                      
                      —
                      
                      
                      
                      (14,057,199
                      )Purchase
      of treasury stock
                      
                      
                      —
                      
                      
                      
                      (15,661,464
                      )Net
      cash provided by (used in) financing activities
                      
                      
                      11,842,234
                      
                      
                      
                      (29,177,446
                      )Net
      Increase (Decrease)  in Cash
                      
                      
                      (12,761,527
                      )
                      
                      
                      16,429,619Cash
      and Cash Equivalents - Beginning of the Period
                      
                      
                      16,429,619
                      
                      
                      
                      —Cash
      and Cash Equivalents - End of Period
                      
                      $
                      3,668,092
                      
                      
                      $
                      16,429,619SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
                      
                      $
                      635,203
                      
                      
                      $
                      59,580Non-Cash
      Investing and Financing Activities:Issuance
      of notes payable - Pleasanton acquisition
                      
                      $
                      550,000
                      
                      
                      $
                      -Adjustment
      of purchase price of oil and gas properties and deferred
      taxes
                      
                      $
                      4,640,000
                      
                      
                      $
                      -Acquisition
      of Maverick (cash flow notes, net of discount)
                      
                      $
                      3,034,000
                      
                      
                      $
                      -Deferred
      acquisition costs accrued and deferred
                      
                      $
                      -
                      
                      
                      $
                      100,000Non-converting
      common shares subject to possible redemption converted to
      equity
                      
                      $
                      -
                      
                      
                      $
                      8,390,795Acquisition
      of Maverick in 2008 and TEC in 2007:Cash
                      
                      $
                      621,518
                      
                      
                      $
                      2,959,773Accounts
      receivable
                      
                      
                      4,296,033
                      
                      
                      
                      1,923,957Inventory
                      
                      
                      -
                      
                      
                      
                      85,582Other
      current assets
                      
                      
                      157,303
                      
                      
                      
                      246,169Property
      and equipment
                      
                      
                      1,510,052
                      
                      
                      
                      1,381,398Oil
      and gas properties
                      
                      
                      -
                      
                      
                      
                      154,881,344Real
      estate held for development
                      
                      
                      -
                      
                      
                      
                      2,700,000Goodwill
                      
                      
                      5,912,611
                      
                      
                      
                      -Intangible
      assets
                      
                      
                      5,522,250
                      
                      
                      
                      -Accounts
      payable
                      
                      
                      (634,984
                      )
                      
                      
                      (1,983,133
                      )Accrued
      expenses
                      
                      
                      (1,765,404
                      )
                      
                      
                      -Accrued
      payroll
                      
                      
                      (576,165
                      )
                      
                      
                      -Fair
      value of commodity derivatives
                      
                      
                      -
                      
                      
                      
                      (4,207,430
                      )Asset
      retirement obligation
                      
                      
                      -
                      
                      
                      
                      (2,542,881
                      )Deferred
      tax liability
                      
                      
                      -
                      
                      
                      
                      (48,100,560
                      )Term
      notes and revolving line of credit
                      
                      
                      (5,223,086
                      )
                      
                      
                      -Capitalized
      lease obligations
                      
                      
                      (524,010
                      )
                      
                      
                      -Total
      purchase price
                      
                      
                      9,296,118
                      
                      
                      
                      107,344,219Less:
      Cash consideration paid to sellers
                      
                      
                      (6,000,000
                      )
                      
                      
                      (41,704,635
                      )Less:  Cash
      paid to finder
                      
                      
                      -
                      
                      
                      
                      (3,000,000
                      )Less:
      Transaction costs
                      
                      
                      (262,118
                      )
                      
                      
                      (2,639,584
                      )Non-cash
      consideration issued to sellers
                      
                      $
                      3,034,000
                      
                      
                      $
                      60,000,000




The
accompanying notes are an integral part of these consolidated financial
statements.


F-6




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Note
1 - Organization, Business and Operations and Basis of
Presentation




Platinum
Energy Resources, Inc. and subsidiaries (the “Company” or “Platinum”) was
incorporated in Delaware on April 25, 2005 as a blank check company for the
purpose of effecting a business combination with an unidentified operating
business in the global oil and natural gas industry. In October 2005, the
Company completed an initial public offering and raised gross proceeds of
approximately $115 million, as described in Note 9.  In October 2007,
the Company acquired substantially all of the assets and assumed all of the
liabilities of Tandem Energy Corporation (“Tandem”) described in Note 3
below. Prior to the Tandem transactions, the Company had no operations other
than conducting an initial public offering and seeking a business combination.
Effective on April 29, 2008, the Company acquired Maverick Engineering, Inc.
(“Maverick”), an engineering services enterprise which was incorporated in
December 1993 in the State of Texas, described in Note 3.





Subsequent
to the Maverick acquisition, the Company considers itself to be in two lines of
business as follows:





(i) The
oil and gas division operations have approximately 37,000 acres under lease in
relatively long-lived fields with well-established production histories, 21,000
of which were acquired as part of the Tandem acquisition. The Company’s
properties are concentrated primarily in the Gulf Coast region in Texas, the
Permian Basin in Texas and New Mexico and the Fort Worth Basin in
Texas;


and





(ii)
Maverick provides engineering and construction services primarily for three
types of clients: (1) upstream oil and gas, domestic oil and gas producers and
pipeline companies; (2) industrial, petrochemical and refining plants; and (3)
infrastructure, private and public sectors, including state municipalities,
cities, and port authorities. Maverick operates out of facilities headquartered
in Victoria, Texas and operates primarily in Texas.




Note 2 — Summary of Significant
Accounting Policies




Principles of
Consolidation




The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated. Certain reclassifications of prior period balances
have been made to conform to current reporting practices. These
reclassifications had no effect on the previously reported
loss.




Acquisitions




Acquisitions
have been accounted for using the purchase method of accounting under Statement
of  Financial Accounting Standards (“SFAS No. 141”) “Accounting for
Business Combinations”. The acquired companies’ results have been included in
the accompanying financial statements from their respective dates of
acquisition. Allocation of the purchase price for acquisitions was based on the
estimates of fair value of the net assets acquired and is subject to adjustment
upon finalization of the purchase price allocation within the one year
anniversary of the acquisition.




Estimates
and Assumptions




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates include volumes of oil and natural gas
reserves, abandonment obligations, impairment of oil and natural gas properties,
depreciation, depletion and amortization, income taxes, bad debts, derivatives,
contingencies and litigation.


F-7


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Oil
and natural gas reserve estimates, which are the basis for unit-of-production
depletion and the ceiling test, have a number of inherent uncertainties. The
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. Results of
drilling, testing, and production subsequent to the date of the estimate may
justify revision of such estimate. Accordingly, reserve estimates are often
different from the quantities of oil and natural gas that are ultimately
recovered. In addition, reserve estimates are vulnerable to changes in wellhead
prices of crude oil and natural gas. Such prices have been volatile in the past
and can be expected to be volatile in the future.





The
Company uses the full cost method of accounting for exploration and development
activities as defined by the Securities and Exchange Commission (“SEC”). Under
this method of accounting, the costs of unsuccessful, as well as successful,
exploration and development activities are capitalized as properties and
equipment. This includes any internal costs that are directly related to
exploration and development activities but does not include any costs related to
production, general corporate overhead or similar activities. Gain or loss on
the sale or other disposition of oil and gas properties is not recognized,
unless the gain or loss would significantly alter the relationship between
capitalized costs and proved reserves of oil and natural gas attributable to a
country. The Company has defined a cost center by country. Currently, all of the
Company’s oil and gas properties are located within the continental United
States.




Properties
and equipment may include costs that are excluded from costs being depreciated
or amortized. Oil and gas costs excluded represent investments in unproved
properties and major development projects in which the Company owns a direct
interest. These unproved property costs include nonproducing leasehold,
geological and geophysical costs associated with leasehold or drilling interests
and exploration drilling costs. All costs excluded are reviewed at least
quarterly to determine if impairment has occurred.





Accounts
Receivable and Allowance for Doubtful Accounts




Oil and Gas Operations - The
Company’s trade receivables consist primarily of receivables from non-operators
who own an interest in properties which the Company operates.  The
Company has the ability and the right to withhold oil and gas revenues from any
owner who is delinquent in their payments.





Services - Revenues are
billed and accounts receivable recorded as services are performed. Most services
revenues are derived from time and material projects. Unbilled receivables
represent costs and estimated fees on work for which billings have not been
presented to customers. When billed, these amounts are included in accounts
receivable - trade. Unbilled accounts receivable include management’s best
estimates of the amounts expected to be realized on the work that has been
performed to date.




Proved Oil and Gas
Reserves




In
accordance with Rule 4-10(a) of SEC Regulation S-X, proved oil and gas reserves
are the estimated quantities of crude oil, natural gas, and natural gas liquids
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions, i.e., prices and costs as of the date the estimate is
made. Prices include consideration of changes in existing prices provided only
by contractual arrangements, but not on escalation based upon future
conditions.




(i)
              Reservoirs
      are considered proved if economic producibility is supported by either
      actual production or conclusive formation tests. The area of a reservoir
      considered proved includes (A) that portion delineated by drilling and
      defined by gas-oil and/or oil-water contacts, if any; and (B) the
      immediately adjoining portions not yet drilled, but which can be
      reasonably judged as economically productive on the basis of available
      geological and engineering data. In the absence of information on fluid
      contacts, the lowest known structural occurrence of hydrocarbons controls
      the lower proved limit of the
reservoir.







F-8


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007




(ii)
              Reserves
      which can be produced economically through application of improved
      recovery techniques (such as fluid injection) are included in the “proved”
      classification when successful testing by a pilot project, or the
      operation of an installed program in the reservoir, provides support for
      the engineering analysis on which the project or program was
      based.
  (iii)
              Estimates
      of proved reserves do not include the
  following:













(A)
              oil
      that may become available from known reservoirs but is classified
      separately as “indicated additional reserves”;(B)
              crude
      oil, natural gas, and natural gas liquids, the recovery of which is
      subject to reasonable doubt because of uncertainty as to geology,
      reservoir characteristics, or economic
factors;




(C)
            crude
      oil, natural gas, and natural gas liquids, that may occur in undrilled
      prospects; and




(D)
            crude
      oil, natural gas, and natural gas liquids that may be recovered from oil
      shales, coal and other such
sources.





Depletion,
Amortization and Impairment





Oil and Gas Operations -Depletion is provided using the unit-of-production method based upon
estimates of proved oil and natural gas reserves with oil and natural gas
production being converted to a common unit of measure based upon their relative
energy content. Investments in unproved properties and major development
projects are not amortized until proved reserves associated with the projects
can be determined or until impairment occurs. If the results of an assessment
indicate that the properties are impaired, the amount of the impairment
is deducted from the capitalized costs to be amortized. Once the
assessment of unproved properties is complete and when major development
projects are evaluated, the costs previously excluded from amortization are
transferred to the full cost pool and amortization begins. The amortizable base
includes estimated future development costs and where significant,
dismantlement, restoration and abandonment costs, net of estimated salvage
value.





