UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q





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





For the
quarterly period ended September 30, 2010





or




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





For the
transition period from ___________ to __________





Commission
file number: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 1000
                Houston,
      Texas
                (Address
      of principal executive offices)
              
              77077
                (Zip
      Code)





(281)
649-4500


(Registrant's
telephone number, including area code)





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
 No ̈





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





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 definition of “accelerated filer” “large accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act (check
one).


Large
Accelerated Filer ̈   Accelerated Filero   Non-Accelerated Filero Smaller reporting
companyx





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





As of
November 8, 2010, 22,606,476 of the registrant’s common stock, par value $0.0001
per share, were outstanding.








PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


Table
of Contents





PagePART
      I- FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements (Unaudited)
              3Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              21Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              27Item
      4T.
              Controls
      and Procedures
              28PART
      II- OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              28Item
      1A.
              Risk
      Factors
              30Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              30Item
      3.
              Defaults
      Upon Senior Securities
              30Item
      4.
              Removed
      and Reserved
              30Item
      5.
              Other
      Information
              30Item
      6.
              Exhibits
              30Signatures
              31


2





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)





September 30,
                      2010
                    
                    
                    December 31,
                      2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    2,395,820
                    
                    
                    $
                    2,941,939Restricted
      cash
                    
                    
                    466,761
                    
                    
                    
                    -Accounts
      receivable, net of $608,065 and $224,392 allowance for doubtful accounts
      as of September 30, 2010 and December 31, 2009Oil
      and gas sales
                    
                    
                    1,620,391
                    
                    
                    
                    2,079,201Service
                    
                    
                    2,119,554
                    
                    
                    
                    2,632,735Joint
      interest billings
                    
                    
                    557,730
                    
                    
                    
                    328,811Inventory
                    
                    
                    399,451
                    
                    
                    
                    410,791Fair
      value of commodity derivatives - current
                    
                    
                    650,200
                    
                    
                    
                    3,595,144Prepaid
      expenses and other current assets
                    
                    
                    345,984
                    
                    
                    
                    610,989Total
      Current Assets
                    
                    
                    8,555,891
                    
                    
                    
                    12,599,610Property
      and equipment, at costOil
      and gas properties, full cost method
                    
                    
                    208,369,020
                    
                    
                    
                    208,291,206Other
      property and equipment
                    
                    
                    5,600,171
                    
                    
                    
                    5,565,746Less
      accumulated depreciation, depletion, amortization and
      impairment
                    
                    
                    (171,528,333
                    )
                    
                    
                    (167,973,630
                    )Property
      and equipment, net
                    
                    
                    42,440,858
                    
                    
                    
                    45,883,322Other
      assetsFair
      value of commodity derivatives
                    
                    
                    159,600
                    
                    
                    
                    3,190,294Real
      estate held for development
                    
                    
                    2,700,000
                    
                    
                    
                    2,700,000Total
      Assets
                    
                    $
                    53,856,349
                    
                    
                    $
                    64,373,226LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payableTrade
                    
                    $
                    1,830,477
                    
                    
                    $
                    2,154,188Oil
      and gas sales
                    
                    
                    1,259,398
                    
                    
                    
                    920,818Unearned
      service revenues
                    
                    
                    855,706
                    
                    
                    
                    1,525,356Accrued
      liabilities and other
                    
                    
                    1,810,061
                    
                    
                    
                    2,508,579Income
      taxes payable
                    
                    
                    301,948
                    
                    
                    
                    328,324Current
      portion of asset retirement obligation
                    
                    
                    801,915
                    
                    
                    
                    812,670Current
      portion of related party debt
                    
                    
                    5,149,305
                    
                    
                    
                    -Current
      maturities of long-term debt, capital lease obligations and notes
      payable
                    
                    
                    4,716,073
                    
                    
                    
                    17,802,925Total
      Current Liabilities
                    
                    
                    16,724,883
                    
                    
                    
                    26,052,860Long-term
      debt and capital lease obligations, net of current portion
                    
                    
                    65,341
                    
                    
                    
                    111,315Notes
      payable - acquisitions
                    
                    
                    3,613,088
                    
                    
                    
                    3,422,433Other
      accrued liabilities
                    
                    
                    100,511
                    
                    
                    
                    119,735Asset
      retirement obligation
                    
                    
                    6,426,558
                    
                    
                    
                    6,426,424Total
      Liabilities
                    
                    
                    26,930,381
                    
                    
                    
                    36,132,767COMMITMENTS
      AND CONTINGENCIES
                    
                    
                    -
                    
                    
                    
                    -STOCKHOLDERS'  EQUITYPreferred
      stock, $0.0001 par value, 1,000,000 authorized, 0 issued
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $0.0001 par value; 75,000,000 shares authorized; 24,068,675 issued
      and 22,606,476 and 22,070,762 outstanding at September 30, 2010,
      and December 31, 2009, respectively
                    
                    
                    2,407
                    
                    
                    
                    2,407Additional
      paid-in capital
                    
                    
                    152,133,318
                    
                    
                    
                    155,175,771Accumulated
      deficit
                    
                    
                    (113,747,702
                    )
                    
                    
                    (111,276,255
                    )Treasury
      stock – 1,462,199 and 1,997,913 shares, respectively, at
      cost
                    
                    
                    (11,462,055
                    )
                    
                    
                    (15,661,464
                    )Total
      Stockholders' Equity
                    
                    
                    26,925,968
                    
                    
                    
                    28,240,459Total
      Liabilities and Stockholders' Equity
                    
                    $
                    53,856,349
                    
                    
                    $
                    64,373,226





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


3


PLATINUM ENERGY RESOURCES,
INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF
OPERATIONS


(UNAUDITED)





Three Months Ended September
      30,
                    
                    
                    Nine Months Ended September
    30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009RevenuesOil
      and gas sales
                    
                    $
                    4,383,505
                    
                    
                    $
                    4,703,985
                    
                    
                    $
                    14,953,967
                    
                    
                    $
                    12,483,989Service
      revenues
                    
                    
                    4,428,304
                    
                    
                    
                    4,766,841
                    
                    
                    
                    13,167,291
                    
                    
                    
                    14,774,555Total
      revenues
                    
                    
                    8,811,809
                    
                    
                    
                    9,470,826
                    
                    
                    
                    28,121,258
                    
                    
                    
                    27,258,544Costs
      and expensesLease
      and other operating expense
                    
                    
                    3,128,093
                    
                    
                    
                    2,159,876
                    
                    
                    
                    8,400,207
                    
                    
                    
                    7,093,775Cost
      of service revenues
                    
                    
                    4,051,762
                    
                    
                    
                    4,149,891
                    
                    
                    
                    12,590,604
                    
                    
                    
                    13,764,777Marketing,
      general and administrative expense
                    
                    
                    2,128,997
                    
                    
                    
                    1,788,802
                    
                    
                    
                    4,752,731
                    
                    
                    
                    6,337,261Depreciation,
      depletion and amortization expense
                    
                    
                    1,021,576
                    
                    
                    
                    1,683,510
                    
                    
                    
                    3,554,703
                    
                    
                    
                    5,479,819Accretion
      of asset retirement obligations
                    
                    
                    127,365
                    
                    
                    
                    80,475
                    
                    
                    
                    483,712
                    
                    
                    
                    240,022Total
      costs and expenses
                    
                    
                    10,457,793
                    
                    
                    
                    9,862,554
                    
                    
                    
                    29,781,957
                    
                    
                    
                    32,915,654Loss from
      operations
                    
                    
                    (1,645,984
                    )
                    
                    
                    (391,728
                    )
                    
                    
                    (1,660,699
                    )
                    
                    
                    (5,657,110
                    )Other
      income (expense)Interest
      income
                    
                    
                    3,914
                    
                    
                    
                    4,201
                    
                    
                    
                    62,939
                    
                    
                    
                    8,515Interest
      expense
                    
                    
                    (236,304
                    )
                    
                    
                    (353,231
                    )
                    
                    
                    (748,491
                    )
                    
                    
                    (983,848
                    )Commodity
      derivatives – realized and unrealized gains (losses)
                    
                    
                    (1,860,220
                    )
                    
                    
                    950,947
                    
                    
                    
                    78,756
                    
                    
                    
                    (6,927,447
                    )Foreign
      currency exchange loss
                    
                    
                    (166,609
                    )
                    
                    
                    -
                    
                    
                    
                    (166,609
                    )
                    
                    
                    -Other
                    
                    
                    -
                    
                    
                    
                    3,208
                    
                    
                    
                    -
                    
                    
                    
                    5,761Total
      other income (expense)
                    
                    
                    (2,259,219
                    )
                    
                    
                    605,125
                    
                    
                    
                    (773,405
                    )
                    
                    
                    (7,897,019
                    )Income
      (loss) before income taxes
                    
                    
                    (3,905,203
                    )
                    
                    
                    213,397
                    
                    
                    
                    (2,434,104
                    )
                    
                    
                    (13,554,129
                    )Provision
      (benefit) for income taxes
                    
                    
                    12,422
                    
                    
                    
