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 June 30, 2009
 
 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. Yes x  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
preceeding 12 months (or such shorter period that the registrant was required to
submit and post such files). Yes  ̈ No  ̈
  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 Filer o
   Non-Accelerated Filer o (Do not check if a
smaller reporting company) Smaller reporting company x
 
 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
August 5, 2009, 24,068,675 shares 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
                3Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                22Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                30Item
      4T.
                Controls
      and Procedures
                30PART
      II- OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                31Item
      1A.
                Risk
      Factors
                31Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                31Item
      3.
                Defaults
      Upon Senior Securities
                31Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                31Item
      5.
                Other
      Information
                31Item
      6.
                Exhibits
                32Signatures
                33
  2
 
 PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 June 30, 2009
                            
                            
                            December 31,
                              2008(UNAUDITED)
                            
                            
                            *ASSETSCURRENT ASSETSCash
      and cash equivalents
                            
                            $
                            2,471,177
                            
                            
                            $
                            3,668,092Accounts
      receivable, net of $194,392 and $164,392 allowance for doubtful accounts
      as of June 30, 2009 and December 31, 2008, respectivelyOil
      and gas sales
                            
                            
                            1,862,933
                            
                            
                            
                            1,629,931Service
                            
                            
                            2,593,109
                            
                            
                            
                            5,255,041Inventory
                            
                            
                            480,593
                            
                            
                            
                            436,477Fair
      value of commodity derivatives - current
                            
                            
                            2,722,315
                            
                            
                            
                            1,968,186Prepaid
      expenses and other current assets
                            
                            
                            504,238
                            
                            
                            
                            747,225Total
      Current Assets
                            
                            
                            10,634,365
                            
                            
                            
                            13,704,952Property
      and equipment, at costOil
      and gas properties, full cost method
                            
                            
                            205,300,801
                            
                            
                            
                            204,372,437Other
                            
                            
                            5,501,762
                            
                            
                            
                            5,492,072Less
      accumulated depreciation, depletion, amortization and
      impairment
                            
                            
                            (148,292,502
                            )
                            
                            
                            (145,016,531
                            )Property
      and equipment, net
                            
                            
                            62,510,061
                            
                            
                            
                            64,847,978Other
      assetsIntangible
      assets, net
                            
                            
                            4,618,674
                            
                            
                            
                            5,061,066Fair
      value of commodity derivatives
                            
                            
                            8,764,249
                            
                            
                            
                            18,562,702Real
      estate held for development
                            
                            
                            2,700,000
                            
                            
                            
                            2,700,000Total
      Assets
                            
                            $
                            89,227,349
                            
                            
                            $
                            104,876,698LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payableTrade
                            
                            $
                            1,268,049
                            
                            
                            $
                            2,551,808Oil
      and gas sales
                            
                            
                            892,144
                            
                            
                            
                            1,115,114Accrued
      liabilities and other
                            
                            
                            3,410,807
                            
                            
                            
                            4,437,995Income
      taxes payable
                            
                            
                            162,483
                            
                            
                            
                            119,770Current
      maturities of long-term debt, capital lease obligations and notes
      payable
                            
                            
                            17,150,111
                            
                            
                            
                            13,403,731Total
      Current Liabilities
                            
                            
                            22,883,594
                            
                            
                            
                            21,628,418Long-term
      debt and capital lease obligations, net of current portion
                            
                            
                            1,309,627
                            
                            
                            
                            4,687,423Notes
      payable - acquisitions
                            
                            
                            3,300,951
                            
                            
                            
                            3,231,959Other
      accrued liabilities
                            
                            
                            139,626
                            
                            
                            
                            148,458Asset
      retirement obligation
                            
                            
                            4,747,068
                            
                            
                            
                            4,537,243Deferred
      income taxes
                            
                            
                            5,640,366
                            
                            
                            
                            10,459,000Total
      Long-term Liabilities
                            
                            
                            15,137,638
                            
                            
                            
                            23,064,083COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'  EQUITYPreferred
      stock, $.0001 par value, 1,000,000 authorized, 0 issued
                            
                            
                            —
                            
                            
                            
                            —Common
      stock, $.0001 par value; 75,000,000 shares authorized; 24,068,675 issued
      and 22,070,762 outstanding in each period, respectively
                            
                            
                            2,407
                            
                            
                            
                            2,407Additional
      paid-in capital
                            
                            
                            155,100,474
                            
                            
                            
                            155,100,474Accumulated
      deficit
                            
                            
                            (88,235,300
                            )
                            
                            
                            (79,257,220
                            )Treasury
      stock - 1,997,913 shares, at cost
                            
                            
                            (15,661,464
                            )
                            
                            
                            (15,661,464
                            )Total
      Stockholders' Equity
                            
                            
                            51,206,117
                            
                            
                            
                            60,184,197Total
      Liabilities and Stockholders' Equity
                            
                            $
                            89,227,349
                            
                            
                            $
                            104,876,698
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  * Derived
from the audited financial statements for the year ended December 31,
2008
  3
 
 PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
  Three Months Ended June 30,
                  
                  
                  Six Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008RevenuesOil
      and gas sales
                  
                  $
                  4,465,303
                  
                  
                  $
                  10,694,071
                  
                  
                  $
                  7,780,004
                  
                  
                  $
                  17,828,875Service
      revenues
                  
                  
                  4,487,219
                  
                  
                  
                  5,056,682
                  
                  
                  
                  10,007,714
                  
                  
                  
                  5,056,6828,952,522
                  
                  
                  
                  15,750,753
                  
                  
                  
                  17,787,718
                  
                  
                  
                  22,885,557Costs
      and expensesLease
      and other operating expense
                  
                  
                  2,203,471
                  
                  
                  
                  2,864,605
                  
                  
                  
                  4,933,899
                  
                  
                  
                  5,320,911Cost
      of service revenues
                  
                  
                  4,281,185
                  
                  
                  
                  3,959,110
                  
                  
                  
                  9,614,886
                  
                  
                  
                  3,959,110Marketing,
      general and administrative expense
                  
                  
                  2,317,738
                  
                  
                  
                  3,768,613
                  
                  
                  
                  4,548,459
                  
                  
                  
                  5,500,440Depreciation,
      depletion and amortization expense
                  
                  
                  1,866,365
                  
                  
                  
                  2,577,874
                  
                  
                  
                  3,796,309
                  
                  
                  
                  4,641,163Accretion
      of asset retirement obligations
                  
                  
                  80,834
                  
                  
                  
                  49,319
                  
                  
                  
                  159,547
                  
                  
                  
                  110,988Total
      costs and expenses
                  
                  
                  10,749,593
                  
                  
                  
                  13,219,521
                  
                  
                  
                  23,053,100
                  
                  
                  
                  19,532,612Operating
      income (loss)
                  
                  
                  (1,797,071
                  )
                  
                  
                  2,531,232
                  
                  
                  
                  (5,265,382
                  )
                  
                  
                  3,352,945OTHER
      INCOME (EXPENSES)Interest
      income
                  
                  
                  881
                  
                  
                  
                  35,796
                  
                  
                  
                  4,314
                  
                  
                  
                  140,183Interest
      expense
                  
                  
                  (334,726
                  )
                  
                  
                  (230,880
                  )
                  
                  
                  (630,617
                  )
                  
                  
                  (244,685
                  )Change
      in fair value of commodity derivatives
                  
                  
                  (8,405,839
                  )
                  
                  
                  (23,093,171
                  )
                  
                  
                  (7,878,394
                  )
                  
                  
                  (25,129,253
                  )Other
                  
                  
                  122
                  
                  
                  
                  107,657
                  
                  
                  
                  2,553
                  
                  
                  
                  176,927Total
      other income (expense)
                  
                  
                  (8,739,562
                  )
                  
                  
                  (23,180,598
                  )
                  
                  
                  (8,502,144
                  )
                  
                  
                  (25,056,828
                  )Income
      (Loss) Before Income Taxes
                  
                  
                  (10,536,633
                  )
                  
                  
                  (20,649,366
                  )
                  
                  
                  (13,767,526
                  )
                  
                  
                  (21,703,883
                  )Provision
      (Benefit) For Income Taxes
                  
                  
                  3,674,709
                  
                  
                  
                  (7,577,740
                  )
                  
                  
                  (4,789,446
                  )
                  
                  
                  (7,631,740
                  )Net
      Loss
                  
                  $
                  (6,861,924
                  )
                  
                  $
                  (13,071,626
                  )
                  
                  $
                  (8,978,080
                  )
                  
                  $
                  (14,072,143
                  )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES:Basic
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762Diluted
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762
                  
                  
                  
                  22,070,762NET
      INCOME (LOSS) PER COMMON SHARE:Basic
                  
                  $
                  (0.31
                  )
                  