In
arriving at rates under the unit-of-production method, the quantities of
recoverable oil and natural gas reserves are established based on estimates made
by the Company’s geologists and engineers which require significant judgment as
does the projection of future production volumes and levels of future costs,
including future development costs. In addition, considerable judgment is
necessary in determining when unproved properties become impaired and in
determining the existence of proved reserves once a well has been drilled. All
of these judgments may have significant impact on the calculation of depletion
expense. There have been no material changes in the methodology used by the
Company in calculating depletion of oil and gas properties under the full cost
method during the year ended December 31, 2008 and the period October
26, 2007 to December 31, 2007.





Sales of
proved and unproved properties are accounted for as adjustments of capitalized
costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved oil
and natural gas reserves, in which case the gain or loss would be recognized in
the statement of operations.





Ceiling
Test




Under the
full cost method of accounting, a ceiling test is performed quarterly. The full
cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule
4-10. The ceiling test determines a limit on the carrying value of oil and gas
properties.  The capitalized costs of proved oil and gas properties,
net of accumulated depreciation, depletion, amortization, and
impairment and the related deferred income taxes, may not exceed the
estimated future net cash flows from proved oil and gas reserves, excluding
future cash outflows associated with settling asset retirement obligations that
have been accrued on the balance sheet, generally using prices in effect at the
end of the period held flat for the life of production and including the effect
of derivative instruments that qualify as cash flow hedges, discounted at 10%,
net of related tax effects, plus the cost of unevaluated properties and major
development projects excluded from the costs being amortized. If capitalized
costs exceed this limit, the excess is charged to expense and reflected as
additional accumulated depreciation, depletion, amortization and
impairment.


F-9


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





In
accordance with SEC Staff Accounting Bulletin ("SAB") No. 103,Update of Codification of Staff
Accounting Bulletins , derivative instruments qualifying as cash flow
hedges are to be included in the computation of limitation on capitalized costs.
The Company has not
accounted for its derivative contracts as cash flow hedges. Accordingly, the
effect of these derivative contracts has not been considered in calculating the
full cost ceiling limitation as of December 31, 2008.





The
Company recorded a non-cash ceiling test impairment of oil and natural gas
properties of $130.1 million ($84.6 million, net of tax) during the
fourth quarter ended December 31, 2008, as a result of the substantial
decline in commodity prices and negative revisions in the Company's proved
undeveloped reserve quantities.   The negative revisions were
principally related to the decline in commodity prices which would make it
uneconomical to invest in development activities at the low commodity prices at
December 31, 2008. In
accordance with SEC Topic 12- Oil and Gas Producing Activities, the full cost
ceiling limitation was computed giving effect to the subsequent price changes
for oil and gas. The computed ceiling amount was approximately $5 million
greater than the limitation using the prices in effect at December 31, 2008 and,
accordingly, the full cost impairment charge for 2008 was determined using the
recomputed ceiling amount.




In
addition to the impairment of our oil and natural gas properties, we recorded a
$1.7 million non-cash impairment of our drilling rigs. The rigs were
purchased in 2007, with the intention of securing access to an appropriate rig
and crew for our exploration efforts. Due to the continued volatility in the
prices of oil and natural gas, and its negative effect on the drilling industry,
we will continue to review this asset for additional impairment. We cannot
predict whether additional impairment will be necessary.





Asset
Retirement Obligation





The
Company follows the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the Company to recognize a
liability for the present value of all legal obligations associated with the
retirement of tangible, long-lived assets and capitalize an equal amount as a
cost of the asset. The cost of the abandonment obligations, less estimated
salvage values, is included in the computation of depreciation, depletion and
amortization.





Property





Property
is recorded at cost. Improvements or betterments of a permanent nature are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal. Gains or losses resulting from property disposals are credited or
charged to operations currently. Depreciation is computed using the
straight-line method over the estimated useful lives ranging from 3 to 15
years.





Goodwill
and Intangible Assets





Goodwill
represents the excess of cost over fair value of net assets acquired through
acquisitions. The Company follows the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible
Assets. Goodwill recorded by the Company has not been amortized and
will be evaluated on an annual basis, or sooner if deemed necessary, in
connection with other long-lived assets, for potential impairment.




F-10


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





In
accordance with SFAS No. 144, Accounting for the impairment or
Disposal of Long-Lived Assets, the Company evaluates the recoverability
of identifiable intangible assets whenever events or changes in circumstances
indicate that an intangible asset’s carrying amount may not be recoverable. Such
circumstances could include, but are not limited to (1) a significant decrease
in the market value of an asset, (2) a significant adverse change in the extent
or manner in which an asset is used, or (3) an accumulation of costs
significantly in excess of the amount originally expected for the acquisition of
an asset. The Company measures the carrying amount of the asset against the
estimated undiscounted future cash flows associated with it. Should the sum of
the expected future net cash flows be less than the carrying value of the asset
being evaluated, an impairment loss would be recognized. The impairment loss
would be calculated as the amount by which the carrying value of the asset
exceeds its fair value. The fair value is measured based on quoted market
prices, if available. If quoted market prices are not available, the estimate of
fair value is based on various valuation techniques, including the discounted
value of estimated future cash flows. The evaluation of asset impairment
requires the Company to make assumptions about future cash flows over the life
of the asset being evaluated. These assumptions require significant judgment and
actual results may differ from assumed and estimated amounts.





Based on
its testing as of December 31, 2008, the Company recognized $7.8 million of
goodwill impairment charges and an additional charge of $0.2 million related to
the impairment of other intangible assets related to the acquisition of
Maverick.





Stock-Based
Compensation


The
Company has adopted SFAS No. 123(R) “Share Based Payment”
(“SFAS 123(R)”). This statement is a revision of SFAS Statement
No. 123, and supersedes APB Opinion No. 25, and its related
implementation guidance. SFAS 123(R) addresses all forms of share based
payment (“SBP”) awards including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation rights. Under
SFAS 123(R), SBP awards are measured at fair value on the awards’
grant date, based on the estimated number of awards that are expected to vest
and results in a charge to operations





Non-Employee Stock Based
Compensation




The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS No. 123(R) and Emerging Issues Task Force
(“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services,” (“EITF 96-18”) which requires that such equity instruments
be recorded at their fair value on the measurement date. The measurement of
stock-based compensation is subject to periodic adjustment as the underlying
equity instrument vests.   In October 2007, the Company issued
178,572 shares of its common stock valued at $1,250,000 in connection with a
consulting agreement as described in Note 7.





Income
Taxes




The
Company follows the asset and liability method prescribed by SFAS No. 109,
Accounting for Income Taxes
(“SFAS 109”). Under this method of accounting for income taxes, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in enacted tax rates is recognized in income in the
period that includes the enactment date.





Effective
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in the Company’s
financial statements in accordance with SFAS 109, and prescribes a recognition
threshold and measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and
transition.





Management
has evaluated and concluded that there are no significant uncertain tax
positions requiring recognition in the Company’s financial statements as of
December 31, 2008.   The Company’s policy is to classify
assessments, if any, for tax related interest as interest expenses and penalties
as marketing, general and administrative expenses.


F-11


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Fair
Value Measurements





Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements(“SFAS No. 157”), which defines fair value, establishes a framework for
measuring fair value, establishes a fair value hierarchy based on the quality of
inputs used to measure fair value and enhances disclosure requirements for fair
value measurements. The implementation of SFAS No. 157 did not cause a change in
the method of calculating fair value of assets or liabilities, with the
exception of incorporating a measure of the Company’s own nonperformance risk or
that of its counterparties as appropriate, which was not material. The primary
impact from adoption is disclosed in Note 6.





In
conjunction with the adoption of SFAS No. 157, the Company also adopted
SFAS No. 159,The Fair
Value Option for Financial Assets and Financial Liabilities—Including an
Amendment of FASB Statement No. 115,  effective
January 1, 2008. SFAS No. 159 allows a company the option to value its
financial assets and liabilities, on an instrument by instrument basis, at fair
value, and include the change in fair value of such assets and liabilities in
its results of operations. The Company did not apply the provisions of SFAS
No. 159 to any of its financial assets or liabilities. Accordingly, there
was no impact to the Company's consolidated financial statements resulting from
the adoption of SFAS No. 159.





Income
(Loss) Per Share




The
Company follows the provisions of SFAS No. 128, “Earnings Per Share” (“SFAS No.
128”). In accordance with SFAS No. 128, earnings (loss) per common share amounts
(“basic EPS”) were computed by dividing earnings (loss) by the weighted
average number of common shares outstanding for the period. Earnings per common
share amounts, assuming dilution (“diluted EPS”), were computed by reflecting
the potential dilution from the exercise of dilutive common stock purchase
warrants. SFAS No. 128 requires the presentation of both basic EPS and diluted
EPS on the face of the consolidated statements of operations.





Environmental
Expenditures




The
Company is subject to extensive federal, state and local environmental laws and
regulations. These laws regulate the discharge of materials into the environment
and may require the Company to remove or mitigate the environmental effects of
the disposal or release of petroleum or chemical substances at various sites.
Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures
that relate to an existing condition caused by past operations and that have no
future economic benefits are expensed.





Liabilities
for expenditures of a non-capital nature are recorded when environmental
assessment and/or remediation is probable, and the costs can be reasonably
estimated. Such liabilities are generally undiscounted unless the timing of cash
payments for the liability or component is fixed or reliably
determinable.




Derivative Financial
Investments




From
time to time, the Company may utilize derivative instruments, consisting of
puts, calls, swaps, and price collars, to attempt to reduce its exposure to
changes in commodity prices and interest rates. The Company accounts for its
derivatives in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. SFAS No. 133
requires that all derivative instruments be recognized as assets or liabilities
in the balance sheet, measured at fair value. The accounting for changes in the
fair value of a derivative depends on both the intended purpose and the formal
designation of the derivative. Designation is established at the inception of a
derivative, but subsequent changes to the designation are permitted. The Company
has elected not to designate any of its derivative financial contracts as
accounting hedges and, accordingly, has accounted for these derivative financial
contracts using mark-to-market accounting. Changes in fair value of derivative
instruments which are not designated as cash flow hedges are recorded in other
income (expense) as changes in fair value of commodity
derivatives.




Contingencies
 
 Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and its
legal counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims that
may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein.
 
 If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potentially material loss contingency is not
probable, but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be
disclosed.
 
 Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the nature of the guarantee would be
disclosed.


F-12


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007




Real Estate Held for
Development




The
Company’s real estate held for development was recorded at fair market value
when the Company completed its purchase of the assets of Tandem Energy
Corporation on October 26, 2007 and relates to approximately 41 acres of
undeveloped land located near Tomball, Texas.





Revenue
Recognition and Gas Balancing




The
Company utilizes the sales method of accounting for oil, natural gas and natural
gas liquids revenues whereby revenues, net of royalties, are recognized as the
production is sold to purchasers and collectibility is assured. The amount of
gas sold may differ from the amount to which the Company is entitled based on
its revenue interests in the properties. The Company did not have any
significant gas imbalance positions at December 31, 2008 and December 31,
2007.




Comprehensive
Income




SFAS No.
130, Reporting Comprehensive
Income, established standards for reporting and displaying comprehensive
income and its components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. There were no differences between net
income and comprehensive income.