                    89,086
                    
                    
                    
                    37,343
                    
                    
                    
                    (4,700,360
                    )Net
      income (loss)
                    
                    $
                    (3,917,625
                    )
                    
                    $
                    124,311
                    
                    
                    $
                    (2,471,447
                    )
                    
                    $
                    (8,853,769
                    )Income
      (loss) per common share:Basic
      and diluted
                    
                    $
                    (0.17
                    )
                    
                    $
                    0.01
                    
                    
                    $
                    (0.11
                    )
                    
                    $
                    (0.40
                    )Weighted
      average common shares outstanding:Basic
      and diluted
                    
                    
                    22,606,476
                    
                    
                    
                    22,070,762
                    
                    
                    
                    22,520,071
                    
                    
                    
                    22,070,762





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


4





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)





Nine
      Months EndedSeptember 30,2010
                
                
                2009Cash
      Flows From Operating ActivitiesNet
      loss
                
                $
                (2,471,447
                )
                
                $
                (8,853,769
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Bad
      debt expense
                
                
                383,673
                
                
                
                45,000Depreciation,
      depletion and amortization of property, plant and
equipment
                
                
                3,554,703
                
                
                
                4,816,381Accretion
      of asset retirement obligation
                
                
                483,712
                
                
                
                240,022Accretion
      of debt discount
                
                
                190,655
                
                
                
                177,361Amortization
      of intangible assets/write-off of bank loan fees
                
                
                -
                
                
                
                663,438Stock-based
      compensation
                
                
                58,741
                
                
                
                38,656Deferred
      income taxes
                
                
                -
                
                
                
                (4,743,945
                )Commodity derivatives
      – realized and unrealized (gains) losses
                
                
                (78,756
                )
                
                
                7,020,107Foreign
      currency exchange loss
                
                
                166,609
                
                
                
                -Changes
      in operating assets and liabilities:Accounts
      receivable – Oil and gas
                
                
                434,326
                
                
                
                (374,130
                )Accounts
      receivable – Service
                
                
                129,508
                
                
                
                1,620,451Accounts
      receivable – Joint interest billings
                
                
                (228,919
                )
                
                
                267,701Inventory
                
                
                11,340
                
                
                
                25,686Prepaid
      expenses and other current assets
                
                
                265,005
                
                
                
                249,544Accounts
      payable – Trade
                
                
                (323,711
                )
                
                
                (1,273,818
                )Accounts
      payable – Oil and gas
                
                
                (5,694
                )
                
                
                (128,807
                )Accrued
      liabilities, unearned service revenues and other
                
                
                (289,177
                )
                
                
                (762,185
                )Income
      taxes payable
                
                
                (26,376
                )
                
                
                67,110Net
      cash provided by (used in) operating activities
                
                
                2,254,192
                
                
                
                (905,197
                )Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
                
                
                (262,298
                )
                
                
                (1,550,261
                )Change
      in restricted cash
                
                
                (466,761
                )
                
                
                -Cash
      received on settlement of derivative contracts
                
                
                6,078,878
                
                
                
                1,165,930Net
      cash provided by (used in) investing activities
                
                
                5,349,819
                
                
                
                (384,331
                )Cash
      Flows From Financing ActivitiesProceeds
      of revolving credit facility
                
                
                -
                
                
                
                1,000,000Payments
      on long-term debt and capital leases
                
                
                (8,150,130
                )
                
                
                (1,094,129
                )Net
      cash used in financing activities
                
                
                (8,150,130
                )
                
                
                (94,129
                )Net
      Increase (Decrease)  in Cash and
      Cash Equivalents
                
                
                (546,119
                )
                
                
                (1,383,657
                )Cash
      and Cash Equivalents - Beginning of the Period
                
                
                2,941,939
                
                
                
                3,668,092Cash
      and Cash Equivalents - End of Period
                
                $
                2,395,820
                
                
                $
                2,284,435SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
                
                $
                581,542
                
                
                $
                752,272Income
      taxes
                
                
                —
                
                
                
                70,000Non-Cash
      Investing and Financing ActivitiesIssuance
      of treasury stock to settle accrued liability
                
                $
                1,098,215
                
                
                $
                —Asset
      retirement cost and obligation
                
                $
                151,000
                
                
                $
                40,269





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


5





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





Note
1 – Organization, Business and Operations




Platinum
Energy Resources, Inc. and subsidiaries (the “Company” or “Platinum”) considers
itself to be in two lines of business:





(i) The
oil and gas division, which has approximately 37,000 acres under lease in
relatively long-lived fields with well-established production histories. 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) The
engineering and construction services division, which services primarily 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 Engineering, Inc. (Maverick) operates out
of facilities headquartered in Houston, Texas and operates primarily in
Texas.





Note
2 – Going Concern





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  The Company has incurred
significant losses, resulting in cumulative losses of $113,747,702 through
September 30, 2010. At September 30, 2010, the Senior Credit Facility
balance was approximately $5.15 million. The Company’s current cash on hand
of $2,395,820 is not adequate to satisfy the debt. Also, the Company has
negative working capital of $8,168,992. Currently the Company is looking at
various ways of correcting these issues, including exploring joint venture
opportunities as well as a thorough analysis of our specific assets for
potential divestiture. Further the Company has assets and liabilities that could
be affected by unfavorable outcomes of litigation in progress. See
Litigation Note 16 for a full discussion of litigation.





As a
result of the above discussed conditions, there exists substantial doubt about
our ability to continue as a going concern. Management believes that we will be
able to extend the related party debt and be victorious in the various
litigations discussed in Note 16. However, until we have a better understanding
of the outcome of the pending litigation, a going concern exists. Our
consolidated financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The consolidated financial statements do not include
any adjustments relating to the recoverability of the recorded assets or the
classification of liabilities that may be necessary should the Company be unable
to continue as a going concern.





Note
3 – Basis of Presentation





The
accompanying unaudited interim consolidated financial statements as of
September 30, 2010 and for the three and nine months then ended have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and pursuant to the
instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and
Exchange Commission (“SEC”) and on the same basis as the annual audited
consolidated financial statements. The unaudited interim consolidated balance
sheet as of September 30, 2010, unaudited interim consolidated statements
of operations for the three and nine months ended September 30, 2010 and
2009, and the unaudited interim consolidated statements of cash flows for the
nine months ended September 30, 2010 and 2009 include all adjustments,
consisting only of normal recurring adjustments, which management considers
necessary for a fair presentation of the financial position, operating results
and cash flows for the periods presented. The results for the three and nine
months ended September 30, 2010 are not necessarily indicative of results
to be expected for the year ending December 31, 2010 or for any future
interim periods. The notes to the consolidated financial statements do not
include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete consolidated
financial statements. The accompanying unaudited interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2009 as filed with the SEC.





The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated.


6


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





Note 4
– Summary of Significant Accounting Policies





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
and production, abandonment obligations, impairment of oil and natural gas
properties (if any), depreciation, depletion and amortization, income taxes, bad
debts, derivatives, contingencies and litigation.





Cash
and Cash Equivalents




Cash and
cash equivalents include demand deposits and money market funds for purposes of
the statements of cash flows. The Company considers all highly liquid monetary
instruments with original maturities of three months or less to be cash
equivalents.  Financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of cash
deposits.  Accounts at each financial institution are insured by the
Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.   As of
September 30, 2010, the Company had deposits with institutions in excess of the
insured limits totaling $2,435,713, which includes restricted cash.





Restricted
Cash





Restricted
cash is related to the collateral for letters of credit for regulatory permits
for the Company’s oil and gas division. In prior periods, the Company used
its Senior Credit Facility with Bank of Texas to collateralize its letters of
credits with the various permitting agencies.





Allowance
for Doubtful Accounts





The
Company’s reported balance of accounts receivable, net of allowance for doubtful
accounts, represents management’s estimate of the amount that ultimately will be
realized in cash. The Company reviews the adequacy of the allowance for
doubtful accounts on an ongoing basis, using historical payment trends, the age
of the receivables and knowledge of the individual customers. When the
analyses indicate, management increases or decreases the allowance
accordingly. If the financial condition of our customers were to
deteriorate, additional allowances may be required. The Company increased
its allowance for doubtful accounts by $383,673 during the three-month period
ended September 30, 2010 due to changes in the potential collectibility of
certain receivables in our engineering segment.





Foreign
Currency





Foreign
currency transaction gains and losses are included in the statements of
operations in accordance with ASC 830.





Oil and Gas
Properties





The
Company uses the full cost method of accounting for exploration and development
activities. Under this method of accounting, the costs of unsuccessful, as well
as successful, exploration and development activities are capitalized as oil and
gas properties. 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.


7


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





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, using average prices for the preceding
12 months applied on a non-escalated basis and including the effect of
derivative instruments that qualify as cash flow hedges, if any, 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.





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.





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 assessments
inherently involve 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.





Subsequent
Events





Management
evaluated subsequent events through the date at which the financial statements
were issued. Management determined that, except as disclosed herein, no
such events have occurred that would require adjustment to or disclosure in the
financial statements.