                  $
                  (0.59
                  )
                  
                  $
                  (0.41
                  )
                  
                  $
                  (0.63
                  )Diluted
                  
                  $
                  (0.31
                  )
                  
                  $
                  (0.59
                  )
                  
                  $
                  (0.41
                  )
                  
                  $
                  (0.63
                  )
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  4


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)










Six Months
                                                    Ended June 30,
                                                    2009
                                                  
                                                  
                                                  Six Months
                                                    Ended June 30,
                                                    2008Cash
      Flows From Operating ActivitiesNet (loss)
                                                  
                                                  $
                                                  (8,978,080
                                                  )
                                                  
                                                  $
                                                  (14,072,143
                                                  )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation,
      depletion and amortization of property, plant and
equipment
                                                  
                                                  
                                                  3,353,917
                                                  
                                                  
                                                  
                                                  4,603,546Accretion
      of asset retirement obligation and debt discount
                                                  
                                                  
                                                  276,716
                                                  
                                                  
                                                  
                                                  105,306Amortization
      of intangible assets/write-off of bank loan fees
                                                  
                                                  
                                                  442,392
                                                  
                                                  
                                                  
                                                  37,617Deferred
      income taxes
                                                  
                                                  
                                                  (4,818,634
                                                  )
                                                  
                                                  
                                                  (7,558,254
                                                  )Unrealized
      loss on commodity derivatives
                                                  
                                                  
                                                  9,044,324
                                                  
                                                  
                                                  
                                                  21,879,970Changes
      in operating assets and liabilities:Accounts
      receivable
                                                  
                                                  
                                                  2,428,930
                                                  
                                                  
                                                  
                                                  (3,021,693
                                                  )Inventory
                                                  
                                                  
                                                  (44,116
                                                  )
                                                  
                                                  
                                                  (453,479
                                                  )Prepaid
      expenses and other current assets
                                                  
                                                  
                                                  242,986
                                                  
                                                  
                                                  
                                                  (127,334
                                                  )Accounts
      payable
                                                  
                                                  
                                                  (1,506,729
                                                  )
                                                  
                                                  
                                                  3,021,210Accrued
      liabilities and other
                                                  
                                                  
                                                  (1,036,020
                                                  )
                                                  
                                                  
                                                  770,259Income
      taxes payable
                                                  
                                                  
                                                  42,713
                                                  
                                                  
                                                  
                                                  (172,486
                                                  )Commodity
      derivatives
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (1,008,566
                                                  )Net
      cash provided by (used in) operating activities
                                                  
                                                  
                                                  (551,601
                                                  )
                                                  
                                                  
                                                  4,003,953Cash
      Flows From Investing ActivitiesAdditions
      to property and equipment
                                                  
                                                  
                                                  (965,722
                                                  )
                                                  
                                                  
                                                  (10,325,098
                                                  )Acquisition
      of other businesses - oil and gas properties
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (7,739,139
                                                  )Acquisition
      of Maverick, net of cash of $ 621,518
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (5,640,601
                                                  )Advance
      payment and costs, Pleasanton transaction
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  2,522,639Net
      cash used in investing activities
                                                  
                                                  
                                                  (965,722
                                                  )
                                                  
                                                  
                                                  (21,182,199
                                                  )Cash
      Flows From Financing ActivitiesProceeds
      of revolving credit facility
                                                  
                                                  
                                                  1,000,000
                                                  
                                                  
                                                  
                                                  7,797,767Payments,
      long-term debt and capital leases
                                                  
                                                  
                                                  (679,592
                                                  )
                                                  
                                                  
                                                  (34,422
                                                  )Net
      cash provided by financing activities
                                                  
                                                  
                                                  320,408
                                                  
                                                  
                                                  
                                                  7,763,345Net
      (Decrease)in Cash
                                                  
                                                  
                                                  (1,196,915
                                                  )
                                                  
                                                  
                                                  (9,414,901
                                                  )Cash
      - Beginning of the Period
                                                  
                                                  
                                                  3,668,092
                                                  
                                                  
                                                  
                                                  16,429,619Cash
      - End of Period
                                                  
                                                  $
                                                  2,471,177
                                                  
                                                  
                                                  $
                                                  7,014,718SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
                                                  
                                                  $
                                                  432,427
                                                  
                                                  
                                                  $
                                                  194,108Income
      taxes
                                                  
                                                  $
                                                  70,000
                                                  
                                                  
                                                  $
                                                  99,000Non-Cash
      Investing and Financing Activities:Issuance
      of notes payable - Pleasanton acquisition
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  550,000Asset
      retirement cost and obligation
                                                  
                                                  $
                                                  50,278
                                                  
                                                  
                                                  $
                                                  302,207Acquisition
      of oil and gas property - Pleasanton
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  550,000Issuance
      of Cash Flow Notes, net- Maverick transaction
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  3,034,000Acquisition
      of Maverick
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  3,034,000Adjustment
      of purchase price of oil and gas properties
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  4,640,000Acquisition
      of Maverick:Cash
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  621,518Accounts
      receivable
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  4,296,033Other
      current assets
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  157,303Property
      and equipment
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  1,510,052Goodwill
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  5,912,611Intangible
      assets
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  5,522,250Accounts
      payable
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (634,984
                                                  )Accrued
      expenses
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (1,765,404
                                                  )Accrued
      payroll
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (576,165
                                                  )Term
      notes and revolving line of credit
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (5,223,086
                                                  )Capitalized
      lease obligations
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (524,010
                                                  )Total
      purchase price
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  9,296,118Less:
      cash consideration paid to sellers
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (6,000,000
                                                  )Less:
      transaction costs
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (262,118
                                                  )Non-cash
      consideration issued to sellers - Cash Flow Notes, net
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  3,034,000





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


5





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009


(UNAUDITED)





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




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





(i) The
oil and gas division operations have approximately 37,000 acres under lease in
relatively long-lived fields with well-established production histories. 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)
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 Engineering, Inc. ( “Maverick”)
operates out of facilities headquartered in Victoria, Texas and operates
primarily in Texas.




Note
2 – Basis of Presentation




The
accompanying unaudited interim condensed consolidated financial statements as of
June 30, 2009 and for the three and six 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 condensed consolidated balance sheet
as of June 30, 2009, unaudited interim condensed consolidated statements of
operations for the three months and six months ended June 30, 2009 and 2008, and
the unaudited interim condensed consolidated statements of cash flows for the
six months ended June 30, 2009 and 2008 are unaudited, but include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of the financial position, operating results
and cash flows for the periods presented. The results for the three months and
six months ended June 30, 2009 are not necessarily indicative of results to be
expected for the year ending December 31, 2009 or for any future interim
period. The condensed consolidated balance sheet at December 31, 2008 has
been derived from audited consolidated financial statements; however, these
notes to the condensed 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 condensed 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, 2008 as filed with the SEC.




Note 3 — 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, abandonment obligations, impairment of oil and natural gas properties,
depreciation, depletion and amortization, income taxes, bad debts, derivatives,
contingencies and litigation.


6





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009


(UNAUDITED)





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





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




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


7





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009


(UNAUDITED)


Derivative Financial
Investments




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




Contingencies





Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and its
legal counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims that
may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein.





If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potentially material loss contingency is not
probable, but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be
disclosed.





Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the nature of the guarantee would be
disclosed.


8





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)





Recently
Issued Accounting Pronouncements




On
January 1, 2009, the Company adopted SFAS No. 141 (revised 2007),
“Business Combinations,” (“SFAS 141(R)”), which replaces SFAS No. 141,
“Business Combinations,” (“SFAS 141”) but retains the fundamental requirements
in SFAS 141, including that the purchase method be used for all business
combinations and for an acquirer to be identified for each business combination.
This standard defines the acquirer as the entity that obtains control of one or
more businesses in the business combination and establishes the acquisition date
as the date that the acquirer achieves control instead of the date that the
consideration is transferred. SFAS 141(R) requires an acquirer in a business
combination, including business combinations achieved in stages (step
acquisition), to recognize the assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions. It also requires the
recognition of assets acquired and liabilities assumed arising from certain
contractual contingencies as of the acquisition date, measured at their
acquisition-date fair values. Additionally, SFAS 141(R) requires
acquisition-related costs to be expensed in the period in which the costs are
incurred and the services are received instead of including such costs as part
of the acquisition price. The adoption of SFAS 141(R) did not have a material
impact on the Company’s condensed consolidated financial statements. The
provisions of SFAS 141(R) will be applied at such time when measurement of a
business acquisition is required.