Recently
Issued Accounting Pronouncements




In
February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at
fair value. SFAS 159's objective is to reduce both complexity in accounting for
financial instruments and the volatility in earnings caused by measuring related
assets and liabilities differently. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 requires companies to provide additional information that
will help investors and other users of financial statements to more easily
understand the effect of the company's choice to use fair value on its earnings.
It also requires entities to display the fair value of those assets and
liabilities for which the company has chosen to use fair value on the face of
the balance sheet. SFAS 159 is effective as of the beginning of an entity's
first fiscal year beginning after November 15, 2007. The implementation of SFAS
159 did not have a material effect on the Company’s consolidated financial
statements.
  In
December 2007, the FASB issued SFAS No. 141(Revised 2007), Business Combinations (“SFAS
141(R)”), which replaces SFAS No. 141, Business Combinations . SFAS
141(R) establishes principles and requirements for determining how an enterprise
recognizes and measures the fair value of certain assets and liabilities
acquired in a business combination, including non-controlling interests,
contingent consideration, and certain acquired contingencies. SFAS 141(R) also
requires acquisition-related transaction expenses and restructuring costs be
expensed as incurred rather than capitalized as a component of the business
combination. SFAS 141(R) will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. SFAS
141(R) would have an impact on the accounting for any businesses acquired by the
Company after the effective date of the pronouncement.
  In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements — An Amendment of ARB No. 51
(“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the
non-controlling interest in a subsidiary (previously referred to as minority
interests). SFAS 160 also requires that a retained non-controlling interest upon
the deconsolidation of a subsidiary be initially measured at its fair value.
Upon adoption of SFAS 160, the Company would be required to report any
non-controlling interests as a separate component of stockholders’ equity. The
Company would also be required to present any net income (loss) allocable to
non-controlling interests and net income (loss) attributable to the stockholders
of the Company separately in its consolidated statements of operations. SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption
of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS 160 shall be applied prospectively. SFAS 160
would have an impact on the presentation and disclosure of the non-controlling
interests of any non wholly-owned businesses acquired by the Company in the
future.
  In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement
No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance and cash flows. The guidance in SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. This
Statement encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The
adoption of SFAS 161 is not expected to have a material impact on the Company’s
consolidated financial statements.
  In
April 2008, the FASB issued FASB Staff Position SFAS 142-3, Determination of the Useful Life of
Intangible Assets (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other
Intangible Assets . The objective of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
142 and the period of expected cash flows used to measure the fair value of the
asset under SFAS 141(R) and other U.S. GAAP principles. FSP SFAS 142-3 is
effective for fiscal years beginning after December 15, 2008. The adoption of
FSP SFAS 142-3 is effective January 1, 2009 and is not expected to have a
material impact on the Company’s consolidated financial
statements.
  In
June 2008, the FASB ratified Emerging Issue Task Force (“EITF”) 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock (“EITF
07-5”). EITF 07-5 provides framework for determining whether an instrument is
indexed to an entity’s own stock. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The implementation of EITF 07-5 is not
expected to have a material effect on the Company’s consolidated financial
statements.
  In
October 2008, the FASB issued FASB Staff Position 157-3, Determining Fair Value of a
Financial Asset in a Market That is Not Active (“FSP 157-3”). FSP 157-3
classified the application of SFAS 157 in an inactive market. It demonstrated
how the fair value of a financial asset is determined when the market for that
financial asset is inactive. FSP 157-3 was effective upon issuance, including
prior periods for which financial statements had not been issued. The
implementation of FSP 157-3 did not have a material effect on the Company’s
consolidated financial statements.
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(“SFAS 157”). This Statement defines fair value, establishes a framework for
measuring fair value and expands disclosure of fair value measurements. SFAS 157
applies under other accounting pronouncements that require or permit fair value
measurements and accordingly, does not require any new fair value measurements.
The Company adopted SFAS 157 as of January 1, 2008. In February 2008, the FASB
issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No.
157 , which provides a one year deferral of the effective date of SFAS
157 for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. Therefore, the Company has adopted the provisions of SFAS 157 with
respect to its financial assets and liabilities only. The adoption of SFAS 157
did not have a material effect on the Company’s consolidated financial
statements.
  In
December 2008, the FASB issued FASB Staff Position FIN 48-3, Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises (“FSP FIN 48-3”),
which was effective upon issuance. Management has determined that this
pronouncement does not apply to any of the Company’s
transactions.
  In
December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets (“FSP 132(R)-1”). FSP 132(R)-1
provides guidance on disclosure of plan assets of defined benefit pensions or
other postretirement plans and is effective for fiscal years ending after
December 15, 2009. Management has determined that this pronouncement does not
apply to any of the Company’s transactions.
  In
January 2009, the FASB issued FASB Staff Position EITF 99-20-1, Amendments to the Impairment
Guidance of EITF Issue No. 99-20 (“FSP EITF 99-20”). FSP EITF 99-20 deals
with securitized financial assets and other than temporary impairment. FSP EITF
99-20 is effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. Management has
determined that this pronouncement does not apply to any of the Company’s
transactions.
 F-13


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





In
December 2008, the SEC issued the final rule, "Modernization of Oil and Gas
Reporting," which adopts revisions to the SEC's oil and natural gas
reporting disclosure requirements and is effective for annual reports on
Forms 10-K for years ending on or after December 31, 2009. Early
adoption of the new rules is prohibited. The new rules are intended to provide
investors with a more meaningful and comprehensive understanding of oil and
natural gas reserves to help investors evaluate their investments in oil and
natural gas companies. The new rules are also designed to modernize the oil and
natural gas disclosure requirements to align them with current practices and
changes in technology. The new rules include changes to the pricing used to
estimate reserves, the ability to include nontraditional resources in reserves,
the use of new technology for determining reserves and permitting disclosure of
probable and possible reserves. The Company is currently evaluating the
potential impact of these rules. The SEC is discussing the rules with the FASB
staff to align FASB accounting standards with the new SEC rules. These
discussions may delay the required compliance date. Absent any change in the
effective date, the Company will begin complying with the disclosure
requirements in our annual report on Form 10-K for the year ending
December 31, 2009.





Note
3 — Acquisitions





On
October 26, 2007, Platinum consummated the Tandem acquisition pursuant to the
related acquisition agreement. Consideration for the transaction consisted of
the assumption and satisfaction of $41.7 million of TEC indebtedness plus
accrued interest, and 7.7 million shares of common stock of Platinum. The per
share cash value was $7.80 as of the closing date. Pursuant to the acquisition
agreement, the Company filed a registration statement with the Securities and
Exchange Commission with respect to the approximately 7.7 million Platinum
common shares issued in connection with the acquisition, effective August 7,
2008. In connection with the asset acquisition agreement, the Company entered
into a finder’s agreement and a consulting agreement with Mr. Lance
Duncan.





The
following details the allocation of the purchase price of the TEC acquisition in
thousands:





Consideration
      -
                                      
                                      TECCash
                                      
                                      $
                                      47,344Equity
      instruments (7,692,308 Platinum common shares )
                                      
                                      
                                      60,000$
                                      107,344Recognized
      amount of identifiable assets acquired andliabilities
      assumed -Assets
      acquiredCash
                                      
                                      $
                                      2,960Accounts
      receivable, net
                                      
                                      
                                      1,924Inventory
                                      
                                      
                                      86Property
      and equipment:Oil
      and Gas Properties
                                      
                                      
                                      154,881Other
                                      
                                      
                                      1,381Covenant
      not to compete and other
                                      
                                      
                                      246Real
      estate held for development
                                      
                                      
                                      2,700Liabilities
      assumedAccounts
      payable and other
                                      
                                      
                                      (1,983
                                      )Asset
      retirement obligations
                                      
                                      
                                      (2,543
                                      )Fair
      value of commodity derivatives
                                      
                                      
                                      (4,207
                                      )Deferred
      income taxes
                                      
                                      
                                      (48,101
                                      )Total
      identifiable net assets
                                      
                                      $
                                      107,344





F-14




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007




Unaudited
Pro-Forma Financial Information




The
following unaudited pro forma consolidated results of operations assume that the
acquisitions of the acquired entities as disclosed herein were completed as of
January 1, 2007:





Year Ended December
    31,
                
                Revenue
                
                
                Income
                  (Loss)
                  Before
                  Income
                  Taxes
                
                
                Net Income
                  (Loss)
                
                
                Earnings
                  (Loss)
                  Per SharePro
      forma 2007
                
                $
                22,547,000
                
                
                $
                (7,089,000
                )
                
                $
                (4,608,000
                )
                
                $
                (0.19
                )





The
proforma combined results are not necessarily indicative of the results that
actually would have occurred if the Tandem acquisition had been completed as of
the beginning of 2007, nor are they necessarily indicative of future
consolidated results. The results of operations of Tandem are included in the
accompanying consolidated financial statements, commencing with the closing date
of October 26, 2007.




Subsequent to the Tandem acquisition
the Company has made the following acquisitions related to the oil and gas
operations:





Operating
                            
                            Price
                            
                            
                            Working
                            
                            CurrentDate
                            
                            ProspectName
                            
                            Location
                            
                            Status
                            
                            (millions)
                            
                            
                            Interest
                            
                            StatusNovember,
      2007
                            
                            N.
      Minnie Bock
                            
                            Nueces
      County, TX
                            
                            Non-operated
                            
                            $
                            1.1
                            
                            
                            
                            12%
                            
                            ProducingDecember,
      2007
                            
                            La
      Rosa
                            
                            Refugio,
      TX
                            
                            Non-operated
                            
                            $
                            5.3
                            
                            
                            
                            50%
                            
                            ProducingDecember,
      2007
                            
                            Lothian
                            
                            Lea, Chavez, Eddy, NM
                            
                            Operated
                            
                            $
                            6.9
                            
                            
                            
                            100%
                            
                            ProducingDecember,
      2007
                            
                            Barnett
      Shale (1)
                            
                            Palo
      Pinto, TX
                            
                            Operated
                            
                            $
                            0.9
                            
                            
                            
                            100%
                            
                            Non-producingDecember,
      2007
                            
                            Big
      Al
                            
                            Scurry,
      TX
                            
                            Operated
                            
                            $
                            0.3
                            
                            
                            
                            100%
                            
                            ProducingJanuary,
      2008
                            
                            Pleasanton (2)
                            
                            Atascosa,
      TX
                            
                            Operated
                            
                            $
                            6.7
                            
                            
                            
                            70%
                            
                            Non-producingApril,
      2008
                            
                            Pruitt/Davis
                            
                            Atascosa,
      TX
                            
                            Operated
                            
                            $
                            0.8
                            
                            
                            
                            100%
                            
                            ProducingMay,
      2008
                            
                            Leike(3)
                            
                            Atascosa,
      TX
                            
                            Operated
                            
                            $
                            0.0
                            
                            
                            
                            70%
                            
                            Non-producingJune,
      2008
                            
                            Lacy (4)
                            
                            Hidalgo,
      TX
                            
                            Non-operated
                            
                            $
                            1.0
                            
                            
                            
                            25%
                            
                            Completed





(1)
            Acquisition
      of an additional 50% working interest in the Barnett Shale acreage within
      the Ball/Bird field.  This acquisition increased the Company’s
      net acreage position by 2,300 acres and gave us a 100% working interest in
      the Barnett Shale.  This acreage is held by production from
      existing operated wells in the
field.