Reclassifications





Certain
reclassifications have been made to prior year information to conform to the
current period presentation.





Recently Issued Accounting
Pronouncements





In
January 2010, the FASB issued additional disclosure requirements related to fair
value measurements. The guidance requires disclosure of transfers of assets
and liabilities between Level 1 and Level 2 in the fair value measurements
hierarchy, including the reasons for the transfers and disclosure of major
purchases, sales, issuances, and settlements on a gross basis in the
reconciliation of the assets and liabilities measured under Level 3 of the fair
value measurement hierarchy. The guidance is effective for interim and
annual periods beginning after December 15, 2009, except for the Level 3
reconciliation disclosures, which are effective for interim and annual periods
beginning after December 15, 2010. We adopted the provisions for the
quarter ended March 31, 2010, except for the Level 3 reconciliation disclosures,
which we will adopt for the quarter ending March 31, 2011. We do not expect
adoption of the Level 3 reconciliation disclosures in 2011 to have a material
impact on our financial position or results of operations.


8


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





Accounting
standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on our consolidated financial statements
upon adoption.





Note
5 – 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 nine months ended
September 30, 2010 (stated in thousands):




Balance
      at January 1, 2010
                    
                    $
                    208,291Acquisition
      of properties:Proved
                    
                    
                    —Unproved
                    
                    
                    —Exploration
      Costs
                    
                    
                    —Revision
      to asset retirement obligation
                    
                    
                    (151
                    )Development
      costs
                    
                    
                    229Balance
      at September 30, 2010
                    
                    $
                    208,369





The
following table sets forth the Company’s capitalized costs relating to oil and
gas producing activities at September 30, 2010 and December 31, 2009 (stated in
thousands):





September 30,
                    2010
                  
                  
                  December 31,
                    2009Properties
      subject to depletion, depreciation and amortization
                  
                  $
                  208,369
                  
                  
                  $
                  208,291Properties
      not subject to depletion, depreciation and amortization
                  
                  
                  -
                  
                  
                  
                  -208,369
                  
                  
                  
                  208,291Accumulated
      depletion and impairment
                  
                  
                  (167,880
                  )
                  
                  
                  (164,497
                  )Net
      capitalized costs
                  
                  $
                  40,489
                  
                  
                  $
                  43,794





Note
6 – 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.
All derivative instruments are 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. Changes in fair value of derivative instruments which are not designated
as cash flow hedges are recorded in other income (expense) as Commodity
derivatives - realized and unrealized gains and losses. 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 further
described in Note 10.





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. 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 three months ended September 30, 2010 and 2009, the Company included in
other income (expense) realized and unrealized gains (losses) related to its
derivative contracts as follows (stated in thousands):


9


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





Three
      Months
                    Ended
      September 30,
                    2010
                  
                  
                  Three
      Months
                    Ended
      September 30,
                    2009Crude
      oil derivatives gains (losses)Realized
                  
                  $
                  3,470
                  
                  
                  $
                  93Unrealized
                  
                  
                  (5,330
                  )
                  
                  
                  858$
                  (1,860
                  )
                  
                  $
                  951





For the
nine months ended September 30, 2010 and 2009, the Company included in other
income (expense) realized and unrealized gains (losses) related to its
derivative contracts as follows (stated in thousands):





Nine Months
                        Ended September 30,
                        2010
                      
                      
                      Nine Months
                        Ended September 30,
                        2009Crude
      oil derivatives gains (losses)Realized
                      
                      $
                      4,252
                      
                      
                      $
                      1,259Unrealized
                      
                      
                      (4,173
                      )
                      
                      
                      (8,186
                      )$
                      79
                      
                      
                      $
                      (6,927
                      )





In June
2010, the Company liquidated six put contracts at $85 per barrel and an
additional five put contracts at $80 per barrel for net cash proceeds of $1.16
million. These put contracts had settlement dates through December 2010. During
September 2010, the Company liquidated 31 swap contracts valued from $95.00 to
$95.50 per barrel. These swap contracts had settlement dates through
December 2013. The net proceeds to the Company was $3.5 million. The
Company received an additional $2.5 million during the nine months ended
September 30, 2010 attributable to contracts that settled in the normal course
of business. Presented below is a summary of the Company’s crude oil derivative
financial contracts at September 30, 2010:





Period
                        Ended
                        September 30,
                      
                      Instrument
                        Type
                      
                      Total
                        Volumes
                        (BBL)
                      
                      
                      Contract
                        Price
                      
                      
                      Fair Value Asset
                        (stated in
                        thousands)2011
                      
                      Puts
                      
                      
                      20,000
                      
                      
                      
                      75.00
                      
                      
                      $
                      17Puts
                      
                      
                      120,000
                      
                      
                      
                      80.00
                      
                      
                      
                      6332012
                      
                      Puts
                      
                      
                      20,000
                      
                      
                      
                      80.00
                      
                      
                      
                      160Total
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      810





Note
7 – Fair Value Measurements





As
defined in ASC 820, 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. ASC 820 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.


10


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





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.





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). Level
      3 instruments can include derivative instruments where the Company does
      not have sufficient corroborating market evidence of significant inputs to
      the valuation model to support classifying these instruments as Level 1 or
      Level 2.





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
that are measured at fair value on a recurring basis as of September 30, 2010,
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 September 30, 2010(in
      thousands)Level 1
                              
                              
                              Level 2
                              
                              
                              Level
      3
                              
                              
                              TotalCommodity
      derivatives – oil and gas
                              
                              $
                              —
                              
                              
                              $
                              810
                              
                              
                              $
                              —
                              
                              
                              $
                              810





The
determination of the fair values above incorporates various factors required
under ASC 815. 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 three and nine
months ended September 30, 2010 and 2009 are reported in other income on the
consolidated statement of operations.





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
Senior 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, or in the case of the Senior Credit
Facility, the maturity date is in the near future.


11


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)


Note 8 – Commitments and
Contingencies
  Lance
Duncan 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 were fixed in number
(except for stock splits or other recapitalizations). These shares were 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 did not issue these shares due to a
dispute between the Company and Mr. Duncan. In February 2010, all claims
between the Company and Mr. Duncan were resolved and the balance of the shares
was distributed accordingly. See Note 15.





Note9–Related Party Transaction




On
September 1, 2010, A.R. Development Corporation purchased the Senior Credit
Facility and all rights to the security from Bank of Texas. Our CEO, Al Rahmani,
is the owner of A.R. Development Corporation. See Note 10.





Note
10 – Long-Term Debt and Capital Lease Obligations





The
following table sets forth the Company’s long-term debt position as of September
30, 2010 and December 31, 2009 (stated in thousands):





September30,
                            2010
                          
                          
                          December 31,
                            2009Oil
      and gas revolving line of credit
                          
                          (a)
                          
                          $
                          -
                          
                          
                          $
                          13,029Related
      party loan - $CDN denominated
                          
                          (a)
                          
                          
                          5,149
                          
                          
                          
                          -Notes
      payable - acquisitions
                          
                          (b)
                          
                          
                          3,613
                          
                          
                          
                          3,422Revolving
      line of credit to former shareholders – Maverick
                          
                          (c)(f)
                          
                          
                          2,917
                          
                          
                          
                          2,917Term
      note to former shareholders - Maverick
                          
                          (d)(f)
                          
                          
                          252
                          
                          
                          
                          252Second
      term note to former shareholders - Maverick
                          
                          (e)(f)
                          
                          
                          1,404
                          
                          
                          
                          1,404Capital
      lease obligations
                          
                          
                          
                          
                          208
                          
                          
                          
                          312$
                          13,543
                          
                          
                          $
                          21,336Less:
      Current maturities
                          
                          
                          
                          
                          9,865
                          
                          
                          
                          17,802Long-term
      debt
                          
                          
                          
                          $
                          3,678
                          
                          
                          $
                          3,534





(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 as well as substantially all of the
derivative financial instruments discussed in Note 6. The Senior Credit
Facility was originally to mature on March 14, 2012, at which time all
outstanding borrowings would have to be repaid.





Under the
terms of the Senior Credit Facility, 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 Senior Credit Facility requires us to maintain a ratio of indebtedness to
cash flow of no more than 3 to 1. 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.




12




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





In June
2009, the borrowing base was reduced to $15 million and the Senior Credit
Facility was amended to change the interest rate provisions. Under the amended
loan agreement, outstanding debt incurred interest at LIBOR, plus a margin,
which varied according to the ratio of the Borrower’s outstanding borrowings
against the defined borrowing base, ranging from 2.5% to 3.5%, provided the
interest rate did not fall below a floor rate of 4.5% per annum.  In
addition, the Borrower was obligated to the bank for a monthly fee of any unused
portion of the line of credit at the rate of 0.50% per annum. The maturity
date was also modified to June 1, 2010.




In May
2010, the Company paid down $1.5 million on the Senior Credit Facility. In
June 2010, the Company paid down an additional $2 million on the Senior Credit
Facility utilizing cash on hand and the proceeds from the liquidation of certain
derivative contracts as further described in Note 6. The Borrower did not
repay the amounts due under the Senior Credit Facility on June 1,
2010.