On
January 1, 2009, the Company adopted SFAS No. 157, “Fair Value
Measurements,” (“SFAS 157”) as it relates to nonfinancial assets and
nonfinancial liabilities that are not recognized or disclosed at fair value in
the consolidated financial statements on at least an annual basis. SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited exceptions.
The adoption of SFAS 157, as it relates to nonfinancial assets and nonfinancial
liabilities, had no impact on the Company’s condensed consolidated financial
statements. The provisions of SFAS 157 will be applied at such time as a fair
value measurement of a nonfinancial asset or nonfinancial liability is required,
which may result in a fair value that is materially different than would have
been calculated prior to the adoption of SFAS 157.




On
January 1, 2009, the Company adopted SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51,”
(“SFAS 160”). SFAS 160 amends Accounting Research Bulletin No. 51,
“Consolidated Financial Statements,” to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. This standard defines a noncontrolling
interest, previously called a minority interest, as the portion of equity in a
subsidiary not attributable, directly or indirectly, to a parent. SFAS 160
requires, among other items, that a noncontrolling interest be included in the
consolidated statement of financial position within equity separate from the
parent’s equity; consolidated net income to be reported at amounts inclusive of
both the parent’s and noncontrolling interest’s shares and, separately, the
amounts of consolidated net income attributable to the parent and noncontrolling
interest all on the consolidated statement of operations; and if a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be measured at fair value and a gain or loss be recognized in net
income based on such fair value. The presentation and disclosure requirements of
SFAS 160 were applied retrospectively. The adoption of SFAS 160 had no impact on
the Company’s condensed consolidated financial statements.




On
January 1, 2009, the Company adopted SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement
No. 133,” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an
entity’s derivative and hedging activities, including (i) how and why an
entity uses derivative instruments, (ii) how derivative instruments and
related hedged items are accounted for under SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), and
(iii) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance, and cash flows. The adoption
of SFAS 161 had no impact on the Company’s condensed consolidated financial
statements.




On
January 1, 2009, the Company adopted FASB Staff Position (FSP) No. FAS
142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP FAS
142-3”). FSP FAS 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under FASB Statement No. 142, “Goodwill and
Other Intangible Assets,” (“SFAS 142”) in order to improve the consistency
between the useful life of a recognized intangible asset under SFAS 142 and the
period of expected cash flows used to measure the fair value of the asset under
SFAS 141(R) and other GAAP. The adoption of FSP FAS 142-3 had no impact on the
Company’s condensed consolidated financial statements.




On
January 1, 2009, the Company adopted FSP No. EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities,” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that
unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share
pursuant to the two-class method. The adoption of FSP EITF 03-6-1 did not have a
material impact on the Company’s condensed consolidated financial
statements.




On
January 1, 2009 the Company adopted EITF Issue No. 07-5, “Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own
Stock” (“EITF 07-5”). EITF 07-5 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument, or embedded
feature, is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions. It also clarifies on the impact
of foreign currency denominated strike prices and market-based employee stock
option valuations. The adoption of EITF 07-5 did not have a material impact on
the Company’s condensed consolidated financial statements.




In
May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS
165”). SFAS 165 establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. SFAS 165 is effective for
interim or annual periods ending after June 15, 2009. Management has
evaluated subsequent events to determine if events or transactions occurring
through August 7, 2009 (the date at which the financial statements were
available to be issued), and has determined that no such events have occurred
that would require adjustment to or disclosure in the financial
statements.




In
June 2009 the FASB issued SFAS No. 166, “Accounting for Transfers of
financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”).
SFAS 166 eliminates the concept of a qualifying special-purpose entity, creates
more stringent conditions for reporting a transfer of a portion of a financial
asset as a sale, clarifies other sale-accounting criteria, and changes the
initial measurement of a transferor’s interest in transferred financial assets.
SFAS 166 will be effective January 1, 2010. The adoption of this pronouncement
is not expected to have a material impact on the Company’s consolidated
financial position and results of operations.
  In
June 2009 the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (“SFAS 167”). SFAS 167 eliminates Interpretation 46(R)’s
exceptions to consolidating qualifying special-purpose entities, contains new
criteria for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary
of a variable interest entity. SFAS 167 also contains a new requirement that any
term, transaction, or arrangement that does not have a substantive effect on an
entity’s status as a variable interest entity, a company’s power over a variable
interest entity, or a company’s obligation to absorb losses or its right to
receive benefits of an entity must be disregarded in applying Interpretation
46(R)’s provisions. The elimination of the qualifying special-purpose entity
concept and its consolidation exceptions means more entities will be subject to
consolidation assessments and reassessments. SFAS 167 will be effective January
1, 2010. The adoption of this pronouncement is not expected to have a
material impact on the Company’s consolidated financial position and results of
operations.
  In July
2009, the FASB issued SFAS No. 168, “The FASB Accounting Codification and the
Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168"). Statement
No. 168 supersedes Statement No. 162 issued in May 2008. Statement No. 168 will
become the source of authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules
and interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. On the effective date of this Statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other nongrandfathered non-SEC accounting literature not included in the
Codification will become nonauthoritative.   This Statement is effective
for our quarterly reporting period ending September 30, 2009. The adoption of
Statement No. 168 is not expected to materially impact the Company’s
consolidated financial position or results of operations.


Other
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.


9





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)





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


10





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)




Note
4 - Oil and Gas Properties




The
following table sets forth the Company’s costs incurred in oil and gas property
acquisition, exploration and development activities for the six months ended
June 30, 2009. (stated in thousands):




Balance
      at December 31, 2008
                    
                    $
                    204,372Acquisition
      of propertiesProved
                    
                    
                    —Unproved
                    
                    
                    —Adjustment
      to purchase price of oil and gas properties
                    
                    
                    —Exploration
      costs
                    
                    
                    3Development
      costs
                    
                    
                    926Balance
      at June 30, 2009
                    
                    $
                    205,301




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




June 30,
                      2009Proved
      oil and gas properties
                    
                    $
                    204,038Unproved
      oil and gas properties
                    
                    
                    1,263205,301Accumulated
      depletion and impairment
                    
                    
                    (145,474
                    )Net
      capitalized costs at June 30, 2009
                    
                    $
                    59,827




Note
5 – Derivative Financial Instruments




The
Company engages in price risk management activities from time to
time.  We utilize derivative instruments, consisting of swaps, floors
and collars, to attempt to reduce our exposure to changes in commodity prices.
We account for our derivatives in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended.  We have
elected not to designate any of our derivative financial contracts as accounting
hedges and, accordingly, account for these derivative financial contracts using
mark-to-market accounting. Changes in fair value of derivative instruments which
are not designated as cash flow hedges are recorded in other income (expense) as
changes in fair value of derivatives. The obligations under the derivatives
contracts are collateralized by the same assets that collateralize the Senior
Credit Facility, and the contracts are cross-defaulted to the Senior Credit
Facility.  Substantially all of the derivative financial instruments
are collateral for the Senior Credit Facility.




While the
use of these arrangements may limit the Company's ability to benefit from
increases in the price of oil and natural gas, it is also intended to reduce the
Company's potential exposure to significant price declines. 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 June 30, 2009 and 2008, the Company included in other income
(expense) realized and unrealized losses related to its derivative contracts as
follows (stated in thousands):


11




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)





Three
                      Months
                      Ended June
                      30,
                      2009
                    
                    
                    Three
                      Months
                      Ended June
                      30, 2008Crude
      oil derivative realized settlements
                    
                    $
                    328
                    
                    
                    
                    (1,849
                    )Crude
      oil derivative change in unrealized gains (losses)
                    
                    
                    (8,734
                    )
                    
                    
                    (21,244
                    )Gain
      (loss) on derivatives
                    
                    $
                    (8,406
                    )
                    
                    
                    (23,093
                    )





For the
six months ended June 30, 2009 and 2008, the Company included in other income
(expense) realized and unrealized losses related to its derivative contracts as
follows (stated in thousands):





Six
                      Months
                      Ended
                      June 30, 2009
                    
                    
                    Six
                      Months
                      Ended
                      June 30, 2008Crude
      oil derivative realized settlements
                    
                    $
                    1,166
                    
                    
                    
                    (2,767
                    )Crude
      oil derivative change in unrealized gains (losses)
                    
                    
                    (9,044
                    )
                    
                    
                    (22,362
                    )Loss
      on derivatives
                    
                    $
                    (7,878
                    )
                    
                    
                    (25,129
                    )





Presented
below is a summary of the Company’s crude oil derivative financial contracts at
June 30, 2009:





Period Ended
                            June 30,
                          
                          Instrument
                            Type
                          
                          Total Volumes
                            (MMBTU/BBL)
                          
                          
                          Contract
                            Price
                          
                          
                          Fair Value
                            Asset
                            (stated in
                            thousands)2010
                          
                          Swaps
                          
                          
                          60,000
                          
                          
                          