(2)
            Purchase
      of non-producing leases to workover existing wells to complete them in the
      Edwards formation.  To date, the Company has expended
      approximately $400,000 on the workover program with limited
      results.  Further development is
  anticipated.




(3)
            Participation
      in a non-producing lease to workover an existing well to complete in
      the Edwards formation.  To date, the Company has expended
      approximately $1.7 million with limited results.  Further
      development is anticipated.




(4)
            Purchase
      of non-producing acreage.  Operator has successfully completed a
      well at approximately 7,600 feet, and is in the process of equipping the
      well for production.  The Company’s share of the drilling and
      completion cost was approximately
$550,000.


F-15


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





In
December 2007, Platinum purchased the outstanding stock of Red Iron Tool,
Inc. (Red Iron) for approximately $2.2 million. Red Iron owns three pulling
units and other service equipment near TEC’s Ira field in Scurry County, Texas.
Of the acquisition cost, approximately $1.6 million was allocated to the
equipment acquired, approximately $185,000 in accounts receivable, and
approximately $376,000 was allocated to the former owners 2 year employment
agreement, and non-compete contract.





On April
29, 2008, the Company completed the acquisition of Maverick pursuant to an
agreement and plan of merger entered into on March 18, 2008. Maverick is
a provider of project management, engineering, procurement, and
construction management services to both the public and private sectors,
including the oil and gas business in which the Company is engaged. Maverick is
based in south Texas with offices in Corpus Christi, Victoria, and
Houston.  Maverick provides services to the Company which would
otherwise be procured from third parties.  The aggregate consideration
paid in the merger was $6 million in cash and $5 million to be paid over the
next 5 years pursuant to non-interest bearing cash flow notes, subject to
certain escrows, holdbacks and post-closing adjustments. The cash flow notes are
payable quarterly at the rate of 50% of pre-tax net income, as it is defined in
the merger agreement, generated by the Maverick business on a stand-alone basis
in the preceding quarter. Payment can be accelerated by certain events,
including change in control of the Company.





The
purchase price was subject to adjustment for any change in working capital as
defined in the agreement, between October 31, 2007 and the closing date, as well
as other adjustments associated with changes in indebtedness. The cash flow
notes were reduced by the amount of the working capital post closing adjustment
which was determined by the Company to be $645,596. This amount may be subject
to modification as may be agreed between the parties. At the time the
acquisition was completed, a discount to present value in the amount of
$1,320,404 was recorded and deducted from the cash flow notes as these notes are
non-interest bearing for the initial 5 years of their term. As a result, the net
book value of the notes on April 29, 2008 was $3,034,000 and $3,183,783 as
December 31, 2008 after the accretion of the discount in the amount of $149,783
in the period from April 29, 2008 though December 31, 2008.





In
addition, the sellers agreed to satisfy and assume Maverick's bank indebtedness
in the aggregate amount of $4,889,538 consisting of a $2,960,155 revolving line
of credit maturing April 2008, a $1,584,375
term note due April 2011, and $345,008 oil and gas note due May 2009, using a
portion of the cash received by them at closing. Following the closing, the
Company was indebted to the sellers for these amounts under the identical terms
of the bank loan agreements. On April 30, 2008, Maverick entered into extension
and modification agreements with the sellers pursuant to which the sellers
agreed to defer principal payments of the $1.6 million term loan for six months
and extend the maturity date to April 2013. The sellers also agreed to extend
the maturity date of the revolving line of credit to 2010. In addition, as of
December 31, 2008, Maverick was not in compliance with the debt service coverage
ratio contained in the loan agreements. On August 14, 2008, the sellers waived
the Company's obligation to maintain this ratio through September 30, 2009 (See
Note 8).





The
aggregate purchase price for Maverick reflected in the financials, including
legal and other items, was $9,296,118. The results of operations of Maverick are
included for the period from April 29, 2008 (the date of acquisition) through
December 31, 2008.





The
following table details the allocation of the purchase price of the Maverick
acquisition (stated in thousands):




F-16


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


Consideration:Cash,
      including acquisition costs
                    
                    $
                    6,262Cash
      flow notes, net of working capital adjustment and present value
      discount
                    
                    
                    3,034$
                    9,296Recognized
      amount of assets acquired and liabilities assumedAssets
      acquired:Cash
                    
                    $
                    622Accounts
      receivable
                    
                    
                    4,296Other
      current assets
                    
                    
                    157Property
      and equipment
                    
                    
                    1,510Goodwill
                    
                    
                    7,845Amortizable
      intangible assets
                    
                    
                    5,52219,952Liabilities
      assumed:Accounts
      payable
                    
                    
                    (635
                    )Accrued
      expenses
                    
                    
                    (2,341
                    )Deferred
      tax liability
                    
                    
                    (1,933
                    )Term
      notes and revolving line of credit
                    
                    
                    (5,223
                    )Capitalized
      lease obligations
                    
                    
                    (524
                    )(10,656
                    )Total
      net assets acquired
                    
                    $
                    9,296




Unaudited
Pro-Forma Financial Information




The
following unaudited pro forma consolidated results of operations assume that the
Maverick acquisition was completed as of January 1, 2008 for the periods shown
below (stated in thousands, except for per share amount):





Pro Forma Consolidated Results of OperationsRevenue
                  
                  
                  (Loss)
                    Before
                    Income
                    Taxes
                  
                  
                  Net (Loss)
                  
                  
                  (Loss)
                    Per ShareYear
      Ended December 31, 2008
                  
                  $
                  63,828
                  
                  
                  $
                  (125,192
                  )
                  
                  $
                  (80,950
                  )
                  
                  $
                  (3.67
                  )





The pro
forma combined results are not necessarily indicative of the results that
actually would have occurred if the Maverick acquisition had been completed as
of the beginning of 2008, nor are they necessarily indicative of future
consolidated results. The impact on pro forma results of other transactions
entered into by the Company other than Maverick was immaterial.





The
assets and liabilities related to the foregoing acquisitions were recorded in
the Company’s consolidated balance sheet at their estimated fair values at the
date of acquisition in accordance with the provisions of SFAS No. 141, “Business
Combinations” and may be adjusted within one year of the date of
acquisition.





The
Company follows the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 142, Goodwill and
Other Intangible Assets and SFAS No. 144, Accounting for the impairment or
Disposal of Long-Lived Assets. Goodwill and
intangible assets acquired were evaluated at during the fourth quarter of 2008
for potential impairment.  Based on its testing as of December 31,
2008, the Company recognized $7.8 million of goodwill impairment charges and an
additional charge of $0.2 million related to the impairment of amortizable
intangible assets related to the acquisition of Maverick.


F-17


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007




Note 4 - Oil and Gas
Properties




The
following table sets forth the Company’s costs incurred in oil and gas property
acquisition, exploration and development activities for the period from January
1, 2008 through December 31, 2008 and for the period from October 26, 2007
through December 31, 2007 (stated in thousands):





2008
                      
                      
                      2007Beginning
      balance:
                      
                      $
                      170,572
                      
                      
                      $
                      —Acquisition
      of propertiesProved
                      
                      
                      7,489
                      
                      
                      
                      169,214Unproved
                      
                      
                      1,000
                      
                      
                      
                      —Adjustment
      to purchase price of oil and gas properties
                      
                      
                      4,640
                      
                      
                      
                      —Exploration
      costs
                      
                      
                      1,130
                      
                      
                      
                      —Development
      costs
                      
                      
                      19,541
                      
                      
                      
                      1,358Balance
      at December 31:
                      
                      $
                      204,372
                      
                      
                      $
                      170,572




The
following table sets forth the Company’s capitalized costs relating to oil and
gas producing activities at December 31, 2008 (stated in
thousands):




Proved
      oil and gas properties
                    
                    $
                    202,113Unproved
      oil and gas properties
                    
                    
                    2,259204,372Accumulated
      depletion and impairment (1)
                    
                    
                    (142,500
                    )Net
      capitalized costs at December 31, 2008
                    
                    $
                    61,872








Note
5 – Derivative Financial Instruments




The
Company engages in price risk management activities from time to
time.  We utilize derivative instruments, consisting of swaps, floors
and collars, to attempt to reduce our exposure to changes in commodity prices.
We account for our derivatives in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended.  SFAS No.
133 requires that all derivative instruments be recognized as assets or
liabilities in the balance sheet, measured at fair value. The accounting for
changes in the fair value of a derivative depends on both the intended purpose
and the formal designation of the derivative. Designation is established at the
inception of a derivative, but subsequent changes to the designation are
permitted. We have elected not to designate any of our derivative financial
contracts as accounting hedges and, accordingly, account for these derivative
financial contracts using mark-to-market accounting. Changes in fair value of
derivative instruments which are not designated as cash flow hedges are recorded
in other income (expense) as changes in fair value of derivatives. The
obligations under the derivatives contracts are collateralized by the same
assets that collateralize the Senior Credit Facility, and the contracts are
cross-defaulted to the Senior Credit Facility.  Substantially all of
the derivative financial instruments are collateral for the Senior Credit
Facility.


While the
use of these arrangements may limit the Company's ability to benefit from
increases in the price of oil and natural gas, it is also intended to reduce the
Company's potential exposure to significant price declines. The Company had
approximately 44% of its 2008 crude oil production and 8% of its gas production
covered by derivative contracts. These derivative transactions are generally
placed with major financial institutions that the Company believes are
financially stable; however, in light of the recent global financial crisis,
there can be no assurance of the foregoing.





For
the year ended December 31, 2008 and two months ended December 31, 2007,
the Company included in other income realized and unrealized losses related to
its derivative contracts as follows (stated in thousands):


F-18


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





2008
              
              2007Crude
      oil derivative realized settlements
              
              $
              (5,256
              )
              
              (115)Crude
      oil derivative change in unrealized gains (losses)
              
              
              22,565
              
              
              (1,358)Gain
      (loss) on derivatives
              
              $
              17,309
              
              
              (1,473)





Presented
below is a summary of the Company’s crude oil derivative financial contracts at
December 31, 2008:





Period
      Ended
                                      December
      31,
                                    
                                    Instrument
      Type
                                    
                                    Total
      Volumes
                                      (MMBTU/BBL)
                                    
                                    
                                    Contract
                                      Price
                                    
                                    
                                    Fair
      Value Asset
                                      (stated
      in thousands)2009
                                    
                                    Swaps
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    71.00
                                    
                                    
                                    $
                                    1,9682010
                                    
                                    Swaps
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    95.50
                                    
                                    
                                    
                                    3,680Puts
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    75.00
                                    
                                    
                                    
                                    2,409Puts
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    85.00
                                    
                                    
                                    
                                    3,321Puts
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    80.00
                                    
                                    
                                    
                                    1,0802011
                                    
                                    Swaps
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    95.25
                                    
                                    
                                    
                                    2,997Puts
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    80.00
                                    
                                    
                                    
                                    2,4462012
                                    
                                    Swaps
                                    
                                    
                                    120,000
                                    
                                    
                                    
                                    95.00
                                    
                                    
                                    
                                    2,630Total
      fair value
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    20,531





Note
6 – Fair Value Measurements





The
Company adopted SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”), effective January 1, 2008 for all financial assets and
liabilities. As defined in SFAS 157, fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price). In
determining the fair value of its derivative contracts the Company evaluates its
counterparty and third party service provider valuations and adjusts for credit
risk when appropriate, SFAS 157 requires disclosure that establishes a framework
for measuring fair value and expands disclosure about fair value measurements.
The statement requires fair value measurements be classified and disclosed in
one of the following categories:





Level
      1:
            Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or liabilities. The Company
      considers active markets as those in which transactions for the assets or
      liabilities occur in sufficient frequency and volume to provide pricing
      information on an ongoing basis.