On
August 6, 2010, with an effective date of June 1, 2010, the Company and the Bank
of Texas executed an amendment to the Senior Credit Facility. The Amendment
(1) granted the Company an extension on the maturity date of the loan to
September 1, 2010, (2) reduced the Borrowing Base under the Senior Credit
Facility to approximately $9.5 million, (3) required the Company to reduce the
then outstanding balance of $9.5 million under the Senior Credit Facility by $1
million, (4) waived certain events of default of the Borrower through the period
ended May 31, 2010, and (5) increased the interest rate floor to a rate of not
less than 5% per annum. The Company paid a fee of $40,000 to the Bank of
Texas in connection with the waivers and the extension in the maturity date and
$36,846 in interest. Additionally, on August 6, 2010, the Company used cash
on hand to pay down $1 million on the Senior Credit Facility, reducing the Bank
of Texas loan balance to approximately $8.5 million. On August 30, 2010,
the Company liquidated its swap derivatives for $3,527,455 as further described
in Note 6 and used those proceeds to pay down the Credit Facility to a balance
of $4.98 million.





On
September 1, 2010, A.R. Development Corporation, a company owned and controlled
by our CEO, purchased the Senior Credit Facility and all rights to the ancillary
security from Bank of Texas. At the time of the purchase, the balance on the
Senior Credit Facility was $4.98 million.





The
modified Senior Credit Facility provides for an initial loan period of a fixed
term of six months from September 1, 2010 and carries an interest rate of 5.5%
per annum for the first two months ending November 1, 2010. Thereafter, for the
next two months the interest will be 6% per annum until January 1, 2011,
followed by an interest rate of 6.5% per annum until March 1, 2011.
Additionally, there was a $40,000 fee paid to A. R. Development
Corporation.




The modified Senior Credit Facility is
denoted in Canadian dollars; therefore, the Company recognized a currency loss
of $166,730 in September 2010. The modified Senior Credit Facility was valued at
$5,149,305 at September 30, 2010 due to this currency loss.




The
Company may pay off part or the whole loan during the period and the interest
rate will be applied to the outstanding amount of the loan. It was also
understood that the Senior Credit Facility would no longer be a revolving note
and therefore no new advances will be made under the Senior Credit Facility to
the Company. The Senior Credit Facility remains collateralized by substantially
all of the Company’s oil and gas assets.





As of
September 30, 2010, the $5.149 million outstanding under the note
was bearing interest at 5.5%.




(b)Maverick-As part of the
acquisition of Maverick, the Company agreed to pay $5 million over 5 years
pursuant to non-interest bearing cash flow notes, subject to certain escrows,
holdbacks and post-closing adjustments (“Cash Flow Notes”). 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. At the five
year anniversary of the Cash Flow Notes, if the aggregate quarterly payments
made pursuant to the formula described in the preceding sentence are less than
$5 million, any shortfall will be converted into a one year term note, bearing
interest at the prime rate plus 2% per annum, with principal and interest due in
equal monthly installments over the twelve month term. The Cash Flow Notes
can be accelerated by certain events, including change in control of
Maverick. The Company’s believes that no events since the acquisition of
Maverick have triggered an acceleration in the due date of the Cash Flow
Notes.





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. 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 Cash Flow Notes on April 29, 2008 was $3,034,000. Accretion of
the discount related to the Cash Flow Notes of $64,704 and $60,191, for the
three months ended September 30, 2010 and 2009, respectively, and for the nine
months ended September 30, 2010 and 2009, $190,656 and $177,360, respectively,
was recognized as interest expense.


13


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





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 Company has not
reclassified the long-term portion of these Cash Flow Notes included in Notes
payable – acquisitions to current liabilities. It is the Company’s position
that Maverick generated pretax quarterly losses during the period April 29, 2008
through September 30, 2010, 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. These Cash Flow Notes are now the subject of
litigation between Kovar and the Company as further described in Note
16.





(c) $2,917,000 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.   No payments were made during 2010 and the principal and
interest remains unpaid. The interest rate applicable under this agreement
is currently 3.5%. See Litigation - Note 16.





(d) $252,000 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 was due at maturity in May 2009. No payments were made in
2010. See Litigation - Note 16.





(e) $1,404,000 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. No
payments were made in 2010. The current interest rate applicable under this
agreement is 3.75%. See Litigation - Note 16.





(f) On April 29, 2009,
Maverick received a notice of acceleration (the “Acceleration Letter”) with
respect to the revolving line of credit, the term note and the second term note
payable to the Maverick former shareholders (the”Maverick Notes”) and 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 Maverick Notes. No
payments were made after the first quarter of 2009 through September 30,
2010. The Company and Maverick have asserted claims in litigation against
the holders of the Maverick Notes, Robert L. Kovar Services, LLC, Robert L.
Kovar, individually, and others.  See Litigation Note - 16. The
Company is accruing interest on the Maverick Notes while the claims are being
resolved.





Annual
maturities of indebtedness, including capital lease obligations, at September
30, 2010 are as follows (stated in thousands):




For
      the Year Ended September 30,2011
                  
                  $
                  9,9302012
                  
                  
                  -2013
                  
                  
                  3,6132014
                  
                  
                  -Thereafter
                  
                  
                  -$
                  13,543




14


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2010
 (UNAUDITED)




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
September 30, 2010 (stated in thousands):




For
      the Year Ended September 30,2011
                  
                  $
                  1902012
                  
                  
                  62Thereafter
                  
                  
                  -Total
      minimum lease payments
                  
                  
                  252Less:  Amount
      representing interest
                  
                  
                  (44
                  )Current
      value of minimum lease payments
                  
                  
                  208Less:  Current
      maturities
                  
                  
                  (143
                  )$
                  65





The
effective interest rates on capitalized leases range from 5% - 31%.





Note
11 – Asset Retirement Obligation





For the
Company, asset retirement obligations (“ARO”) represent the systematic, monthly
accretion and depreciation of future abandonment costs of tangible assets such
as wells, service assets, and other facilities. The fair value of a liability
for an asset’s retirement obligation is recorded in the period in which it is
incurred if a reasonable estimate of fair value can be made, and the
corresponding cost is capitalized as part of the carrying amount of the related
long-lived asset. The liability is accreted to its then present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. If the liability is settled for an amount other than the recorded
amount, an adjustment is made to the full cost pool, with no gain or loss
recognized, unless the adjustment would significantly alter the relationship
between capitalized costs and proved reserves. The Company’s policy with respect
to ARO is to assign depleted wells to a salvager for the assumption of
abandonment obligations before the wells have reached their economic limits; the
Company has estimated its future ARO obligation with respect to its operations.
The ARO assets, which are carried on the balance sheet as part of the full cost
pool, have been included in our amortization base for the purposes of
calculating depreciation, depletion and amortization expense.




The
following table describes changes in the asset retirement liability as of
September 30, 2010. The ARO liability in the table below includes amounts
classified as long-term at September 30, 2010 (stated in
thousands):





Nine Months
                    Ended
                    September 30,
                    2010ARO
      liability at beginning of period – Current and Long-Term
                  
                  $
                  7,239Abandonments
      during period
                  
                  
                  (350
                  )Accretion
      expense
                  
                  
                  484Obligations
      arising during period
                  
                  
                  8Changes
      in estimates
                  
                  
                  (153
                  )ARO
      liability at end of period – Current and Long-Term
                  
                  $
                  7,228





Note 12 – Earnings
per Share





Basic earnings per share (“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, 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.




15




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September
30, 2010
 (UNAUDITED)


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):


Three
      Months Ended September 30,2010
                  
                  
                  2009Numerator:Net
      Income (loss) applicable to common stockholders
                  
                  $
                  (3,917,625
                  )
                  
                  $
                  124,311Denominator:Denominator
      for basic earnings (loss) per share — weighted-average shares
      outstanding
                  
                  
                  22,606,475
                  
                  
                  
                  22,070,762Effect
      of potentially dilutive common shares:Warrants
                  
                  
                  —
                  
                  
                  
                  —Employee
      and director stock options
                  
                  
                  —
                  
                  
                  
                  —Denominator
      for diluted earnings (loss) per share — weighted-average shares
      outstanding and assumed conversions
                  
                  
                  22,606,475
                  
                  
                  
                  22,070,762Basic
      earnings ( loss) per share
                  
                  $
                  (0.17
                  )
                  
                  $
                  0.01Diluted
      earnings ( loss) per share
                  
                  $
                  (0.17
                  )
                  
                  $
                  0.01





Nine
      Months Ended September 30,2010
                  
                  
                  2009Numerator:Net
      loss applicable to common stockholders
                  
                  $
                  (2,471,447
                  )
                  
                  $
                  (8,853,769)Denominator:Denominator
      for basic earnings (loss) per share — weighted-average shares
      outstanding
                  
                  
                  22,520,071
                  
                  
                  
                  22,070,762Effect
      of potentially dilutive common shares:Warrants
                  
                  
                  —
                  
                  
                  
                  —Employee
      and director stock options
                  
                  
                  —
                  
                  
                  
                  —Denominator
      for diluted earnings (loss) per share — weighted-average shares
      outstanding and assumed conversions
                  
                  
                  22,520,071
                  
                  
                  
                  22,070,762Basic
      earnings (loss) per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.40
                  )Diluted
      earnings (loss) per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.40
                  )





The increasein weighted-average shares
outstanding at September 30, 2010, is the result of issuing 535,714 shares to
Lance Duncan.For the
three and nine months ended September 30, 2010 and 2009, the Company excluded
options to purchase 151,000 and 156,000 shares of common stock, respectively, as
the effect would be anti-dilutive.