                          71.00
                          
                          
                          $
                          (55
                          )Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.50
                          
                          
                          
                          1,265Puts
                          
                          
                          60,000
                          
                          
                          
                          75.00
                          
                          
                          
                          572Puts
                          
                          
                          60,000
                          
                          
                          
                          85.00
                          
                          
                          
                          9402011
                          
                          Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.50
                          
                          
                          
                          1,153Puts
                          
                          
                          60,000
                          
                          
                          
                          75.00
                          
                          
                          
                          606Puts
                          
                          
                          60,000
                          
                          
                          
                          85.00
                          
                          
                          
                          953Puts
                          
                          
                          110,000
                          
                          
                          
                          80.00
                          
                          
                          
                          1,439Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.25
                          
                          
                          
                          1,0482012
                          
                          Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.25
                          
                          
                          
                          978Puts
                          
                          
                          60,000
                          
                          
                          
                          80.00
                          
                          
                          
                          811Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.00
                          
                          
                          
                          9102013
                          
                          Swaps
                          
                          
                          60,000
                          
                          
                          
                          95.00
                          
                          
                          
                          866Total
      fair value
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          11,486




Note
6 – Fair Value Measurements





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





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





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


12


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)





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




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





The
following table presents information about the Company’s assets and
liabilities, measured at fair value on a recurring basis as of June 30,
2009, 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 June 30, 2009(in
      thousands)Level
      1
                                      
                                      
                                      Level
      2
                                      
                                      
                                      Level
      3
                                      
                                      
                                      TotalOil
      and natural gas derivatives
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      11,486
                                      
                                      
                                      
                                      —
                                      
                                      
                                      $
                                      11,486




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




Gains and
losses (realized and unrealized) included in earnings for the three and six
months ended June 30, 2009 and 2008, are reported in other income (expense) on
the Consolidated Statement of Operations.


13


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)




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





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





Note 7 – Commitments and
Contingencies




Consulting
Agreement





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





On
October 26, 2007, the first installment of 178,572 of irrevocable shares was
issued to Mr. Duncan.  These shares were valued at $1,250,000 which
was charged to operations during the year ended December 31,
2007.  The Company was required to issue the remaining 535,714 shares
of its common stock in 2008 and 2009. The Company has not issued these shares
due to a dispute between the Company and Duncan with respect to other claims
that Duncan has raised (See Note 12).   $1,098,215 and
$1,188,215 is included in other accrued liabilities on the balance
sheets dated December 31, 2008 and June 30, 2009, respectively, related to
these unissued 535,714 shares of common stock.


14


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009
 (UNAUDITED)




Note
8 - Long-Term Debt and Capital Lease Obligations




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





Oil
      and gas revolving line of credit
                        (a)
                        
                        $
                        13,009Notes
      payable - acquisitions
                        (b)
                        
                        
                        3,493Revolving
      LOC to former shareholders – Maverick
                        (c)(f)
                        
                        
                        2,917Term
      note to former shareholders - Maverick
                        (d)(f)
                        
                        
                        252Second
      term note to former shareholders - Maverick
                        (e)(f)
                        
                        
                        1,403Notes
      payable to third party – Maverick
                        (g)
                        
                        
                        305Capital
      lease obligations
                        
                        
                        
                        382$
                        21,761Less:
      Current maturities
                        
                        
                        
                        17,150Long-term
      debt
                        
                        
                        $
                        4,611


15




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2009


(UNAUDITED)




(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 “ Bank ” ). 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, including the Company's commodity
derivatives.





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





Under the
terms of revolving line of credit agreement, the Borrower must maintain certain
financial ratios, must repay any amounts due in excess of the borrowing base,
and may not declare any dividends or enter into any transactions resulting in a
change in control, without the bank’s consent.




A
financial covenant under the credit facility requires us to maintain a ratio of
indebtedness to cash flow of no more than 3 to 1. As of December 31, 2008, the
Borrowers were not in compliance with this covenant. The bank has
agreed to waive the covenant non-compliance issue, subject to the Company’s
ratification of the amended credit facility more fully described
below.





On
June 12, 2009, the Borrowers received a “Notice of Borrowing Base
Redetermination and Notice of Event of Default” from the
bank.  The bank has set the new borrowing base at $15 million,
shortened the maturity date of the loan from March 14, 2012 to June 1, 2010,
raised the floor interest rate from 4% to 4.5%, redefined certain covenant
ratios, and requires certain fees paid to grant the waivers necessary to cure
the aforementioned covenant defects.  The Company executed the Second
Amendment to the Senior Credit Facility on June 25, 2009.  The
Company, as the parent company, is not a co-borrower or guarantor of the line,
and transfers from the Borrower to the parent company are limited to (i) $1
million per fiscal year to the parent for management fees, and (ii) the
repayment of up to $2 million per fiscal year in subordinate indebtedness owed
to the parent. As of June 30, 2009 the $13.0 million outstanding under the
revolving line of credit was bearing interest at the bank’s base rate,
which, at the time, was 4.5 %.  As amended the Senior Credit Facility
expires in June, 1 2010.  Accordingly, the Company has reclassified
the full $13 million as a current liability.





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





The
purchase price was subject to adjustment for any change in working capital as
defined in the agreement, between October 31, 2007 and the closing date, as well
as other adjustments associated with changes in indebtedness. The cash flow
notes were reduced by the amount of the working capital post closing adjustment
which was determined by the Company to be $645,596. This amount may be subject
to modification as may be agreed between the parties. At the time the
acquisition was completed, a discount to present value in the amount of
$1,320,404 was recorded and deducted from the cash flow notes as these notes are
non-interest bearing for the initial 5 years of their term. As a result, the net
carrying value of the notes on April 29, 2008 was $3,034,000 and $3,183,783 at
December 31, 2008 and 3,300,951 at June 30, 2009 after the accretion of the
discount in the amount of $117,168 during the first six months of
2009.





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





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




In
connection with the Pleasanton acquisition, the Company entered into a
settlement agreement for $1,000,000 in order to secure clear title to the
properties acquired, of which it paid $450,000 cash and issued a note for
the balance in the amount of $550,000. The note bears interest at 12% per annum,
and is subject to monthly payments beginning June 1, 2008 of an amount equal to
1⁄2 of the net proceeds from production attributable to the Company’s interest in
the purchased leasehold or $30,000, whichever is greater, until the note is paid
in full. As of June 30, 2009 the entire balance of $191,440 is classified as a
current liability.


16




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2009


(UNAUDITED)





(c) $3,250,000 revolving line
of credit, payable to the Maverick former shareholders in monthly interest
payments at prime plus .25%, principal and unpaid interest due at maturity in
September 2010. On December 31, 2008 and June 30, 2009, Maverick was not in
compliance with the debt service coverage ratio required under this
facility.  Maverick obtained a waiver of the obligation to maintain
this ratio through September 30, 2009; and, accordingly, the Company has
classified the full $2,917,403 outstanding revolving line of credit as a current
liability.





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





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





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





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




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




Annual
maturities of indebtedness at June 30, 2009 are as follows (stated in
thousands):




For
      the Year Ended June 30,2010
                        
                        $
                        16,9552011
                        
                        
                        2812012
                        
                        
                        2812013
                        
                        
                        3,862$
                        21,379




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 June
30, 2009 (stated in thousands):




For
      the Year Ended June 30,2010
                  
                  $
                  2112011
                  
                  
                  1602012
                  
                  
                  116Total
      minimum lease payments
                  
                  
                  487Less:  Amount
      representing interest
                  
                  
                  (105
                  )Current
      value of minimum lease payments
                  
                  
                  382Less:  Current
      maturities
                  
                  
                  (195
                  )$
                  187





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





Note 9 –
Earnings per
Share




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


17




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2009


(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 June 30,2009
                
                
                2008Numerator:Net
      (loss) applicable to common stockholders
                
                $
                (6,861,924
                )
                
                $
                (13,071,626
                )Denominator:Denominator
      for basic (loss) per share — weighted-average shares
      outstanding
                
                
                22,070,762
                
                
                
                22,070,762Effect
      of potentially dilutive common shares:Warrants
                
                
                —
                
                
                
                —Employee
      and director stock options
                
                
                —
                
                
                
                —Denominator
      for diluted (loss) per share — weighted-average shares outstanding
      and assumed conversions
                
                
                22,070,762
                
                
                
                22,070,762Basic
      earnings (loss) per share
                
                $
                (0.31
                )
                
                $
                (0.59
                )Diluted
      earnings (loss) per share
                
                $
                (0.31
                )
                
                $
                (0.59
                )





Six
      Months Ended June 30,2009
                
                
                2008Numerator:Net
      (loss) applicable to common stockholders
                
                $
                (8,978,080
                )
                
                $
                (14,072,143
                )Denominator:Denominator
      for basic (loss) per share — weighted-average shares
      outstanding
                
                
                22,070,762
                
                
                
                22,070,762Effect
      of potentially dilutive common shares:Warrants
                
                
                —
                
                
                
                —Employee
      and director stock options
                
                
                —
                
                
                
                —Denominator
      for diluted (loss) per share — weighted-average shares outstanding
      and assumed conversions
                
                
                22,070,762
                
                
                
                22,070,762Basic
      earnings (loss) per share
                
                $
                (0.41
                )
                
                $
                (0.63
                )Diluted
      earnings (loss) per share
                
                $
                (0.41
                )
                
                $
                (0.63
                )





The
Company has determined that the warrants contained in the units sold in its
initial public offering would be antidilutive and thus excluded the effects of
the warrants for the three and six months ending June 30, 2009 and 2008. For the
Six Months Ended June 30, 2009, options to purchase 156,000 shares of common
stock were not considered in calculating diluted EPS because the effect
would be anti-dilutive.