Level
      2:
            Quoted
      prices in markets that are not active, or inputs which are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability. This category includes those derivative instruments
      that are valued using observable market data. Substantially all of these
      inputs are observable in the marketplace throughout the full term of the
      derivative instrument, can be derived from observable data, or supported
      by observable levels at which transactions are executed in the
      marketplace. Instruments in this category include non-exchange traded
      derivatives such as over-the-counter commodity price swaps and interest
      rate swaps.


F-19


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Level
      3:
            Measured
      based on prices or valuation models that require inputs that are both
      significant to the fair value measurement and less observable from
      objective sources (i.e., supported by little or no market activity). The
      Company’s valuation models are primarily industry-standard models that
      consider various inputs including: (a) quoted forward prices for
      commodities, (b) time value, (c) volatility factors and
      (d) current market and contractual prices for the underlying
      instruments, as well as other relevant economic measures. Level 3
      instruments primarily include derivative instruments, such as commodity
      price collars and puts. These instruments are considered Level 3 because
      the Company does not have sufficient corroborating market evidence for
      volatility to support classifying these assets and liabilities as Level
      2.




As
required by SFAS 157, financial assets and liabilities are classified based on
the lowest level of input that is significant to the fair value measurement. The
Company’s assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of the fair value of
assets and liabilities and their placement within the fair value hierarchy
levels.





The
following table presents information about the Company’s assets and liabilities
measured at fair value on a recurring basis as of December 31, 2008, and
indicates the fair value hierarchy of the valuation techniques utilized by the
Company to determine such fair value.  The fair value of derivative
financial instruments is determined based on counterparties’ valuation models
that utilize market-corroborated inputs.





As of December 31, 2008(in
      thousands)Level 1
                      
                      Level 2
                      
                      Level 3
                      
                      TotalOil and natural gas
    derivatives
                      
                      —
                      
                      $
                      20,531
                      
                      —
                      
                      $
                      20,531




The
determination of the fair values above incorporates various factors required
under SFAS 157. These factors include the impact of our nonperformance risk and
the credit standing of the counterparties involved in the Company’s derivative
contracts.




Gains
      and losses (realized and unrealized) included in earnings for the year
      ended December 31, 2008 are reported in other income on the Consolidated
      Statement of Operations.


F-20


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007




During
periods of market disruption, including periods of volatile oil and natural gas
prices, rapid credit contraction or illiquidity, it may be difficult to value
certain of the Company’s derivative instruments if trading becomes less frequent
and/or market data becomes less observable. There may be certain asset classes
that were in active markets with observable data that become illiquid due to the
current financial environment. In such cases, derivative instruments may fall to
Level 3 and thus require more subjectivity and management judgment. As such,
valuations may include inputs and assumptions that are less observable or
require greater estimation as well as valuation methods which are more
sophisticated or require greater estimation thereby resulting in valuations with
less certainty. Further, rapidly changing commodity and unprecedented credit and
equity market conditions could materially impact the valuation of derivative
instruments as reported within our consolidated financial statements and the
period-to-period changes in value could vary significantly. Decreases in value
may have a material adverse effect on our results of operations or financial
condition.





Cash and
cash equivalents, receivables, accounts payable and accrued liabilities were
each estimated to have a fair value approximating the carrying amount due to the
short maturity of those instruments.  Indebtedness under the Company’s
secured revolving bank credit facility and loans related to the acquisition of
Maverick were estimated to have a fair value approximating the carrying amount
since the interest rate is generally market sensitive.





Note 7 – Commitments and Contingencies




Consulting
Agreement





Effective
with the Tandem acquisition on October 26, 2007, the Company entered into a
consulting agreement with Mr. Lance Duncan, for consulting services, including
investigation and evaluation of possible future acquisitions for the Company.
Under the terms of the consulting agreement, the Company agreed to issue to Mr.
Duncan a total of 714,286 shares of the Company’s restricted common stock as
consideration over the period of service. These shares are fixed in number
(except for stock splits or other recapitalizations). These shares are to be
issued in semi-annual installments over the eighteen month term of the agreement
beginning with the closing of the Tandem acquisition.





On
October 26, 2007, the first installment of 178,572 of irrevocable shares was
issued to Mr. Duncan.  These shares were valued at $1,250,000 which
was charged to operations during the year ended December 31,
2007.  The Company was required to issue the remaining 535,714 shares
of its common stock in 2008. The Company has not issued these shares due to a
dispute between the Company and Duncan with respect to other claims that Duncan
has raised (See Note 12).  An expense in the amount of $1,098,215 is
included in marketing, general and administrative expense for the year ended
December 31, 2008 and in other accrued liabilities on the balance sheet as of
December 31, 2008 related to these unissued 535,714 shares of common
stock.


F-21


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007


Employment
Agreements





The
Company is obligated for minimum salaries pursuant to all executive and
non-employment agreements.  Excluding the cost of employee health
benefits, payments of bonuses that are either discretionary or contingent upon
performance criteria and stock based compensation arrangements the total
obligation under these agreements is $2,932,656 as follows (stated in
thousands):





Year Ending December
      31:2009
                            
                            $
                            8052010
                            
                            
                            7882011
                            
                            
                            6232012
                            
                            
                            4762013
                            
                            
                            241$
                            2,933





Operating
leases





The
Company leases its general office space and equipment under non-cancellable
operating leases that expire through August 2012. The total obligation under
existing operating leases is as follows:





For the Year Ending December
      31:2009
                            
                            $
                            9432010
                            
                            
                            9602011
                            
                            
                            9622012
                            
                            
                            536$
                            3,434




Rent
expense was approximately $520,000 for the year ended December 31,
2008.


Capitalized
leases





Maverick
leases office equipment and vehicles under capital lease agreements.
Depreciation expense for capital leases is included with depreciation on
property.  The cost, net of accumulated depreciation of capital leases
included in property and equipment is $499,667 at December 31, 2008. The total
minimum lease payments under capitalized leases together with the present value
of the net minimum lease payments was $467,908 at December 31,
2008.  The effective interest rate on capitalized leases ranges from
5% - 27%.




Note
8 - Long-Term Debt and Capital Lease Obligations




The following table sets forth the
Company’s long-term debt position as of December 31, 2008 (stated in
thousands):





Oil
      and gas revolving line of credit
                                        (a)
                                        
                                        $
                                        12,009Notes
      payable - acquisitions
                                        (b)
                                        
                                        
                                        3,537Revolving
      line of credit to former shareholders – Maverick
                                        (c)(f)
                                        
                                        
                                        3,249Term
      note to former shareholders - Maverick
                                        (d)(f)
                                        
                                        
                                        281Second
      term note to former shareholders - Maverick
                                        (e)(f)
                                        
                                        
                                        1,474Notes
      payable to third party – Maverick
                                        (g)
                                        
                                        
                                        305Capital
      lease obligations
                                        
                                        
                                        
                                        468$
                                        21,323Less:
      Current maturities
                                        
                                        
                                        
                                        13,404Long-term
      debt
                                        
                                        
                                        $
                                        7,919




F-22


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


(a)   On March
14, 2008, Tandem and PER gulf Coast, Inc. (“Borrower”) which are wholly owned
subsidiaries of the Company, entered into a Senior Secured Revolving Credit
Facility (“Senior Credit Facility”) with Bank of Texas. The Senior Credit
Facility provided for a revolving credit facility up to the lesser of the
borrowing base and $100 million. The initial borrowing base was set at $35
million.  The facility is collateralized by substantially all of the
Company’s proved oil & gas assets.





On
January 9, 2009, the Company reaffirmed the borrowing base at $35 million and
amended the Senior Credit Facility to change the interest rate provisions. Under
the amended loan agreement the outstanding debt bears interest at LIBOR, plus a
margin which varies with the ratio of the Borrower’s outstanding borrowings
against the defined borrowing base, ranging from 2.0% to 2.75 % provided the
interest rate does not fall below a floor rate of 4% per annum.  In
addition, the Borrower is obligated to the bank for a monthly fee of any unused
portion of the line of credit at the rate of 0.25% per annum.





Under the
terms of revolving line of credit agreement, the Borrower must maintain certain
financial ratios, must repay any amounts due in excess of the borrowing base,
and may not declare any dividends or enter into any transactions resulting in a
change in control, without the bank’s consent. A
financial covenant under the credit facility requires us to maintain a ratio of
indebtedness to cash flow of no more than 3 to 1. As of December 31,
2008 the Borrowers were not in compliance with this
covenant. The Borrowers have formally requested that the bank
either amend the loan agreement, grant a waiver for this period, or grant
the Borrowers sufficient time to obtain additional capital resources
through alternative means. The bank has submitted the request to its loan
committee, but the Borrowers have not received the waiver as the date
of the issuance of this report. Accordingly, the company has reclassed the
amount of outstanding indebtedness under the credit facility, approximately $12
million, to the current liabilities section of the balance sheet.  If
a suitable arrangement cannot be reached with the bank, the bank could
accelerate the indebtedness and seek to foreclose on the pledged assets.
However, the Borrowers believe they have sufficient liquidity in
its derivative contracts to liquidate some or all of its hedge positions in
order to bring the company back into compliance with the covenant, if
required.





(b)As part
of the acquisition of Maverick the Company agreed to pay $5 million over the
next 5 years pursuant to non-interest bearing cash flow notes, subject to
certain escrows, holdbacks and post-closing adjustments. The cash flow notes are
payable quarterly at the rate of 50% of pre-tax net income generated by the
Maverick business on a stand-alone basis in the preceding quarter. Payment can
be accelerated by certain events, including change in control of the
Company.





The
purchase price was subject to adjustment for any change in working capital as
defined in the agreement, between October 31, 2007 and the closing date, as well
as other adjustments associated with changes in indebtedness. The cash flow
notes were reduced by the amount of the working capital post closing adjustment
which was determined by the Company to be $645,596. This amount may be subject
to modification as may be agreed between the parties. At the time the
acquisition was completed, a discount to present value in the amount of
$1,320,404 was recorded and deducted from the cash flow notes as these notes are
non-interest bearing for the initial 5 years of their term. As a result, the net
carrying value of the notes on April 29, 2008 was $3,034,000 and $3,183,783 at
December 31, 2008 after the accretion of the discount in the amount of $149,783
in the period from April 29, 2008 though December 31, 2008.





On
April 16, 2009, the Company received a written notice of acceleration from
Robert L. Kovar Services, LLC, as the stockholder representative, claiming that
the Company failed to make timely mandatory prepayments in the amount of
$110,381 due under the terms of the Cash Flow Notes.  The Cash Flow
Notes are payable quarterly at the rate of 50% of pre-tax net income, as defined
in the merger agreement, generated by the Maverick business on a stand-alone
basis in the preceding quarter. The
Company has not reclassified the long-term portion of these Notes included in
Notes payable – acquisitions to current liabilities.