Note
13 – Income Taxes





The
Company computes income taxes using the asset and liability method whereby
deferred tax assets 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 basis. 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 apply
to be recovered or settled. The effect on deferred tax assets and liabilities
from a change in tax rates is recognized in income in the period that includes
the enactment date. A valuation allowance is established against such assets
where management is unable to conclude more likely than not that such assets
will be realized.




The
Company uses FASB ASC Topic 740 “Income Taxes” for
presentation of its income taxes. The Company currently does not have any
uncertain tax positions. Effective January 1, 2009, the Company adopted the
interpretation with ASC on Income which relates to Accounting for Uncertainty in
Income Taxes. The interpretation clarifies the accounting for uncertainty in
income taxes recognized in financial statements and requires the impact of a tax
position to be recognized in the financial statements if that position is more
likely than not of being sustained upon examination by the taxing authority.
Interest and/or penalties related to income tax matters are to be recognized in
income tax expense. The adoption of this interpretation did not have a material
effect on the Company’s financial position or results of
operations.


16




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





The
Company’s tax years 2007 and forward are subject to examination.





The
Company has computed the tax position for the nine months ended September 30,
2010 in accordance with the provisions of FASB ASC Topic 740 – “Income Taxes” and ASC 270 –
“Interim
Reporting”.  The Company has estimated that its effective tax
rate for US purposes will be zero for 2010, and consequently, recorded no U.S.
income tax benefit for the nine months ended September 30, 2010 due to
substantial uncertainty regarding ultimate realization





At
September 30, 2010, the Company had, subject to the limitations discussed below,
approximately $23.8 million of net operating losses (an increase of
approximately $4 million from the prior quarter) which may be used to offset
future taxable income which expire beginning in 2026 through 2030.





In
addition to any Section 382 limitations for change of control, uncertainties
exist as to the future utilization of the operating loss carryforwards under the
criteria set forth under ASC 740.  Therefore, the Company has
increased its valuation allowance at September 30, 2010 to approximately $9.5
million, an increase of roughly $1 million from December 21, 2009.





FASB ASC
Topic 740 requires the Company to periodically assess whether it is more likely
than not that it will generate sufficient taxable income to realize its deferred
income tax assets.  In making this determination, it considers all
available positive and negative evidence and make certain
assumptions.  It considers, among other things, the deferred tax
liabilities; the overall business environment; the historical earnings and
losses; and its outlook for future years.  The Company has fully
reserved its deferred tax assets.


The
current period income tax expense is solely attributable to Texas Margin taxes
accrued during the period.





Note
14 – Segment 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
      nine months ended September 30, 2010, three customers accounted for
      approximately 47%, 13% and 12% 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.  For the nine months ended September 30,
      2010, three customers accounted for approximately 42%, 14% and 13%. of the
      Company’s service revenues





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




Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Three Months Ended September 30, 2010:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                4,384
                
                
                $
                4,428
                
                
                $
                -
                
                
                $
                8,812Marketing,
      general and administrative expense
                
                $
                761
                
                
                $
                632
                
                
                $
                736
                
                
                $
                2,129Income
      (loss) before income taxes
                
                $
                (2,719
                )
                
                $
                (450
                )
                
                $
                (736
                )
                
                $
                (3,905
                )





17


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)


Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Three Months Ended September 30, 2009:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                4,704
                
                
                $
                4,767
                
                
                $
                —
                
                
                $
                9,471Marketing,
      general and administrative expense
                
                $
                1,107
                
                
                $
                405
                
                
                $
                277
                
                
                $
                1,789Loss
      before income taxes
                
                $
                730
                
                
                $
                (240
                )
                
                $
                (277
                )
                
                $
                213





Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Nine Months Ended September 30, 2010:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                14,954
                
                
                $
                13,167
                
                
                $
                —
                
                
                $
                28,121Marketing,
      general and administrative expense
                
                $
                2,005
                
                
                $
                1,140
                
                
                $
                1,607
                
                
                $
                4,752Income
      (loss) before income taxes
                
                $
                344
                
                
                $
                (1,171
                )
                
                $
                (1,607
                )
                
                $
                (2,434
                )





Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Nine Months Ended September 30, 2009:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                12,484
                
                
                $
                14,775
                
                
                $
                -
                
                
                $
                27,259Marketing,
      general and administrative expense
                
                $
                2,767
                
                
                $
                1,594
                
                
                $
                1,976
                
                
                $
                6,337Income
      (loss) before income taxes
                
                $
                (9,484
                )
                
                $
                (2,094
                )
                
                $
                (1,976
                )
                
                $
                (13,554
                )





Exploration
                
                
                
                
                
                
                
                
                Consolidatedand Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalTotal
      assets as of September 30, 2010
                
                $
                48,944
                
                
                $
                4,095
                
                
                $
                817
                
                
                $
                53,856Total
      assets as of December 31, 2009
                
                $
                55,350
                
                
                $
                5,582
                
                
                $
                3,441
                
                
                $
                64,373





Note
15 – Treasury Stock





In February 2010, the Company settled
its dispute with Mr. Lance Duncan and issued him 535,714 shares of common stock
out of its treasury stock holdings.   The shares were originally
recorded as treasury shares at the Company’s purchase cost of $7.84 per share,
or $4,199,409.  With the subsequent reissuance, the Company reduced
the cost of treasury shares by $4,199,409 and recorded $3,101,194, representing
the difference between the original acquisition cost of the shares and the value
accrued by the Company, as a decrease in additional paid-in
capital.





Note
16 – 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.  As of the filing date, there has been no material change
in the litigation discussion below.





Exxon
Litigation





On January
16, 2008, Exxon Mobil Corporation filed a petition in the 270th
District Court of Harris County, Texas, naming us as a defendant along with 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 TEC’s predecessor in interest, Merit
Energy Corporation. In 1999, TEC assigned its 50% undivided interest in one of
the tracts in the acquired property to Merenco, an affiliate of 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 TEC and claims that
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 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 currently are not able to
estimate the range of possible exposure or loss, if any, that might result from
this litigation. We acquired substantially all the assets and liabilities of TEC
in the TEC acquisition. Merenco was not acquired by us in the TEC acquisition
and our Chairman, Tim Culp, continues to have a 50% ownership interest in
Merenco.


18


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)


On August
16, 2010, the Court issued an order to the halt the case.  However,
the Court has the right to reopen the case in the future.  The order
in this case has no financial impact on the Company.





Hyman
Litigation





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 violation of the Sarbanes-Oxley Act of 2002, Section 806,
Protection for Employees of Publicly Traded Companies Who Provide Evidence of
Fraud.





On
September 16, 2010, the court dismissed the case and there is no further action
to be taken.





Kovar
Litigation





On
December 3, 2008, Robert Kovar filed suit against Platinum alleging that he
“Resigned for Good Reason” according to his employment contract.  Mr.
Kovar is seeking a Declaration Judgment that he had “Good Reason” to resign his
employment at Platinum Energy and Maverick Engineering.  Mr. Kovar is
also requesting payment of the severance package, accelerated vesting of options
and accelerated payment of the Cash Flow Notes (as described in the Platinum
Energy, Maverick Engineering Merger Agreement and Note 9 above) as described in
his employment agreement, plus attorney fees and court costs.  It is
our contention that Mr. Kovar resigned his position without good reason and is
therefore, not entitled to severance or accelerated vesting of
options.  It is our additional conviction that the Cash Flow Notes has
been cancelled and that Platinum Energy in no longer obligated to make any
payments thereunder, pursuant to the terms of Mr. Kovar’s employment agreement.
We believe that Mr. Kovar’s claim that he resigned with “Good Reason” is without
merit and we intend to vigorously defend ourselves against this
claim.





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 Maverick 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 Maverick 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 Maverick Notes.
The Company and Maverick have asserted claims in litigation against the holders
of the Maverick Notes, Robert L. Kovar Services, LLC, Robert L. Kovar,
individually, and others.





On May 3.
2009, Platinum and Maverick Engineering. Inc. filed suit against Robert L. Kovar
Services. LLC (“RKS”), Robert L. Kovar (“Kovar”), Rick J. Guerra (“Guerra”), and
Walker, Keeling, & Carroll. L.L.P. (“WKC”) collectively (the Defendants”)
alleging, among other things, a suit for declaratory judgment asking the court
to declare that Platinum and Maverick are entitled to indemnification from the
former Maverick stockholders, including Guerra and Kovar, for any damages they
suffer as a result of a default on any note contained in the Maverick and
PermSUB Merger Agreement. In addition, Platinum and Maverick have asked the
Court to declare that WKC has breached the merger agreement by not stepping down
as the Merger Escrow Agent.  Platinum and


Maverick
have also sued to recover costs of court and attorneys’ fees.