Note
10 – Income Taxes




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


18




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2009


(UNAUDITED)




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




In
addition to any Section 382 limitations, uncertainties exist as to the future
utilization of the operating loss carryforwards under the criteria set forth
under SFAS Statement No. 109. Therefore, the Company has established a valuation
allowance of $3.0 million in deferred tax assets at June 30, 2009 and
December 31, 2008.




There are
no uncertain income tax positions required to be recorded pursuant to FIN 48.
The Company files income tax returns in the U.S. (federal and state
jurisdictions). Tax years 2006 to 2008 remain open for all jurisdictions. The
Company’s accounting policy is to recognize interest and penalties, if any,
related to unrecognized tax benefits as income tax expense. The Company does not
have an accrued liability for interest and penalties at June 30,
2009.





Note
11 - Segment Information




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




(i)
            The
      Company sells substantially all of its crude oil production under
      short-term contracts based on prices quoted on the New York Mercantile
      Exchange (“NYMEX”) for spot West Texas Intermediate contracts, adjusted by
      agreed-upon increases or decreases which vary by grade of crude oil. The
      majority of the Company’s natural gas production is sold under short-term
      contracts based on pricing formulas which are generally market responsive.
      From time to time, the Company may also sell a portion of the gas
      production under short-term contracts at fixed prices. For the six
      months ended June 30, 2009, three customers accounted for
      approximately 36%, 13% and 13% of the Company’s crude oil and natural
      gas revenues.  The Company believes that the loss of any of its
      oil and gas purchasers would not have a material adverse effect on its
      results of operations due to the availability of other
      purchasers.





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




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


19




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2009
 (UNAUDITED)
  Exploration
                        
                        
                        
                        
                        
                        
                        
                        
                        ConsolidatedFor the Three Months Ended June 30,
      2009:
                        
                        and Production
                        
                        
                        Engineering
                        
                        
                        Parent
                        
                        
                        TotalRevenues
                        
                        $
                        4,477
                        
                        
                        $
                        4,475
                        
                        
                        $
                        —
                        
                        
                        $
                        8,952Intersegment
      revenues
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Total
      revenues
                        
                        $
                        4,477
                        
                        
                        $
                        4,475
                        
                        
                        $
                        —
                        
                        
                        $
                        8,952Income
      (loss) before income taxes
                        
                        $
                        (8,659
                        )
                        
                        $
                        (798
                        )
                        
                        $
                        (1,080
                        )
                        
                        $
                        (10,537
                        )As of June
      30, 2009 :Total
      assets
                        
                        $
                        79,877
                        
                        
                        $
                        8,686
                        
                        
                        $
                        664
                        
                        
                        $
                        89,227
  
 Exploration
                      
                      
                      
                      
                      
                      
                      
                      
                      ConsolidatedFor the Six Months Ended June 30,
      2009:
                      
                      and Production
                      
                      
                      Engineering
                      
                      
                      Parent
                      
                      
                      TotalRevenues
                      
                      $
                      7,807
                      
                      
                      $
                      9,981
                      
                      
                      $
                      —
                      
                      
                      $
                      17,788Intersegment
      revenues
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
      revenues
                      
                      $
                      7,807
                      
                      
                      $
                      9,981
                      
                      
                      $
                      —
                      
                      
                      $
                      17,788Income
      (loss) before income taxes
                      
                      $
                      (10,305
                      )
                      
                      $
                      (1,765
                      )
                      
                      $
                      (1,698
                      )
                      
                      $
                      (13,768
                      )
  Note
12 — Litigation
 
 From time
to time, the Company is party to certain legal actions and claims arising in the
ordinary course of business. While the outcome of these events cannot be
predicted with certainty, management does not anticipate these matters to have a
materially adverse effect on the financial position or results of operations of
the Company.
 
 On
January 16th, 2008, Exxon Mobil Corporation filed a petition in the 270th 
District Court of Harris County, Texas, naming the Company as a
defendant along with Tandem Energy Corporation, a Colorado corporation (“Old
TEC”), and a third party, Merenco Realty, Inc., demanding environmental
remediation of certain properties in Tomball, Texas. In 1996, pursuant to an
assignment agreement, Exxon Mobil sold certain oil and gas leasehold interests
and real estate interests in Tomball, Texas to Old TEC’s predecessor in
interest, Merit Energy Corporation. In 1999, Old TEC assigned its 50% undivided
interest in one of the tracts in the acquired property to Merenco, an affiliate
of Old TEC, owned 50% by our Chairman of the Board, Tim Culp. In October 2007,
the Texas Railroad Commission notified Exxon Mobil of an environmental site
assessment alleging soil and groundwater contamination for a site in the area of
Tomball, Texas. Exxon Mobil believes that the site is one which was sold to Old
TEC and claims that Old TEC is obligated to remediate the site under the
assignment agreement. Exxon Mobil has requested that the court declare the
defendants obligated to restore and remediate the properties and has requested
any actual damages arising from breach and attorneys’ fees. The
Company believes that Exxon Mobil’s claim that Old TEC is responsible for
any remediation of such site is without merit and we intend to vigorously defend
ourselves against this claim. However, no assurance can be given that we will
prevail in this matter and we estimate the possible loss could range from
$60,000 to $250,000.  In October 2007, The Company acquired
substantially all the assets and liabilities of Old TEC. Merenco was not
acquired by us in the acquisition and the Company's Chairman, Tim
Culp, continues to have a 50% ownership interest in Merenco.
 
 On
November 11, 2008, Mr. Hyman, a former employee of KD Resources, filed a claim
against KD Resources and Platinum Energy stating that he was discharged from KD
Resources in retaliation for informing a supervisor that an accounting employee
had a prior conviction for fraud and embezzlement, which he claims to be in
violation of the Sarbanes-Oxley Act of 2002, Section 806, Protection for
Employees of Publicly Traded Companies Who Provide Evidence of Fraud.  In
December, 2008, the Department of Labor (“DOL”) dismissed the complaint as not
being timely filed.  On or about January 8, 2009, Mr. Hyman appealed the
ruling of the DOL. On January 16, 2009, the DOL filed an Order to Show Cause
whereby Mr. Hyman must show why his case should not have been dismissed. Mr.
Hyman had 30 days to respond to the Order to Show Cause.  On February 14,
2009, Mr. Hyman filed his response to the Order to Show Cause stating that he
failed to file within the required time because he was engaged in negotiations
with the Respondents.  On March 18, 2009, the Department of Labor dismissed
Mr. Hyman’s claim for failure to file within the 90-day filing period. 
 Mr. Hyman has filed a Petition for Review of the Decision and Order
Dismissing Complaint issued March 18, 2009.  A Notice of the Appeal was
filed April 10, 2009 which was granted.  Mr. Hyman has until May 11, 2009
to file his initial brief.  The Company will then have the opportunity
to file a brief which must be done by June 10, 2009.  It is The Company's
intention to argue that Mr. Hyman was never an employee of Platinum Energy
Resources or any of its subsidiaries; as such we are not liable for any issues
between Mr. Hyman and his employer, KD Resources.  It is the Company's
further contention that the only reason Platinum Energy is listed in this action
is because it is a public company and Mr. Hyman needs a public company in order
to obtain his status under the Sarbanes-Oxley Act.
  20
 
 PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2009
 (UNAUDITED)
 On
December 3, 2008, Robert Kovar, our Chief Operating Officer, delivered his
letter of resignation, effective on December 3, 2008, and filed a lawsuit
against us in the district court of Victoria County, Texas claiming that he had
Good Reason (as defined in his Employment Agreement) to terminate his
employment.  In the lawsuit Mr. Kovar is seeking declaratory relief and
claims he is entitled to a severance payment under his Employment Agreement,
accelerated vesting of his stock options and accelerated payment of the cash
flow note issued to him in connection with the purchase by the Company of
Maverick Engineering, Inc. in April 2008.   We believe that Mr. Kovar
did not have Good Reason to resign and that the lawsuit has no merit.  We
intend to vigorously defend ourselves in this action.
 