It is the
Company’s position that Maverick generated a pretax loss during the period April
29, 2008 through December 31, 2008 and the fourth quarter of 2008, and as such
the Company was not obligated to make a mandatory payment to the note
holders.   Generally Accepted Accounting Principles in the United
States of America (“GAAP”) require intangible assets to be amortized over their
useful lives.  In addition, goodwill and intangible assets are
evaluated annually for potential impairment.  The pretax income as
calculated by Robert L. Kovar Services, LLC, as the stockholder representative,
did not include amortization expense or impairment charges related to intangible
assets and goodwill in accordance with GAAP.




In
connection with the Pleasanton acquisition, the Company entered into a
settlement agreement for $1,000,000 in order to secure clear title to the
properties acquired, of which it paid $450,000 cash and issued its note for the
balance in the amount of $550,000. The note bears interest at 12% per annum, and
is subject to monthly payments beginning June 1, 2008 of an amount equal to 1⁄2 of
the net proceeds from production attributable to the Company’s interest in the
purchased leasehold or $30,000, whichever is greater, until the note is paid in
full. The current and long term portion of the note at December 31, 2008
was $306,034 and $48,176, respectively.




F-23


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





(c) $3,250,000 revolving line
of credit, payable to the Maverick former shareholders in monthly interest
payments at prime plus .25%, principal and unpaid interest due at maturity in
September 2010.





(d) Term note, payable to
the Maverick former shareholders in monthly principal and interest payments of
$10,280 with interest at prime plus .75%, unpaid principal and interest due at
maturity in May 2009.





(e) Second term note, payable
to the Maverick former shareholders in monthly interest payments at prime plus
..50% beginning in April 2008 and beginning in October 2008, principal payments
of $23,390 plus interest until maturity in April 2013.





(f) On April 29, 2009,
Maverick received a notice of acceleration (the “Acceleration Letter”) with
respect to the Notes governed by a Loan Agreement and related Security Agreement
originally dated April 30, 2005 and April 29, 2005, respectively.  The
Acceleration Letter alleges that Maverick failed to comply with certain
covenants under the terms of the Loan Agreement and that Maverick failed to make
payments due under the Notes.  The outstanding principal, accrued
interest and late charges alleged to be owed by Maverick in the Acceleration
Letter total $4,659,227.  The Acceleration Letter also contends that
interest continues to accrue at the default rate of 18% per annum.  In
a separate letter, dated May 1, 2009, Robert L. Kovar Services, LLC, as the
stockholder representative for the sellers, purported to terminate the revolving
credit facility under the Loan Agreement and demanded turnover of all collateral
securing indebtedness under the Loan Agreement, including the
Notes.





The
Company and Maverick have asserted claims in litigation against the holders of
the Notes, Robert L. Kovar Services, LLC, Robert L. Kovar, individually, and
others.  The litigation is in its early stages and, accordingly, the
Company cannot predict the outcome of these matters.




(g) Note payable to a third party in monthly
installments, with interest paid at 12%, principal due at maturity in September
2009, collateralized by the guaranty of the Maverick former majority stockholder
and substantially all assets. These notes are collateralized by accounts
receivable, a $4,000,000 life insurance policy on the former majority
stockholder, and general and limited oil and gas partnership interests owned by
the Maverick former majority stockholder.


Annual
maturities of indebtedness at December 31, 2008 are as follows (stated in
thousands):





For
      the Year Ending December 31,2009
                      (1)
                      
                      $
                      13,1812010
                      
                      
                      
                      3,5782011
                      
                      
                      
                      2812012
                      
                      
                      
                      2802013
                      
                      
                      
                      3,535$
                      20,855




(1)
              Includes
      $12,009 of debt outstanding under the Senior Credit Facility which was in
      default at December 31,
2008.




The
following is a schedule of future minimum lease payments under capitalized
leases together with the present value of the net minimum lease payments at
December 31, 2008 (stated in thousands):




For
      the Year Ending December 31:2009
                                
                                $
                                2782010
                                
                                
                                1642011
                                
                                
                                1022012
                                
                                
                                40Total
      minimum lease payments
                                
                                
                                584Less:  Amount
      representing interest
                                
                                
                                (116
                                )Current
      value of minimum lease payments
                                
                                
                                468Less:  Current
      maturities
                                
                                
                                (208
                                )$
                                260





The
effective interest rate on capitalized leases ranges from 5% -
31%.




Note 9 – Equity and Stock
Plans





Public Offering
2005—On
October 28, 2005, the Company sold to the public 14,400,000 units (“Units”) at
an offering price of $8.00 per Unit. Each Unit consists of one share of the
Company’s common stock, $0.0001 par value, and one Redeemable Common Stock
Purchase Warrant (“Warrants”). Of the 14,400,000 common shares issued in the
offering, 2,878,560 shares were initially not recorded in stockholders
equity.  Commensurate with the closing of the Tandem acquisition,
1,076,355 common shares were reclassified to stockholders equity and holders of
1,802,205 shares elected to redeem their shares for cash.  Each
Warrant entitles the holder to purchase from the Company one share of common
stock at an exercise price of $6.00 expiring October 23, 2009. Separate trading
of the common stock and Warrants comprising the Units commenced on or about
December 9, 2005.  As of December 31, 2008, there were outstanding
warrants to purchase 14,400,000 shares of common stock.


F-24


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Share Based
Compensation—On March 20, 2006, the
Board of Directors of the Company approved a 2006 Long-Term Incentive Plan.
Pursuant to the plan, the Company may grant up to 4 million incentive and
non-qualified stock options, stock appreciation rights, performance units,
restricted stock awards and performance bonuses, or collectively, awards, to
officers and key employees. In addition, the plan authorizes the grant of
non-qualified stock options and restricted stock awards to directors and to any
independent contractors and consultants.  Options to purchase the
Company’s common stock have been granted to officers, employees, non-employee
directors and certain key individuals. Options generally become exercisable in
20% to 25% cumulative annual increments beginning with the date of grant
and expire at the end of ten years. As of December 31, 2008 a total of 140,000
stock option grants were issued under the plan which were valued at
$335,000.  During the year ended December 31, 2008 the Company
recorded stock-based compensation attributable to the options of $36,332. No
portion of this expense has been capitalized.




Summaries
of share-based awards transactions follow:





WeightedNumber
                  
                  
                  Averageof Share
                    Options
                  
                  
                  Exercise
                    PriceOutstanding
      at December 31, 2007
                  
                  
                  —
                  
                  
                  $
                  —Granted
                  
                  
                  140,000
                  
                  
                  
                  3.86Exercised
                  
                  
                  —
                  
                  
                  
                  —Canceled
                  
                  
                  —
                  
                  
                  
                  —Outstanding
      at December 31, 2008
                  
                  
                  140,000
                  
                  
                  $
                  3.86




Fair
value of share options was estimated at the date of grant using the
Black-Scholes option pricing model. Certain assumptions were used in determining
the fair value of share options using this model. The Company calculated the
estimated volatility by averaging the historical volatility of the Company’s
stock and the historic volatility of a selected group of comparable peer
companies. The risk-free interest rate is based on observed U.S. Treasury rates
at date of grant, appropriate for the expected lives of the options. The
expected life of options was determined based on the method provided in Staff
Accounting Bulletin 107, as we do not have an adequate exercise history to
determine the average life for the options with the characteristics of those
granted.  Weighted averages of the assumptions used in the
Black-Scholes option pricing model were as follows for grants of options in the
year ended December 31, 2008:





Risk-free
      interest rates
                  
                  
                  3.9
                  %Dividend
      yield
                  
                  
                  0
                  %Volatility
                  
                  
                  68.8
                  %Expected
      life
                  
                  6.4
      yearsWeighted
      average grant date fair value
                  
                  $
                  2.39Total
      options granted
                  
                  
                  140,000Total
      weighted average fair value of options granted
                  
                  $
                  335,000





Computation
of Earnings per Share—The Company accounts for earnings per share in
accordance with SFAS No. 128, which establishes the requirements for
presenting earnings per share ("EPS"). SFAS No. 128 requires the
presentation of "basic" and "diluted" EPS on the face of the statement of
operations. Basic EPS amounts are calculated using the weighted average number
of common shares outstanding during each period. Diluted EPS assumes the
exercise of all stock options, warrants and convertible securities having
exercise prices less than the average market price of the common stock during
the periods, using the treasury stock method. When a loss from continuing
operations exists, as in the periods presented, potential common shares are
excluded in the computation of diluted EPS because their inclusion would result
in an anti-dilutive effect on per share amounts.


F-25


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





Reconciliations
between the numerators and denominators of the basic and diluted EPS
computations for each period are as follows (in thousands, except per share
data):





Year
      Ended December 31,2008
                              
                              
                              2007Numerator:Net
      (loss) applicable to common stockholders
                              
                              $
                              (80,819,595)
                              
                              
                              $
                              (373,032)Denominator:Denominator
      for basic (loss) per share — weighted-average shares
      outstanding
                              
                              
                              22,070,762
                              
                              
                              
                              18,876,347Effect
      of potentially dilutive common shares:Warrants
                              
                              
                              —
                              
                              
                              
                              —Employee
      and director stock options
                              
                              
                              —
                              
                              
                              
                              —Denominator
      for diluted (loss) per share — weighted-average shares outstanding
      and assumed conversions
                              
                              
                              22,070,762
                              
                              
                              
                              18,876,347Basic
      earnings (loss) per share
                              
                              $
                              (3.66
                              )
                              
                              $
                              (0.02)Diluted
      earnings (loss) per share
                              
                              $
                              (3.66
                              )
                              
                              $
                              (0.02)





The
Company has determined that the warrants contained in the units sold in its
initial public offering would be antidilutive and thus excluded the effects of
the warrants for the years ending December 31, 2008 and
2007.   For the year ended December 31, 2008, options to purchase
140,000 shares of common stock were not considered in calculating diluted
earnings per share because the effect would be anti-dilutive.





Note
10 – Income Taxes




The
Company utilizes an asset liability approach to determine the extent of any
deferred income taxes, as described in SFAS No. 109, “Accounting for Income
Taxes.” This method gives consideration to the future tax consequences
associated with differences between financial statement and tax bases of assets
and liabilities.