In
October, 2009, Platinum and Maverick Engineering filed a Second Amended Petition
with the following Causes of Action against the Defendants:  Kovar
fraudulently induced Platinum to enter into the Merger Agreement; Common-Law
Fraud; Statutory Fraud; Breach of Fiduciary Duty; Tortious Interference with
Merger Agreement; Civil Conspiracy; and Breach of Contract.





This case
is in the final stages of discovery and is currently set for trial on November
30, 2010.


19


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(UNAUDITED)





Citgo
Litigation





On
October 14, 2009, Maverick Engineering filed suit in Harris County against CITGO
Refining & Chemical Company, LP for Breach of Contract.  According
to the Petition, Maverick provided engineering services to CITGO and CITGO has
refused to pay for those services.  Maverick is suing for recovery of
$357,538, representing the outstanding accounts receivable balance due from
CITGO on the date the suit was filed, plus damages, costs, attorney fees,
interest, and other relief.  While Maverick has performed all terms,
conditions, and covenants required under its contract with CITGO, it is too
early in this litigation to be able to predict the
outcome.  Currently, the case is in the early stages of discovery with
no hearing date set.




Meier
Litigation





On
October 20, 2009, Lisa Meier filed suit for breach of her employment
contract.  According to the Petition, Ms. Meier resigned for “good
cause” and she is seeking severance pay.  On June 10, 2009, Ms. Meier
delivered to the Board of Directors of Platinum Energy Resources, her second
notice of intent to resign for “Good Reason.” Ms. Meier’s first notice was
submitted on October 23, 2008, less than three months after entering into her
employment agreement, and subsequently withdrawn.





The Board
of Directors accepted Ms. Meier’s resignation, but stated that “good reason” did
not exist.  This matter is currently in the early phase of
litigation.  We believe that Ms. Meier’s claims are without merit and
we intend to vigorously defend ourselves against these claims. There have
been no changes in circumstances or events relating to this litigation since the
discussion in the Company’s annual report.


20


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





This
Quarterly Report on Form 10-Q includes 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. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our 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 such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,”
or the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other Securities and Exchange Commission filings.





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





Overview





We
consider ourselves to be in two lines of business - (i) as an independent oil
and gas exploration and production company and (ii) as an engineering and
construction 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. To be successful, we
      must, over time, be able to find oil and gas reserves and then sell the
      resulting production at a price that is sufficient to cover our finding
      costs, operating expenses, administrative costs and interest expense,
      plus offer an acceptable rate of return on our capital investment. 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. 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 we are engaged as described
      above. Maverick is based in south Texas with offices in Corpus Christi,
      Victoria, and Houston.





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, but also by exploiting opportunities related to our
existing production. For example, we have two fields, the Ira Unit located in
Scurry County, Texas, and the Ballard Unit located in Eddy County, New Mexico
which we believe contain substantial opportunities to expand and enhance their
existing waterflood capabilities. These projects will require capital in the
form of money and expertise.


21


Results
of Operations





Set forth
below are:





(A)
            A
      discussion of the results of operations for Platinum Energy Resources,
      Inc. ("Platinum") for the three and nine months ended September 30, 2010,
      as compared to the three and nine months ended September 30,
      2009;





(B)
            A
      discussion of the results of operations for our oil and gas entities for
      the three and nine months ended September 30, 2010, as compared to the
      three and nine months ended September 30, 2009;
  and





(C)
            A
      discussion of the results of operations for our engineering and
      construction services business for the three and nine months ended
      September 30, 2010, as compared to the three and nine months ended
      September 30, 2009.





(A)
- Results of Operations - Platinum





For
the three months ended September 30, 2010 as compared to the three months ended
September 30, 2009





On a
consolidated basis we had a net loss of approximately $3.9 million during the
three month period ended September 30, 2010, compared to  net income
of approximately $124,000 during the comparative period ended September 30,
2009.





Our general and administrative expenses, other than those attributable to our
oil and natural gas assets and our engineering services business, for the three
months ended September 30, 2010 were $738,000, as compared to approximately
$277,000 for the three months ended September 30, 2009.  The increase
of $461,000 was the result of  increased legal expenses due to pending
litigation, the accrual of bonuses, and the hiring of new
personnel.





For
the nine months ended September 30, 2010 as compared to the nine months ended
September 30, 2009





On a
consolidated basis we had a net loss of approximately $2.5 million during the
nine months ended September 30, 2010, compared to a net loss of approximately
$8.9 million during the comparative period ended September 30,
2009.





Our general and administrative expenses, other than those attributable to our
oil and natural gas assets and our engineering services business, for the nine
months ended September 30, 2010 was $1.61 million as compared to approximately
$1.98 million for the nine months ended September 30, 2009.  The
decrease of $370,000 was the result of a lower head count and continued
monitoring of cost controls.





(B)
- Results of Operations - Oil and Gas





For
the Three Months Ended September 30, 2010 as compared to the
Three Months Ended September 30, 2009





Our
revenues from oil and natural gas sales for the three months ended September 30,
2010 and 2009 declined slightly at $4.4 million and $4.7
million, respectively.  The average oil price we obtained on our
product sales for the three months ended September 30, 2010 was $71.52, compared
to $65.07 for the three months ended September 30, 2009.  The average
gas price we obtained for our product for the three months ended September 30,
2010 was $3.28 per Mcf, as compared to $3.54 per Mcf for the three months ended
September 30, 2009.  Production on a BOE basis decreased 20% from
93,014 BOE during the three months ended September 30, 2009 to 77,481 BOE’s
during the three months ended September 30, 2010.   The decrease
in production was a result of several fields, including the Ira, Lothian, and
Tomball Fields, being shut-in for various maintenance issues.  Some of
these issues have since been corrected and we anticipate that volumes will
increase in the near future.  These decreases were partially offset by
the completion of the Ball #25 well during July 2010, as well as benefits from
the workover program in the Lothian Field in Southeast New
Mexico.  The Company continues to work on its workover program that
was adopted in February 2010.  We expect production to return to
higher levels once the workover program is completed in its
entirety.  The Company expects to complete the workover program late
in the fourth quarter 2010 or the first quarter 2011.





Oil and
gas production costs in the form of lease operating expense on a BOE basis
increased by 59% from $23.22 to $37.06during the three months ended September
30, 2009 and 2010, respectively.  The increase was due primarily to
workover programs put in place to improve the operating efficiency of the wells
and the expensing of the related workover costs. During the three months ended
September 30, 2010, we incurred nonrecurring lease operating costs totaling
$310,994, or $4.12 per BOE, as part of a broad workover
program.  Other factors outside management control, such as third
party service availability and the availability of adequate technical and field
staff, could have an adverse effect on lease operating costs in the
future.


22


Depletion
expense for oil and gas properties was $871,000 and $1,284,000 for the three
months ended September 30, 2010 and 2009, respectively.  This
represents a decrease of $413,000, or 32.2%, during the three months ended
September 30, 2010 compared to the three months ended September 30, 2009. The
decrease was related to a lower carrying value of our oil and gas properties as
a result of the ceiling test impairment recorded as of December 31, 2009 and
lower production volumes.





We also
incurred unrealized losses of $5,330,000 for the three months ended September
30, 2010 as compared to unrealized gains of approximately $858,000 during
the three months ended September 30, 2009 on the value of certain derivative
contracts on crude oil. The change was due to the volatility in the price of
oil.





Supplemental
Oil and Gas Information





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





Three Months Ended September 30,2010
                    
                    
                    2009ProductionOil
      (Bbls)
                    
                    
                    55,142
                    
                    
                    
                    62,201Gas
      (Mcf)
                    
                    
                    134,035
                    
                    
                    
                    184,878Boe
      (Bbls)
                    
                    
                    77.481
                    
                    
                    
                    93,014Average
      Prices (a)Oil
      ($/Bbl)
                    
                    $
                    71.52
                    
                    
                    $
                    65.07Gas
      ($/Mcf)
                    
                    $
                    3.28
                    
                    
                    $
                    3.54Average
      Lifting CostPer
      Boe
                    
                    $
                    37.06
                    
                    
                    $
                    23.22





(a)  The
Company accrued revenue for production and sales for months in which sales have
not settled in the market.  Volumes and prices per unit for each
reporting period include current estimates and changes to estimates made in
prior periods to reflect actual results.  The price we received for
production during the month of September was estimated to be $76.32 per barrel
and $5.12 per Mcf.