 On
December 3, 2008, Lance Duncan filed suit against Platinum Energy Resources,
Inc.  Mr. Duncan is seeking compensation for 515,713 shares of Platinum
stock, $13,857.47 for use of his private plane, and consummation of an agreement
to purchase a drilling rig for the sum of $2,478,000.  On December 21,
2008, Platinum filed a general denial. A Scheduling Order has been accepted by
opposing counsel and approved by the Judge assigned to this matter.  We
believe that Mr. Duncan’s claims are without merit and we intend to vigorously
defend ourselves against these claims.
  On April
16, 2009, the Company received a written notice of acceleration from Robert L.
Kovar Services, LLC, as the stockholder representative, claiming that the
Company failed to make timely mandatory prepayments in the amount of $110,381
due under the terms of the Cash Flow Notes.  On April 29, 2009, Maverick
received a notice of acceleration (the “Acceleration Letter”) with respect to
the Notes governed by a Loan Agreement and related Security Agreement originally
dated April 30, 2005 and April 29, 2005, respectively. The Acceleration Letter
alleges that Maverick failed to comply with certain covenants under the terms of
the Loan Agreement and that Maverick failed to make payments due under the
Notes. The outstanding principal, accrued interest and late charges alleged to
be owed by Maverick in the Acceleration Letter total $4,659,227. The
Acceleration Letter also contends that interest continues to accrue at the
default rate of 18% per annum. In a separate letter, dated May 1, 2009, Robert
L. Kovar Services, LLC, as the stockholder representative for the sellers,
purported to terminate the revolving credit facility under the Loan Agreement
and demanded turnover of all collateral securing indebtedness under the Loan
Agreement, including the Notes. The Company and Maverick have asserted claims in
litigation against the holders of the Notes, Robert L. Kovar Services, LLC,
Robert L. Kovar, individually, and others. The litigation is in its early stages
and, accordingly, the Company cannot predict the outcome of these
matters.
 
 On April
29, 2009, Maverick received a notice of acceleration (the “Acceleration Letter”)
with respect to the Notes. The Acceleration Letter alleges that Maverick
failed to comply with certain covenants under the terms of the Loan Agreement
and that Maverick failed to make payments due under the Notes.  The
outstanding principal, accrued interest and late charges alleged to be owed by
Maverick in the Acceleration Letter total $4,659,227.  The Acceleration
Letter also contends that interest continues to accrue at the default rate of
18% per annum.  In a separate letter, dated May 1, 2009, Robert L. Kovar
Services, LLC, as the stockholder representative for the sellers, purported to
terminate the revolving credit facility under the Loan Agreement and demanded
turnover of all collateral securing indebtedness under the Loan
Agreement.
  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. It is Platinum and Maverick’s
position that the former Maverick Stockholders are obligated under the
Merger Agreement to indemnify Platinum and Maverick for any damages they
suffer as a result of any breach of contract by Maverick, including
a default on any liability existing before the merger of Maverick and
PermSUB. Moreover, by attempting to accelerate and collect on the cashflow
notes and assumed bank debt discussed in the Merger Agreement, WKC has
created a conflict of interest and must resign as the Merger Escrow Agent.
Therefore, Platinum and Maverick intend to offset any liability they may
face in defaulting on payment of the cash flow notes or the assumed bank
debt via the Defendants’ indemnity obligations.  Since this litigation is
in its early stages, the Company cannot predict the outcome of these
matters.
 
 On July
14, 2009, SNP Associates filed suit in the 333rd
District Court of Harris County, Texas against Maverick Engineering, Inc,
Platinum Energy Resources’ wholly owned subsidiary.  SNP is seeking a
Declaratory Judgment, Permanent Injunction, and damages for alleged “trade name
infringement.”  The suit claims that SNP has the legal right to the name
“Maverick Engineering” and that SNP has suffered damages as a result of two
engineering firms having the same name.  We do not believe that any of
SNP’s claims have merit and we intend to vigorously defend ourselves against
these claims.  However, no assurance can be given that we will prevail in
this matter.
  21
  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.
  On
October 26, 2007, we acquired substantially all of the assets and assumed
substantially all of the liabilities of Tandem Energy Corporation ("Tandem").
Prior to that time, we were a blank check company with no operations and no net
revenues. On April 29, 2008 we acquired 100% of the stock of Maverick
Engineering, Inc. ("Maverick"), a full-service engineering services
company.
  Set forth
below are:
  (A)
  A discussion of the results of operations for Platinum Energy Resources,
Inc. ("Platinum") for the three and six months ended June 30, 2009 as compared
to the three and six months ended June 30, 2008
 (B)
  A discussion of the results of operations for our oil and gas operations
for the three and six months ended June 30, 2009 as compared to the three and
six months ended June 30, 2008
 (C) 
We purchased Maverick Engineering on April 29, 2008.  Accordingly, since we
did not own that business during the full three and six month periods ended June
30, 2008, we have included a comparison of certain summarized historical
information of Maverick for the three months ended June 30, 2009 with the three
months ended March 31, 2009, in order to provide the reader with certain
meaningful analytical data.
 
 The
following discussion should be read in conjunction with our Condensed
Consolidated Financial Statements and related Notes thereto included elsewhere
in this report.
  Overview
  With the
consummation of the Maverick acquisition, 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 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.
  From time
to time, we may make strategic acquisitions in our oil and natural gas business
if we believe the acquired assets offer us the potential for reserve growth
through additional developmental drilling activities. However, the successful
acquisition of oil and natural gas properties requires assessment of many
factors, which are inherently inexact and may be inaccurate, including future
oil and natural gas prices, the amount of recoverable reserves, future operating
costs, future development costs, failure of titles to properties, costs and
timing of plugging and abandoning wells and potential environmental and other
liabilities.
  22
  We
believe that the economic climate in the domestic oil and gas industry continues
to be suitable for our business model. As has been demonstrated by recent market
events, oil and gas prices are typically volatile and are subject to market
fluctuations. We continue to believe, however, that supply and demand
fundamentals in the energy marketplace provide us with the economic incentives
necessary for us to assume the risks we face in our search for oil and gas
reserves. While profit margins remain currently favorable at today’s prices, we
cannot guarantee that rising finding costs, production costs, and depletion
expense will not affect our future success. With the recent decline in market
prices of oil and natural gas and increases in these costs may have an even
greater impact on our profit margins. Specifically, our revenue, cash flow from
operations and future growth depend substantially on many factors, including
those beyond our control, such as economic, political and regulatory
developments and competition from other sources of energy. Because of these
factors, we continuously seek ways to reduce exposure to the volatility in oil
and natural gas prices. Our strategy is to hedge a portion of our expected
future oil and natural gas production, using a mixture of calls, puts, forward
contracts and other derivative instruments, to reduce our exposure to
fluctuations in commodity price. In April 2008, we entered into derivative
transactions to put 360,000 barrels of oil to the counter party at the rate of
10,000 barrels per month in the period January 2010 through December 2012 at
prices between $95.00 and $95.50 per barrel. The actual price of oil upon
delivery over the future periods will be determinant of the actual gain of loss
to be realized by the Company cannot be predicted at this time.
  Furthermore,
like all businesses engaged in the exploration and production of oil and natural
gas, we face the challenge of natural production declines. As initial reservoir
pressures are depleted, oil and natural gas production from a given well
decreases. Thus, an oil and natural gas exploration and production company
depletes part of its asset base with each unit of oil or natural gas it
produces. Consequently, key to our success is not only finding reserves through
developmental drilling and strategic acquisitions, but also by exploiting
opportunities related to our existing production. 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.
  (A)
- Results of Operations - Platinum
  For
the three months ended June 30, 2009 as compared to the three months ended June
30, 2008
  For the
three months ended June 30, 2009 and 2008 , our results of operations included
those of the oil and gas entities acquired on and subsequent to October 26,
2007.  For the three months ended June 30, 2008 our results contain limited
results for Maverick since we purchased the engineering firm on April 29, 2008.
See “Business - Growth Strategy” beginning on page 5 and Note 4 to the
consolidated financial statements on page F1-14 in our Form 10K for the year
ended December 31, 2008.  For a comparison of results of operations
relating to our oil and natural gas assets, see “Results of Operations - Oil and
Gas” below.
  On a
consolidated basis we had a net loss of approximately $6.9 million during the
three months ending June 30, 2009 compared to a net loss of approximately $13.1
million during the comparative period ending June 30, 2008.  The primary
component in the losses during both periods was related to the change in the
fair value of our commodity hedge positions during the periods reported. 
For further discussion regarding the losses generated by the changes in fair
value, refer to our discussion of “Results of Operations - Oil and
Gas” later in this section.
  At the
consolidated level, variances for Marketing, general and administrative expense,
Cost of service revenues, and DD&A between the two comparative periods are
primarily a function of the fact that we did not own Maverick for a majority of
the period. Please refer to the “Results of Operations-Oil and
Gas”, and “Results of
Operations-Engineering Services (Maverick)” for further
discussion.
  With
respect to our results of operations excluding our oil and natural gas assets
and the engineering services business (Maverick), we had no net operating
revenues during the 2009 or 2008 periods. 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 June 30, 2009 was
$989,000 as compared to approximately $694,000 for the three months ended June
30, 2008.  The increase was due primarily to an increase in legal and
accounting costs related to the internal investigation, and to the increase in
legal fees associated with ongoing litigation.
  We also
incurred unrealized losses of $3.6 million for the three months ended June
30, 2009, as compared to losses of $1.6 million in the comparable 2008 period on
the decrease in the value of certain put options on crude oil we purchased in
December 2007 and January 2008 for an aggregate of $3,035,000. We have
experienced great volatility in the value of these derivative instruments as a
result of the fluctuation in the price of crude oil.
 