A
reconciliation of the federal statutory income tax rate to the Company’s
effective tax rate as reported is as follows:




2008
                      
                      2007Taxes
      at federal statutory rate
                      
                      
                      (34.0
                      )%
                      (35.0
                      )%State
      income tax net of federal benefit
                      
                      
                      (1.0
                      )%
                      20.0
                      %Non
      taxable income - interest
                      
                      
                      -
                      
                      (302.0
                      )%Non
      deductible expenses (principally goodwill impairment)
                      
                      
                      2.3
                      %
                      0.0
                      %Increase
      and true-up of valuation allowance
                      
                      
                      (2.6
                      )%
                      348.0
                      %Effective
      income tax rate
                      
                      
                      (35.3
                      )%
                      31.0
                      %




Significant
components of deferred tax assets and liabilities at December 31, 2008 and 2007
are as follows:




F-26


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


2008
                        
                        
                        2007Deferred
      expenses - start-up costs
                        
                        $
                        537
                        
                        
                        $
                        384Other
      (includes asset retirement obligation)
                        
                        
                        1,499
                        
                        
                        
                        4Commodity
      derivatives
                        
                        
                        -
                        
                        
                        
                        1,775Net
      operating loss carryforward
                        
                        
                        6,061
                        
                        
                        
                        609Depletion
      carryforward
                        
                        
                        1,924
                        
                        
                        
                        -Less:
      valuation allowance
                        
                        
                        (3,045
                        )
                        
                        
                        (1,366
                        )6,976
                        
                        
                        
                        1,406Intangible
      assets
                        
                        
                        (1,633
                        )
                        
                        
                        -Commodity
      derivatives
                        
                        
                        (6,223
                        )
                        
                        
                        -Difference
      between carrying value of property and equipment and tax
      basis
                        
                        
                        (9,579
                        )
                        
                        
                        (49,491
                        )Net
      deferred tax assets (liabilities)
                        
                        $
                        (10,459
                        )
                        
                        $
                        (48,085
                        )




At
December 31, 2008, the Company had, subject to the limitation discussed below,
$17.3 million of net operating loss carryforwards for U.S. purposes. These loss
carryforwards will expire from 2026 through 2028 if not
utilized.




In
addition to any Section 382 limitations, uncertainties exist as to the future
utilization of the operating loss carryforwards under the criteria set forth
under SFAS Statement No. 109. Therefore, the Company has established a valuation
allowance of $1.4 million in deferred tax assets at December 31, 2007 and $3.0
million at December 31, 2008.




There
are no uncertain income tax positions required to be recorded pursuant to FIN
48. The Company files income tax returns in the U.S. (federal and state
jurisdictions). Tax years 2006 to 2008 remain open for all jurisdictions. The
Company’s accounting policy is to recognize interest and penalties, if any,
related to unrecognized tax benefits as income tax expense. The Company does not
have an accrued liability for interest and penalties at December 31,
2008.





Note
11 - Segment Information




With the
consummation of the Maverick acquisition, in accordance with Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, the Company considers itself to be in
two lines of business - (i) as an independent oil and gas exploration and
production company and (ii) as an engineering services company.




(i)
            The
      Company sells substantially all of its crude oil production under
      short-term contracts based on prices quoted on the New York Mercantile
      Exchange (“NYMEX”) for spot West Texas Intermediate contracts, adjusted by
      agreed-upon increases or decreases which vary by grade of crude oil. The
      majority of the Company’s natural gas production is sold under short-term
      contracts based on pricing formulas which are generally market responsive.
      From time to time, the Company may also sell a portion of the gas
      production under short-term contracts at fixed prices. For the year ended
      December 31, 2008, three customers accounted for approximately 39%,
      15% and 14% of the Company’s crude oil and natural gas
      revenues.  The Company believes that the loss of any of its oil
      and gas purchasers would not have a material adverse effect on its results
      of operations due to the availability of other
    purchasers.





(ii)
            Maverick
      provides engineering and construction services primarily for three types
      of clients: (1) upstream oil & gas, domestic oil and gas producers and
      pipeline companies; (2) industrial, petrochemical and refining plants; and
      (3) infrastructure, private and public sectors, including state
      municipalities, cities, and port authorities. Maverick operates out of
      facilities headquartered in Victoria, Texas and operates primarily in
      Texas. The types of services provided include project management,
      engineering, procurement, and construction management services to both the
      public and private sectors, including the oil and gas business in which
      the Company is engaged.





The
following table presents selected financial information for the Company’s
operating segments (stated in thousands):





F-27


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


Exploration
                      
                      
                      
                      
                      
                      
                      
                      
                      ConsolidatedFor the Year Ended December 31,
      2008:
                      
                      and Production
                      
                      
                      Engineering
                      
                      
                      Parent
                      
                      
                      TotalRevenues
                      
                      $
                      34,849
                      
                      
                      $
                      20,529
                      
                      
                      $
                      -
                      
                      
                      $
                      55,378Intersegment
      revenues
                      
                      
                      -
                      
                      
                      
                      (2,195
                      )
                      
                      
                      -
                      
                      
                      
                      (2,195
                      )Total
      revenues
                      
                      $
                      34,849
                      
                      
                      $
                      18,334
                      
                      
                      $
                      -
                      
                      
                      $
                      53,183Income
      (loss) before income taxes
                      
                      $
                      (111,765
                      )
                      
                      $
                      (8,959
                      )
                      
                      $
                      (4,265
                      )
                      
                      $
                      (124,990
                      )As of December 31,
2008:Total
      assets
                      
                      $
                      82,390
                      
                      
                      $
                      12,141
                      
                      
                      $
                      10,346
                      
                      
                      $
                      104,877




In 2007
the Company only operated one line of business.





Note
12 — Litigation





From time
to time, the Company is party to certain legal actions and claims arising in the
ordinary course of business. While the outcome of these events cannot be
predicted with certainty, management does not anticipate these matters to have a
materially adverse effect on the financial position or results of operations of
the Company.





On
January 16th, 2008, Exxon Mobil Corporation filed a petition in the
270th  District Court of Harris County, Texas, naming the
Company as a defendant along with Tandem Energy Corporation, a Colorado
corporation (“Old TEC”), and a third party, Merenco Realty, Inc., demanding
environmental remediation of certain properties in Tomball, Texas. In 1996,
pursuant to an assignment agreement, Exxon Mobil sold certain oil and gas
leasehold interests and real estate interests in Tomball, Texas to Old TEC’s
predecessor in interest, Merit Energy Corporation. In 1999, Old TEC assigned its
50% undivided interest in one of the tracts in the acquired property to Merenco,
an affiliate of Old TEC, owned 50% by our Chairman of the Board, Tim Culp. In
October 2007, the Texas Railroad Commission notified Exxon Mobil of an
environmental site assessment alleging soil and groundwater contamination for a
site in the area of Tomball, Texas. Exxon Mobil believes that the site is one
which was sold to Old TEC and claims that Old TEC is obligated to remediate the
site under the assignment agreement. Exxon Mobil has requested that the court
declare the defendants obligated to restore and remediate the properties and has
requested any actual damages arising from breach and attorneys’ fees. The
Company believes that Exxon Mobil’s claim that Old TEC is responsible for
any remediation of such site is without merit and we intend to vigorously defend
ourselves against this claim. However, no assurance can be given that we will
prevail in this matter and we estimate the possible loss could range from
$60,000 to $250,000.  In October 2007, The Company acquired
substantially all the assets and liabilities of Old TEC. Merenco was not
acquired by us in the acquisition and the Company's Chairman, Tim
Culp, continues to have a 50% ownership interest in Merenco.





On
November 11, 2008, Mr. Hyman, a former employee of KD Resources, filed a claim
against KD Resources and Platinum Energy stating that he was discharged from KD
Resources in retaliation for informing a supervisor that an accounting employee
had a prior conviction for fraud and embezzlement, which he claims to be in
violation of the Sarbanes-Oxley Act of 2002, Section 806, Protection for
Employees of Publicly Traded Companies Who Provide Evidence of
Fraud.  In December, 2008, the Department of Labor (“DOL”) dismissed
the complaint as not being timely filed.  On or about January 8, 2009, Mr.
Hyman appealed the ruling of the DOL. On January 16, 2009, the DOL filed an
Order to Show Cause whereby Mr. Hyman must show why his case should not have
been dismissed. Mr. Hyman had 30 days to respond to the Order to Show
Cause.  On February 14, 2009, Mr. Hyman filed his response to the Order to
Show Cause stating that he failed to file within the required time because he
was engaged in negotiations with the Respondents.  On March 18, 2009, the
Department of Labor dismissed Mr. Hyman’s claim for failure to file within the
90-day filing period.   Mr. Hyman has filed a Petition for Review of
the Decision and Order Dismissing Complaint issued March 18, 2009.  A
Notice of the Appeal was filed April 10, 2009 which was granted.  Mr. Hyman
has until May 11, 2009 to file his initial brief.  The
Company will then have the opportunity to file a brief which must be done
by June 10, 2009.  It is The Company's intention to argue that Mr. Hyman
was never an employee of Platinum Energy Resources or any of its subsidiaries;
as such we are not liable for any issues between Mr. Hyman and his employer, KD
Resources.  It is the Company's further contention that the only reason
Platinum Energy is listed in this action is because it is a public company and
Mr. Hyman needs a public company in order to obtain his status under the
Sarbanes-Oxley Act.


F-28


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007





On
December 3, 2008, Robert Kovar, our Chief Operating Officer, delivered his
letter of resignation, effective on December 3, 2008, and filed a lawsuit
against us in the district court of Victoria County, Texas claiming that he had
Good Reason (as defined in his Employment Agreement) to terminate his
employment.  In the lawsuit Mr. Kovar is seeking declaratory relief
and claims he is entitled to a severance payment under his Employment Agreement,
accelerated vesting of his stock options and accelerated payment of the cash
flow note issued to him in connection with the purchase by the Company of
Maverick Engineering, Inc. in April 2008.   We believe that Mr.
Kovar did not have Good Reason to resign and that the lawsuit has no
merit.  We intend to vigorously defend ourselves in this
action.





On
December 3, 2008, Lance Duncan filed suit against Platinum Energy Resources,
Inc.  Mr. Duncan is seeking compensation for 515,713 shares of
Platinum stock, $13,857.47 for use of his private plane, and consummation of an
agreement to purchase a drilling rig for the sum of $2,478,000.  On
December 21, 2008, Platinum filed a general denial. A Scheduling Order has been
accepted by opposing counsel and approved by the Judge assigned to this
matter.  We believe that Mr. Duncan’s claims are without merit and we
intend to vigorously defend ourselves against these claims.




On
April 16, 2009, the Company received a written notice of acceleration from
Robert L. Kovar Services, LLC, as the stockholder representative, claiming that
the Company failed to make timely mandatory prepayments in the amount of
$110,381 due under the terms of the Cash Flow Notes.  On April 29,
2009, Maverick received a notice of acceleration (the “Acceleration Letter”)
with respect to the Notes governed by a Loan Agreement and related Security
Agreement originally dated April 30, 2005 and April 29, 2005, respectively. The
Acceleration Letter alleges that Maverick failed to comply with certain
covenants under the terms of the Loan Agreement and that Maverick failed to make
payments due under the Notes. The outstanding principal, accrued interest and
late charges alleged to be owed by Maverick in the Acceleration Letter total
$4,659,227. The Acceleration Letter also contends that interest continues to
accrue at the default rate of 18% per annum. In a separate letter, dated May 1,
2009, Robert L. Kovar Services, LLC, as the stockholder representative for the
sellers, purported to terminate the revolving credit facility under the Loan
Agreement and demanded turnover of all collateral securing indebtedness under
the Loan Agreement, including the Notes. The Company and Maverick have asserted
claims in litigation against the holders of the Notes, Robert L. Kovar Services,
LLC, Robert L. Kovar, individually, and others. The litigation is in its early
stages and, accordingly, the Company cannot predict the outcome of these
matters.