For
the Nine Months Ended September 30, 2010 as compared to the Nine
Months Ended September 30, 2009





Our
revenues from oil and gas sales for the nine months ended September 30, 2010
were $15 million. Oil and gas sales for the nine months ended September 30, 2009
were $12.5 million. The 20% increase in oil and gas revenues, or $2.5 million,
was due to an increase in commodity prices during the nine months ended
September 30, 2010. The average oil price we obtained on our product sales for
the nine months ended September 30, 2010 was $76.01, compared to $52.17 for the
nine months ended September 30, 2009. The average gas price we obtained for our
product for the nine months ended September 30, 2010 was $4.39 per Mcf, as
compared to $3.28 for the nine months ended September 30, 2009. Production on a
BOE basis decreased 22.6% from 300,836 BOE’s during the nine months ended
September 30, 2009, to 234,736 BOE’s during the nine months ended September 30,
2010.





Oil and
gas production costs in the form of lease operating expense on a BOE basis
increased by $8.81 per BOE, or 37%, from $23.58 per BOE during
the nine months ended September 30, 2009 to $32.39 per BOE during the
nine months ended September 30, 2010. The increase was due primarily to workover
programs put in place to improve the operating efficiency of the wells. During
the nine months ended September 30, 2010, we incurred nonrecurring lease
operating costs totaling $1,269,572, or $5.45 per BOE, as part of a broad
workover program.  Other factors outside management control, such as
third party service availability and the availability of adequate technical and
field staff, could have an adverse effect on lease operating costs in the
future.





Depletion
expense for oil and gas properties was $3,084,000 and $4,258,000 for the nine
months ended September 30, 2010 and 2009, respectively.  This
represents an decrease of $1,174,000, or 27.6%, during the nine months ended
September 30, 2010 compared to the nine months ended September 30, 2009. The
decrease was related to a lower carrying value of our oil and gas properties as
a result of the ceiling test impairment recorded as of December 31,
2009.


23


We also
incurred unrealized losses of $4,173,000 for the nine months ended September 30,
2010 as compared to unrealized losses of approximately $8,186,000 during
the nine months ended September 30, 2009 on the value of certain derivative
contracts on crude oil. The change was due to the volatility in the price of
oil.





Supplemental
Oil and Gas Information





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





Nine Months Ended September 30,2010
                    
                    
                    2009ProductionOil
      (Bbls)
                    
                    
                    176,552
                    
                    
                    
                    201,900Gas
      (Mcf)
                    
                    
                    349,103
                    
                    
                    
                    593,617Boe
      (Bbls)
                    
                    
                    254,736
                    
                    
                    
                    300,836Average
      Prices (a)Oil
      ($/Bbl)
                    
                    $
                    76.01
                    
                    
                    $
                    52.17Gas
      ($/Mcf)
                    
                    $
                    4.39
                    
                    
                    $
                    3.28Average
      Lifting CostPer
      Boe
                    
                    $
                    32.39
                    
                    
                    $
                    23.58





(a)  The Company accrued
revenue for production and sales for months in which sales have not settled in
the market.  Volumes and prices per unit for each reporting period
include current estimates and changes to estimates made in prior periods to
reflect actual results.  The price we received for production during
the month of September was estimated to be $76.32 per barrel and $5.12 per
Mcf.





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





For
the three months ended September 30, 2010 as compared to the three months ended
September 30, 2009





Revenues
for the three months ended September 30, 2010 and the three months ended
September 30, 2009 were $4.4 million and $4.8 million,
respectively.  Gross margin performance for these periods was 8.5% and
12.6%, respectively.  The decline in revenues for the period ending
September 30, 2010 was caused by a reduction in revenues from the Oil & Gas
and Survey business lines partially offset by increases in the Industrial
business line.  The reduction in the Oil & Gas and Survey business
line were due to an overall slowdown in business demand; however, the Survey
business line has received new contracts which will be reflected in higher
revenues in the upcoming quarters.  The Industrial business line
revenue increased due to contracts being signed with new
clients.  Engineering services reported pretax losses of $92,911 and
$239,973 in the three months ended September 30, 2010 and 2009,
respectively.





For
the nine months ended September 30, 2010 as compared to the nine months ended
September 30, 2009





Revenues
for the nine months ended September 30, 2010 and the nine months ended
September 30, 2009 were $13.2 million and $14.8 million,
respectively.  Gross margin performance for these periods was 4.35%
and 6.83%, respectively.  The decline in gross margin at September 30,
2010 was caused by a simultaneous work slowdown in our Oil & Gas and Survey
business lines, largely as a result of project curtailments as clients adjusted
to the slowdown in the U.S. economy.  Engineering services reported
pretax losses of $813,256 and $2,094,112 in the nine months ended September 30,
2010 and 2009, respectively.





Liquidity
and Capital Resources





Going
Concern





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  The Company has incurred
significant losses, resulting in cumulative losses of $113,747,702 through
September 30, 2010.  At September 30, 2010 the Senior Credit Facility
balance was approximately $5.15 million.  The Company’s current cash
on hand of $2,395,820 is not adequate to satisfy the debt.  Also, the
Company has negative working capital of $8,168,992.  Currently the
Company is looking at various ways of correcting these issues, including
exploring joint venture opportunities as well as a thorough analysis of our
specific assets for potential divestiture. Further the Company has assets and
liabilities that could be affected by unfavorable outcomes of litigation in
progress.


24


As a
result of the above discussed conditions, there exists substantial doubt about
our ability to continue as a going concern. Management believes that we will be
able to extend the related party debt and be victorious in the various
litigations discussed in Note 16.  However, until we have a better
understanding of the outcome of the pending litigation, a going concern
exists.  Our consolidated financial statements are presented on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The consolidated
financial statements do not include any adjustments relating to the
recoverability of the recorded assets or the classification of liabilities that
may be necessary should the Company be unable to continue as a going
concern.





Capital
Resources





At
September 30, 2010, we had cash and cash equivalents of $2,395,820 and negative
working capital of $8,168,992, compared to cash and cash equivalents of
$2,941,939 and negative working capital of $13,453,250 at December 31,
2009.  The improved working capital was primarily attributable to cash
received in settlement of derivative contracts and payments made against our
outstanding Senior Secured Facility loan balance.





On
September 1, 2010, A.R. Development Corporation, a company owned and controlled
by our CEO, purchased the Senior Credit Facility and all rights to the ancillary
security from Bank of Texas.  On September 1, 2010, the Bank of Texas
extension, which was granted on August 6, 2010, was expiring.  A.R.
Development Corporation purchased the note in order to keep the Bank of Texas
from potentially foreclosing on the assets of the Company.  The
modified Senior Credit Facility is secured by substantially all of the Company’s
proved oil and gas assets as well as substantially all of the derivative
financial instruments.  At the time of the purchase, the balance on
the Senior Credit Facility was $4.98 million.  The modified Senior
Credit Facility is denoted in Canadian dollars.  The Company intends
to payoff the Senior Credit Facility out of cash flow or request for an
extension of the maturity of the note.





Going forward, the Company’s long-term
strategy is to maximize the potential of currently
owned-properties.  This maximization will consist of workovers on
current wells as well as new infield drilling.  The Company is
actively seeking additional outside capital to allow it to accelerate the
implementation of its growth strategy, and such new capital infusion may take
several forms.  There is no guarantee that the Company will be able to
raise outside capital.  Without a significant infusion of new capital,
the Company believes that it can finance the well workovers and new infield
drilling and generate new cash flows to the Company, but only at a pace that can
be supported by cash flows.





Operating
activities provided cash during the nine months ended September 30, 2010 of
$2,254,192, versus cash used by operations of $905,197 during the 2009
period.  The improved operating cash flow for the nine months ended
September 30, 2010, was primarily attributable to decreased net loss for the
2010 period as compared to the 2009 period, and favorable changes in working
capital items for the 2010 period.





Investing activities provided cash
during the nine months ended September 30, 2010 of $5,349,819, versus cash used
in investing activities of $384,331during the 2009 period.  The
improved cash flow from investing activities for 2010 was primarily attributable
to the settlement of derivative contracts and reduced capital expenditures
during the 2010 period.  The Company received $6,001,768 in the 2010
period for the settlement of derivative contracts, as compared to $1,165,930
during the 2009 period.  The Company had additions to property and
equipment in the 2010 period of $606,572 versus $1,550,261 of additions during
the 2009 period.





Financing activities used cash of
$8,150,130 during the nine months ended September 30, 2010, versus using cash of
$94,129 during the 2009 period.  The 2010 period used proceeds
received from the settlement of derivative contracts and excess cash on hand to
reduce the Senior Credit Facility with Bank of Texas by $8.1
million.  The 2009 period includes the impact of $1,000,000 in
proceeds received from the Senior Credit Facility with Bank of
Texas.  No such proceeds were received in the 2010
period.





Capital
Expenditures- Oil and Gas Development





The
reserve report prepared as of December 31, 2009 assumes that we will not spend
any capital expenditures in 2010 to exploit oil and gas opportunities. Our
primary focus since the beginning of the year has been to control our operating
costs.   As cash flow allows, we may commence a limited drilling
or continue our workover program in order to stem the natural decline associated
with our current production. The execution of any capital program is dependent
on the availability of technical and field staff, product pricing, rig
availability and an implementation of corporate strategy. Through September 30,
2010 we have incurred capital expenditures of approximately $607,000, primarily
related to the drilling of the Ball #25 well.