 For
the six months ended June 30, 2009 as compared to the six months ended June 30,
2008
  For the
six months ended June 30, 2009 and 2008, our results of operations included
those of the oil and gas entities acquired on and subsequent to October 26,
2007.  For the six months ended June 30, 2008 our results contain partial
results for Maverick since we purchased the engineering firm on April 29, 2008.
See “Business - Growth Strategy” beginning on page 5 and Note 4 to the
consolidated financial statements on page F1-14 in our Form 10K for the year
ended December 31, 2008. For a comparison of results of operations relating to
our oil and natural gas assets, see “Results of Operations - Oil and
Gas” below.
  23
  On a
consolidated basis we had a net loss of approximately $9.0 million during the
first six months ending June 30, 2009 compared to a net loss of approximately
$14.1 million during the comparative period ending June 30, 2008.  The
primary component in the losses during both periods was related to the change in
the fair value of our commodity hedge positions during the periods
reported.  For further discussion regarding the losses generated by the
changes in fair value, refer to our discussion of “Results of Operations - Oil and
Gas” later in this section.
  At the
consolidated level, variances for Marketing, general and administrative expense,
Cost of service revenues, and DD&A between the two comparative periods are
primarily a function of the fact that we did not own Maverick during most of the
2008 period. Please refer to the “Results of Operations-Oil and
Gas”, and “Results of
Operations-Engineering Services (Maverick)” for further
discussion.
  With
respect to our results of operations excluding our oil and natural gas assets
and the engineering services business (Maverick), we had no net operating
revenues during the 2009 or 2008 periods. Our general and administrative
expenses other than those attributable to our oil and natural gas assets and our
engineering services business for the six months ended June 30, 2009 was $1.6
million as compared to approximately $1.4 million for the six months ended June
30, 2008.  The increase was due primarily to an increase in legal and
accounting costs related to the internal investigation, and to the increase in
legal fees associated with ongoing litigation.
  We also
incurred unrealized losses of $3.9 million for the six months ended June 30,
2009, as compared to $1.6 million in the comparable 2008 period on the decrease
in the value of certain put options on crude oil we purchased in December 2007
and January 2008 for an aggregate of $3,035,000. We have experienced great
volatility in the value of these derivative instruments as a result of the
fluctuation in the price of crude oil.
 
 (B) - Results of Operations - Oil and
Gas
  For
the Three Months Ended June 30, 2009 as compared to the Three
Months Ended June 30, 2008
  Our
revenues from oil and gas sales for the three months ended June 30, 2009 were
$4.5 million. Oil and gas sales for the three months ended June 30, 2008 were
$10.7 million. The 58% decrease in oil and gas revenues was due to a decrease in
commodity prices offset partially by a slight increase in production on a Boe
basis during the three months ended June 30, 2009. The average oil price for the
three months ended June 30, 2009 was $55.51 compared to $122.22 for the three
months ended June 30, 2008. The average gas price for the three months ended
June 30, 2009 was $2.95 per Mcf compared to $11.11 for the three months ended
June 30, 2008. Production on a Boe basis increased 2%  from 100,831 Boe’s
during the three months ended June 30, 2008 to 103,265 Boe’s during the three
months ended June 30, 2009.
 
 Oil and
gas production costs in the form of lease operating expense on a Boe basis
decreased 25% from $28.68 per Boe during the three months ended
June 30, 2008 to $21.43 per Boe during the three months ended June 30,
2009. The decrease was due primarily to an attempt to control costs in
marginally economic areas due to lower commodity prices.  The lower
commodity prices also resulted in lower production taxes, another component of
lease operating expense.   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 decreased 34% or approximately $667,000,
during the three months ended June 30, 2009 compared to the three months ended
June 30, 2008. The decrease was related to a lower carrying value of our oil and
gas properties as a result of the ceiling test write down recorded as of
December 31, 2008.
 
 We also
incurred unrealized losses of approximately $4.8 million for the three months
ended June 30, 2009 as compared to unrealized losses of approximately $21.5
million during the three months ended June 30, 2008 on the value of certain
hedge contracts on crude oil and natural gas.  As actual commodity prices
increase, the estimated future realized value decreases against the prices at
which the hedges were purchased.
 
 For the Six Months Ended June
30, 2009 as compared to the Six Months Ended June 30,
2008
  Our
revenues from oil and gas sales for the six months ended June 30, 2009 were $7.8
million. Oil and gas sales for the six months ended June 30, 2008 were $17.8
million. The 56% decrease in oil and gas revenues was due to a decrease in
commodity prices offset partially by an increase in production on a Boe basis
during the six months ended June 30, 2009. The average oil price for the six
months ended June 30, 2009 was $46.43 compared to $110.77 for the six months
ended June 30, 2008. The average gas price for the six months ended June 30,
2009 was $3.16 per Mcf compared to $9.64 for the six months ended June 30, 2008.
Production on a Boe basis increased 10% from 189,069 Boe’s during the six months
ended June 30, 2008 to 207,822 Boe’s during the six months ended June 30,
2009.
 
 Oil and
gas production costs in the form of lease operating expense on a Boe basis
decreased 15% from $28.14 per Boe during the six months ended
June 30, 2008 to $23.79 per Boe during the six months ended June 30, 2009.
The decrease was due primarily to an attempt to control costs in marginally
economic areas due to lower commodity prices. The lower commodity prices also
resulted in lower production taxes, another component of lease operating
expense.  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.
  24
  Depletion
expense for oil and gas properties decreased $1.2 million, or 29%, during
the six months ended June 30, 2009 compared to the six months ended June 30,
2008. The decrease was related to a lower carrying value of our oil and gas
properties as a result of the ceiling test write down recorded as of December
31, 2008.
 
 We also
incurred unrealized losses of approximately $3.9 million for the six months
ended June 30, 2009 as compared to unrealized losses of approximately $23.5
million during the six months ended June 30, 2008 on the value of certain hedge
contracts on crude oil and natural gas.
 
 Supplemental
Oil and Gas Information
  The
following information is intended to supplement the unaudited condensed
consolidated financial statements included in this report with data that is not
readily available from those statements.
  Three Months Ended June
      30,2009
                                                    
                                                    
                                                    2008ProductionOil
      (Bls)
                                                    
                                                    
                                                    69,769
                                                    
                                                    
                                                    
                                                    71,508Gas
      (Mcf)
                                                    
                                                    
                                                    200,973
                                                    
                                                    
                                                    
                                                    175,936Boe
      (Bls)
                                                    
                                                    
                                                    103,265
                                                    
                                                    
                                                    
                                                    100,831Average
      PricesOil
      ($/Bbl)
                                                    
                                                    $
                                                    55.51
                                                    
                                                    
                                                    $
                                                    122.22Gas
      ($/Mcf)
                                                    
                                                    $
                                                    2.95
                                                    
                                                    
                                                    $
                                                    11.11Average
      Lifting CostPer
      Boe
                                                    
                                                    $
                                                    21.43
                                                    
                                                    
                                                    $
                                                    28.68
 
 Six Months Ended June
      30,2009
                                
                                
                                2008ProductionOil
      (Bls)
                                
                                
                                139,699
                                
                                
                                
                                130,215Gas
      (Mcf)
                                
                                
                                408,739
                                
                                
                                
                                353,125Boe
      (Bls)
                                
                                
                                207,822
                                
                                
                                
                                189,069Average
      PricesOil
      ($/Bbl)
                                