Note
13 - Benefit Plan





Prior
to its acquisition by the Company, Maverick adopted a defined contribution plan
under Section 401(k) of the Internal Revenue Code for the benefit of all
employees who have met certain length-of-service requirements. Under this plan,
Maverick employees may elect to make contributions pursuant to a salary
reduction agreement. Each year, Maverick may make a matching contribution to the
plan on behalf of the participating employees. Employer contributions to the
plan are discretionary. For the period from April 29, 2008 to December 31, 2008
employer contributions charged to operations totaled approximately
$432,000.





Note
14 – Subsequent Events





On
January 9, 2009, the Company reaffirmed its borrowing base of $35 million and
amended the Senior Credit Facility with Bank of Texas to change the interest
rate provisions. Under the amended loan agreement the outstanding debt bears
interest at LIBOR, plus a margin which varies with the ratio of the borrower’s
outstanding borrowings against the defined borrowing base, ranging from 2.0% to
2.75 % provided the interest rate does not fall below a floor rate of 4% per
annum.




The
Company is not in compliance with loan convenants contained in the Senior Credit
Facility as discussed in Note 8.




F-29


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Years Ended December 31, 2008 and 2007




Note 15 – Oil and Gas
Reserve Information (Unaudited)





The
estimates of proved oil and gas reserves utilized in the preparation of the
consolidated financial statements were prepared by Williamson Petroleum
Consultants (Williamson), independent petroleum engineers. Future cash inflows
were computed by applying year-end prices to the year-end quantities of proved
reserves. Future development, abandonment and production costs were computed by
estimating the expenditures to be incurred in developing, producing, and
abandoning proved oil and gas reserves at the end of the year, based on year-end
costs. Future income taxes were computed by applying statutory tax rates to the
estimated net pre-tax cash flows after consideration of tax basis and tax
credits and carryforwards. All of the Company’s reserves are located in the
United States. For information about the Company’s results of operations from
oil and gas producing activities, see the accompanying consolidated statements
of operations.




In
accordance with Rule 4-10(a) of SEC Regulation S-X, proved oil and gas reserves
are the estimated quantities of crude oil, natural gas, and natural gas liquids
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions, i.e., prices and costs as of the date the estimate is
made. Prices include consideration of changes in existing prices provided only
by contractual arrangements, but not on escalations based upon future
conditions.





(1)
Reservoirs are considered proved if economic producibility is supported by
either actual production or conclusive formation test. The area of a reservoir
considered proved includes (A) that portion delineated by drilling and defined
by gas-oil and/or oil-water contacts, if any, and (B) the immediately adjoining
portions not yet drilled, but which can be reasonably judged as economically
productive on the basis of available geological and engineering data. In the
absence of information on fluid contacts, the lowest known structural occurrence
of hydrocarbons controls the lower proved limit of the reservoir.




(2)
Reserves which can be produced economically through application of improved
recovery techniques (such as fluid injection) are included in the proved
classification when successful testing by a pilot project, or the operation of
an installed program in the reservoir, provides support for the engineering
analysis on which the project or program was based.




(3)
Estimates of proved reserves do not include the following: (A) oil that may
become available from known reservoirs but is classified separately as indicated
additional reserves; (B) crude oil, natural gas, and natural gas liquids, the
recovery of which is subject to reasonable doubt because of uncertainty as to
geology, reservoir characteristics, or economic factors; (C) crude oil, natural
gas, and natural gas liquids, that may occur in undrilled prospects; and
(D) crude oil, natural gas, and natural gas liquids, that may be recovered from
oil shales, coal and other such sources.




The
Company emphasizes that reserve estimates are inherently imprecise. Accordingly,
the estimates are expected to change as more current information becomes
available. In addition, a portion of the Company’s proved reserves are
classified as proved developed non-producing and proved undeveloped, which
increases the imprecision inherent in estimating reserves which may ultimately
be produced.




The
following table sets forth proved oil and gas reserves together with the changes
therein and proved developed reserves (oil in Bbls, gas in Mcf, gas converted to
Boe’s at six Mcf per Bbl) for the years ended December 31, 2008 and 2007. (in
thousands):




F-30


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


2008
                
                
                2007Oil
                
                
                Gas
                
                
                Boe
                
                
                Oil
                
                
                Gas
                
                
                Boe(in
      thousands)Proved
      reserves:Beginning
      of period
                
                
                6,526
                
                
                
                21,812
                
                
                
                10,161
                
                
                
                —
                
                
                
                —
                
                
                
                —Revisions
                
                
                (4,084
                )
                
                
                (5,647
                )
                
                
                (5,025
                )
                
                
                —
                
                
                
                —
                
                
                
                —Extensions
      and discoveries
                
                
                120
                
                
                
                —
                
                
                
                120
                
                
                
                —
                
                
                
                —
                
                
                
                —Sales
      of minerals-in-place
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Purchases
      of minerals-in-place
                
                
                29
                
                
                
                688
                
                
                
                144
                
                
                
                6,565
                
                
                
                21,938
                
                
                
                10,221Production
                
                
                (281
                )
                
                
                (811
                )
                
                
                (417
                )
                
                
                (39
                )
                
                
                (126
                )
                
                
                (60
                )End
      of period
                
                
                2,310
                
                
                
                16,042
                
                
                
                4,983
                
                
                
                6,526
                
                
                
                21,812
                
                
                
                10,161Proved
      developed reserves:Beginning
      of period
                
                
                2,639
                
                
                
                6,497
                
                
                
                3,722
                
                
                
                —
                
                
                
                —
                
                
                
                —End
      of period
                
                
                916
                
                
                
                5,333
                
                
                
                1,805
                
                
                
                2,639
                
                
                
                6,497
                
                
                
                3,722




The
Company experienced downward revisions in estimated proved crude oil in 2008.
These downward revisions were as a result of crude oil prices utilized for the
reserve estimate decreasing by 55% and gas prices utilized for the reserve
estimate decreasing by 24% between year-end 2007 and year-end
2008.




The
following is a standardized measure of the discounted net future cash flows and
changes applicable to proved oil and natural gas reserves required by SFAS
No. 69, “Disclosures
about Oil and Gas Producing Activities". The future cash flows are based
on estimated oil and natural gas reserves utilizing prices and costs in effect
as of year end, discounted at 10% per year and assuming continuation of existing
economic conditions.




The
standardized measure of discounted future net cash flows, in management’s
opinion, should be examined with caution. The basis for this table is the
reserve studies prepared by independent petroleum engineering consultants, which
contain imprecise estimates of quantities and rates of production of reserves.
Revisions of previous year estimates can have a significant impact on these
results. Also, exploration costs in one year may lead to significant discoveries
in later years and may significantly change previous estimates of proved
reserves and their valuation. Therefore, the standardized measure of discounted
future net cash flow is not necessarily indicative of the fair value of the
Company’s proved oil and natural gas properties.




Future
income tax expense was computed by applying statutory rates less the effects of
tax credits for each period presented to the difference between pre-tax net cash
flows relating to the Company’s proved reserves and the tax basis of proved
properties and available net operating loss and percentage depletion
carryovers.





The
following table sets forth standardized measure of discounted future net cash
flows (stated in thousands) relating to proved reserves for the years ended
December 31, 2008 and 2007:




2008
                
                
                2007(in
      thousands)Future
      cash inflows
                
                $
                181,725
                
                
                $
                755,292Future
      costs:Production
                
                
                (67,485
                )
                
                
                (188,072
                )Abandonment
                
                
                (15,321
                )
                
                
                (13,735
                )Development
                
                
                (26,396
                )
                
                
                (54,692
                )Income
      taxes
                
                
                —
                
                
                
                (177,440
                )Future
      net cash inflows
                
                
                72,523
                
                
                
                321,35310%
      discount factor
                
                
                (28,177
                )
                
                
                (150,331
                )Standardized
      measure of discounted net cash flows
                
                $
                44,346
                
                
                $
                171,022





F-31


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


The
following table sets forth the changes in the future net cash inflows discounted
at 10% per annum (stated in thousands):


2008
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2007Beginning
      of period
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          171,022
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          $Sales
      of oil and natural gas produced, net of production
    costs
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (20,184
                                                                                                                                          )
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (2,532
                                                                                                                                          )Future
      abandonment cost, net of salvage value
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (961
                                                                                                                                          )Extensions
      and discoveries
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          1,050Net
      change of prices and production costs
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (163,695
                                                                                                                                          )
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          5,119Change
      in future development costs
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          29,520Changes
      in production rates
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (24,651
                                                                                                                                          )Revisions
      of previous quantity estimates
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          (65,952
                                                                                                                                          )Accretion
      of discount
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          26,412Change
      in income taxes
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          89,576Purchases
      of reserves in place
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2,209
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          168,435End
      of period
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          44,346
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          171,022




Impact
of Pricing




The
estimates of cash flows and reserve quantities shown above are based on year-end
oil and gas prices, except in those cases where future natural gas or oil sales
are covered by physical contracts at specified prices. Forward price volatility
is largely attributable to supply and demand perceptions for natural gas and
crude oil.




Under
full-cost accounting rules, the Company reviews the carrying value of its proved
oil and gas properties each quarter. Under these rules, capitalized costs of
proved oil and gas properties, net of accumulated DD&A and deferred income
taxes, may not exceed the present value of estimated future net cash flows from
proved oil and gas reserves, discounted at 10%, plus the lower of cost or fair
value of unproved properties included in the costs being amortized, net of
related tax effects (the “ceiling”). These rules generally require pricing
future oil and gas production at the unescalated oil and gas prices at the end
of each fiscal quarter and require a write-down if the “ceiling” is
exceeded.





The
Company recorded a non-cash ceiling test impairment of oil and natural gas
properties of $130.1 million ($84.6 million, net of tax) during the
fourth quarter ended December 31, 2008, as a result of declines in
commodity prices and negative revisions in the Company's proved reserve
quantities. In
accordance with SEC Topic 12- Oil and Gas Producing Activities, the full cost
ceiling limitation was computed giving effect to the subsequent price changes
for oil and gas. The computed ceiling amount was approximately $5 million
greater than the limitation using the prices in effect at December 31, 2008 and,
accordingly, the full cost impairment charge for 2008 was determined using the
recomputed ceiling amount. The
estimated present value of future cash flows relating to proved reserves is
extremely sensitive to prices used at any measurement period. The prices used
for each commodity for the year ended December 31, 2008 as adjusted were as
follows:




As
      of December 31,
                
                Oil
                
                
                Gas2008
                
                $
                41.92
                
                
                $
                5.292007
                
                $
                92.44
                
                
                $
                7.02





The
following table sets forth the results of operations for producing activities
for the year ended December 31, 2008 and the period October 26, 2007 through
December 31, 2007 (stated in thousands):




F-32


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 For
the Years Ended December 31, 2008 and 2007


2008
              
              
              2007Revenues
              
              
              34,157
              
              
              
              4,308Production
      costs
              
              
              (13,973
              )
              
              
              (1,776
              )Depreciation,
      depletion, amortization and impairment (1)
              
              
              (141,349
              )
              
              
              (1,253
              )Income
      tax expense
              
              
              44,178
              
              
              
              (397
              )Results
      of operations from producing activities (excluding corporate overhead and
      interest costs)
              
              
              (76,987
              )
              
              
              882









F-33