25


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.





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 when oil and natural gas prices decline. If commodity
prices deteriorate, it is possible that we could incur impairment in future
periods.





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, gilsonite and other such sources.


26


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;





·
            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.





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.





Item
3.   Quantitative and Qualitative Disclosures About Market
Risk.





The
primary objective of the following information is to provide forward-looking
quantitative and qualitative information about our potential exposure to market
risks. Market risk is the sensitivity of income to changes in interest rates,
foreign exchanges, commodity prices, equity prices, and other market-driven
rates or prices. The disclosures are not meant to be precise indicators of
expected future losses, but rather indicators of reasonably possible losses.
This forward-looking information provides indicators of how we view and manage
our ongoing market risk exposures.





Interest
Rate Risk





At
September 30, 2010 our oil and gas subsidiaries had approximately $5 million in
outstanding borrowings associated with their credit facility with our CEO and
our engineering services subsidiary had $8.4 million in outstanding
borrowings under term notes with the selling shareholders from whom we acquired
Maverick, our engineering services business.





Price
Risks





See
Note 6 within the financial statements in Item 1 for a description of our
price risks and price risk management activities.


27


Item 4T.   Controls and
Procedures.





Evaluation
of Disclosure Controls and Procedures





The
Company carried out an evaluation, under the supervision and with the
participation of management, including the Company’s principal executive officer
and principal financial officer, of the effectiveness of the disclosure controls
and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of
September 30, 2010.  Based on that evaluation, the Company’s Principal
executive officer concluded that the Company’s disclosure controls and
procedures were not effective as of September 30, 2010 due to material
weaknesses in our internal controls related to inadequate staffing within our
accounting department and upper management, lack of consistent policies and
procedures, inadequate monitoring of controls, inadequate disclosure controls
and significant turnover among the staff and officers of the
Company.  It is Management’s plan to remediate the internal control
material weakness by implementing new controls and procedures that combined will
improve the quality of the financial reporting process.





Disclosure
controls and procedures include controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act are properly recorded, processed, summarized and reported within
the time periods required by the Commission’s rules and forms. Management
necessarily applied its judgment in assessing the costs and benefits of such
controls and procedures that, by their nature, can provide only reasonable
assurance regarding management’s control objectives. Management does not expect
that its disclosure controls and procedures will prevent all errors and fraud. A
control system, irrespective of how well it is designed and operated, can only
provide reasonable assurance, and cannot guarantee that it will succeed in its
stated objectives.





Changes
in Internal Control Over Financial Reporting





There
were no changes in internal control over financial reporting that occurred
during the first nine months of 2010 that have materially affected, or are
reasonably likely to affect materially, our internal control over financial
reporting.





OTHER
INFORMATION





Item 1.   Legal
Proceedings.





Exxon
Litigation





On January
16th, 2008, Exxon Mobil Corporation filed a petition in the 270 th
District Court of Harris County, Texas, naming us as a defendant along with 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 TEC’s predecessor in interest, Merit
Energy Corporation. In 1999, TEC assigned its 50% undivided interest in one of
the tracts in the acquired property to Merenco, an affiliate of 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 TEC and claims that
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 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 currently are not able to
estimate the range of possible exposure or loss, if any, that might result from
this litigation. We acquired substantially all the assets and liabilities of TEC
in the TEC acquisition. Merenco was not acquired by us in the TEC acquisition
and our Chairman, Tim Culp, continues to have a 50% ownership interest in
Merenco.  Currently the Court has indicated a willingness to put the
case on hold pending completion of the Railroad Commission
investigation.





On August
16, 2010, the order issued an order to the halt the case.  However,
the court has the right to reopen the case in the future.  The order
in this case has no financial impact on the Company.





Hyman
Litigation





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 violation of the Sarbanes-Oxley Act of 2002, Section 806,
Protection for Employees of Publicly Traded Companies Who Provide Evidence of
Fraud.





On
September 16, 2010, the court dismissed the case and there is no further action
to be taken.





Kovar
Litigation





On
December 3, 2008, Robert Kovar filed suit against Platinum alleging that he
“Resigned for Good Reason” according to his employment contract.  Mr.
Kovar is seeking a Declaration Judgment that he had “Good Reason” to resign his
employment at Platinum Energy and Maverick Engineering.  Mr. Kovar is
also requesting payment of the severance package, accelerated vesting of options
and accelerated payment of the Cash Flow Notes (as described in the Platinum
Energy, Maverick Engineering Merger Agreement and Note 9 above) as described in
his employment agreement, plus attorney fees and court costs.  It is
our contention that Mr. Kovar resigned his position without good reason and is
therefore, not entitled to severance or accelerated vesting of
options.  It is our additional conviction that the Cash Flow Notes has
been cancelled and that Platinum Energy in no longer obligated to make any
payments thereunder, pursuant to the terms of Mr. Kovar’s employment agreement.
We are currently in the discovery phase of this matter.  We believe
that Mr. Kovar’s claim that he resigned with “Good Reason” is without merit and
we intend to vigorously defend ourselves against this claim.


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.  On April 29, 2009,
Maverick received a notice of acceleration (the “Acceleration Letter”) with
respect to the Maverick 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 Maverick 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 Maverick Notes.
The Company and Maverick have asserted claims in litigation against the holders
of the Maverick Notes, Robert L. Kovar Services, LLC, Robert L. Kovar,
individually, and others. This litigation is in its early stages and,
accordingly, the Company cannot predict the outcome of these
matters.





On May 3.
2009, Platinum and Maverick Engineering. Inc. filed suit against Robert L. Kovar
Services. LLC (“RKS”), Robert L. Kovar (“Kovar”), Rick J. Guerra (“Guerra”), and
Walker, Keeling, & Carroll. L.L.P. (“WKC”) collectively (the Defendants”)
alleging, among other things, a suit for declaratory judgment asking the court
to declare that Platinum and Maverick are entitled to indemnification from the
former Maverick stockholders, including Guerra and Kovar, for any damages they
suffer as a result of a default on any note contained in the Maverick and
PermSUB Merger Agreement. In addition, Platinum and Maverick have asked the
Court to declare that WKC has breached the merger agreement by not stepping down
as the Merger Escrow Agent.  Platinum and


Maverick
have also sued to recover costs of court and attorneys’ fees.





In
October, 2009, Platinum and Maverick Engineering filed a Second Amended Petition
with the following Causes of Action against the Defendants:  Kovar
fraudulently induced Platinum to enter into the Merger Agreement; Common-Law
Fraud; Statutory Fraud; Breach of Fiduciary Duty; Tortious Interference with
Merger Agreement; Civil Conspiracy; and Breach of Contract.   As
this case is still in the discovery phase of litigation, at this time, it is
impossible for us to provide an informed assessment of the likelihood of a
favorable or unfavorable outcome in this case.





This case
is in the final stages of discovery and is currently set for trial on November
30, 2010.





Citgo
Litigation





On
October 14, 2009, Maverick Engineering filed suit in Harris County against CITGO
Refining & Chemical Company, LP for Breach of Contract.  According
to the Petition, Maverick provided engineering services to CITGO and CITGO has
refused to pay for those services.  Maverick is suing for recovery of
$357,538, representing the outstanding accounts receivable balance due from
CITGO on the date the suit was filed, plus damages, costs, attorney fees,
interest, and other relief.  While Maverick has performed all terms,
conditions, and covenants required under its contract with CITGO, it is too
early in this litigation to be able to predict the
outcome.  Currently, the case is in the early stages of discovery with
no hearing date set.





Meier
Litigation





On
October 20, 2009, Lisa Meier filed suit for breach of her employment
contract.  According to the Petition, Ms. Meier resigned for “good
cause” and she is seeking severance pay.  On June 10, 2009, Ms. Meier
delivered to the Board of Directors of Platinum energy Resources, her second
notice of intent to resign for “Good Reason.” Ms. Meier’s first notice was
submitted on October 23, 2008, less than three months after entering into her
employment agreement, and subsequently withdrawn.





The Board
of Directors accepted Ms. Meier’s resignation, but stated that “good reason” did
not exist.  This matter is currently in the early phase of
litigation.  We believe that Ms. Meier’s claims are without merit and
we intend to vigorously defend ourselves against these claims. There have
been no changes in circumstances or events relating to this litigation since the
discussion in the Company’s annual report.


29


Item 1A.   Risk Factors.





There
have been no material changes to the risk factors set forth in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009.





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





None.





Item 3.   Defaults Upon Senior
Securities.





None.





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





Removed
and reserved.





Item 5.   Other
Information.





None.





Item 6.   Exhibits.





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





Exhibit
                Number
              
              Exhibit Description31.1
              
              Section
      302 Certification of Principal Executive Officer31.2
              
              Section
      302 Certification of Principal Financial
Officer




30


SIGNATURES





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





PLATINUM
      ENERGY RESOURCES, INC.Date:
      November 15, 2010
              By:
              /s/ Al RahmaniAl
      Rahmani
                Chief
      Executive Officer


31