                                $
                                46.43
                                
                                
                                $
                                110.77Gas
      ($/Mcf)
                                
                                $
                                3.16
                                
                                
                                $
                                9.64Average
      Lifting CostPer
      Boe
                                
                                $
                                23.79
                                
                                
                                $
                                28.14
 
 (C)
- Results of Operations - Engineering Services (Maverick)
  For
the three months ended June 30, 2009 as compared to the three months ended March
31, 2009
  Revenues
for the three months ended June 30, 2009 and the three months ended March
31, 2009 were $4.5 million and $5.4 million, respectively. Gross margin
performance for these periods was 4.4% and 1.8%, respectively. The
improvement in second quarter gross margin is attributable to adjustments in
staffing levels and elimination of non-billable positions as a result of the
current economic slowdown.  These staffing level adjustments led to
improved personnel utilization in the second quarter. In addition, second
quarter gross margin was positively impacted by an improved business mix, as the
oil and gas, infrastructure and survey businesses contributed a higher
proportion of second quarter revenues.  Engineering services reported
pretax losses of $798,520 and $1,056,053 in the three months ended June 30, 2009
and the three months ended March 31, 2009
respectively.
  25
  
 Liquidity
and Capital Resources
  In
connection with our initial public offering consummated on October 28, 2005, we
sold (i) 14,400,000 units to the public, with each unit consisting of one share
of our common stock, $0.0001 per share, and one warrant expiring October 28,
2009 to purchase one share of common stock at an exercise price of $6.00 per
share and (ii) to the representatives of the underwriters a five year option to
purchase up to a total of 720,000 units in the aggregate at a per unit price of
$10.00. The units issuable upon exercise of this option are identical to those
offered in the public offering except that the warrants included in the option
have an exercise price of $7.50. The underwriters’ unit purchase option may be
exercised for cash or on a “cashless” basis, at the holder’s option, such that
the holder may use the appreciated value of the option (the difference between
the exercise prices of the option and the underlying warrants and the market
price of the units and underlying securities) to exercise the option without the
payment of any cash. If circumstances warrant and in the event that any holders
of the unit purchase option choose to exercise all or a portion of the unit
purchase option on a cashless basis, we will receive no cash proceeds but would
be required to issue additional units. In addition we can give no assurance that
any of the warrants included in the units sold to the public will be exercised
and result in any proceeds to us.
 
 The
following additional events occurred or had an impact during the six months
ended June 30, 2009 or may have an impact on our liquidity in future
periods:
  a.  
On March 14, 2008, two of our oil and natural gas operating subsidiaries, Tandem
Energy Corporation and PER Gulf Coast, Inc. entered into a new credit facility
with the Bank of Texas, establishing a revolving line of credit with an initial
borrowing base of $35 million. The revolving line of credit is secured by the
oil and gas properties and will be used to facilitate the execution of our
drilling and acquisition programs. The line bears interest at the bank’s base
rate or LIBOR, plus a margin which varies with the ratio of the outstanding
borrowings against the defined borrowing base, ranging from 1.50% to 2.25%.
These oil and gas subsidiaries can choose periodically to change the interest
rate base which applies to outstanding borrowings. Under the terms of revolving
line of credit agreement, they 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. As the parent company, we are not a co-borrower or
guarantor of the line, and transfers from the oil and gas operations to us are
limited to (i) $1 million per fiscal year for management fees, and (ii) the
repayment of up to $2 million per fiscal year in subordinate indebtedness owed
to us.
  Under the
terms of revolving line of credit agreement, the Borrower must maintain certain
financial ratios, must repay any amounts due in excess of the borrowing base,
and may not declare any dividends or enter into any transactions resulting in a
change in control, without the bank’s consent.
 A
financial covenant under the credit facility requires us to maintain a ratio of
indebtedness to cash flow of no more than 3 to 1. Although, as of June 30, 2009,
we were in compliance of all bank covenants, as of December 31, 2008 we
were not in compliance regarding the indebtedness to income ratio. The bank
agreed to waive the covenant non-compliance issue subject to the payment of
additional fees and other terms more fully described below.
 
 On June 12, 2009, the Company received a “Notice of Borrowing Base
Redetermination and Notice of Event of Default” from the bank.  The
bank set the new borrowing base at $15 million, shortened the maturity date of
the loan from March 14, 2012 to June 1, 2010, raised the floor interest rate
from 4% to 4.5%, redefined certain covenant ratios, and required certain fees
paid to grant the waivers necessary to cure the aforementioned covenant
defect.  The Company executed the Second Amendment to the loan
agreement on June 25, 2009.  The Company, as the parent company, is
not a co-borrower or guarantor of the line, and transfers from the Borrower to
the parent company are limited to (i) $1 million per fiscal year to the parent
for management fees, and (ii) the repayment of up to $2 million per fiscal year
in subordinate indebtedness owed to the parent. As of June 30, 2009 the $13.0
million outstanding under the revolving line of credit was bearing interest
at the bank’s base rate, which, at the time, was 4.5 %.  As amended the
Senior Credit Facility expires on June 1, 2010.  Accordingly, we have
reclassified the entire $13 million as a current liability.
 
 b. On
April 29, 2008, the Company completed the acquisition of Maverick,
a provider of project management, engineering, procurement, and
construction management services to both the public and private sectors,
including the oil and gas business in which the Company is engaged.  The
aggregate consideration paid in the merger was $6 million in cash and $5 million
to be paid over the next 5 years pursuant to non-interest bearing cash flow
notes, subject to certain escrows, holdbacks and post-closing adjustments. The
cash flow notes were reduced for a working capital post closing adjustment
which was determined by the Company to be $645,596. This amount may be subject
to modification as may be agreed between the parties. At the time the
acquisition was completed, a discount to present value in the amount of
$1,320,404 was recorded and deducted from the cash flow notes as these notes are
non-interest bearing for the initial 5 years of their term. In addition, the
sellers agreed to satisfy and assume Maverick's bank indebtedness in the
aggregate amount of $4,889,538 consisting of a $2,960,155 revolving line of
credit maturing April 2008, a $1,584,375 term note due April 2011, and $345,008
oil and gas note due May 2009 (collectively referred to as the “Notes”), using a
portion of the cash received by them at closing. Following the closing, the
Company was indebted to the sellers for these amounts under the identical terms
of the bank loan agreements. On April 30, 2008, Maverick entered into extension
and modification agreements with the sellers pursuant to which sellers agreed to
defer principal payments of the $1.6 million term loan for six months and extend
the maturity date to April 2013. The sellers also agreed to extend the maturity
date of the revolving line of credit to 2010. In addition, as of December 31,
2008, Maverick was not in compliance with the debt service coverage ratio
contained in the loan agreements. On August 14, 2008, the sellers waived the
Company's obligation to maintain this ratio through September 30, 2009.
Accordingly, we have reclassified $2,917,403 of the Notes from long term debt to
current.
 
  26




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




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




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




c. On
August 11, 2008, we entered into an employment agreement with Lisa Meier
pursuant to which Ms. Meier was appointed as chief financial officer and
treasurer of the Company. Ms. Meier is a certified public accountant. Ms. Meier
earned a Bachelor of Business Administration from the University of Texas at
Austin and a Master of Professional Accountancy from the University of Texas at
Austin in 1996. The employment agreement provided for an initial five year term,
a $250,000 base annual salary, increasing by 5% annually, an annual bonus as
determined by the Board or a compensation committee of the Board which, in the
event the Company has positive cash flow, would be at least $50,000 a
performance bonus based on certain predetermined budgeted goals.




In
addition, under terms of the employment agreement, Ms. Meier was granted 50,000
incentive stock options to purchase shares of the Company’s common stock with an
exercise price equal to the closing price on August 11, 2008, the date of grant,
and will be granted an additional 50,000 stock options each year thereafter
during the term of her employment. All options will be issued pursuant to the
Company’s 2006 Long Term Incentive Plan and will be subject to a four year
vesting schedule, with one-quarter of such options vesting on each anniversary
of the date of grant, beginning August 11, 2009. Upon a change in control of the
Company, the employment agreement provides that all options granted to Ms. Meier
will immediately vest.




Pursuant
to the employment agreement, if Ms. Meier’s employment is terminated by the
Company without cause or Ms. Meier terminates her employment for good reason,
she will receive an 18 month severance package. If, however, Ms. Meier’s
employment is terminated by us for cause or Ms. Meier terminates her employment
without good reason, she will receive no severance package.




Ms. Meier
agreed that during the term of her employment with us and for an 18 month period
thereafter, she would not compete with the Company nor solicit our employees. If
Ms. Meier breaches any of these obligations, she would forfeit her right to any
severance payments and benefits to which she otherwise would be
entitled.




On
October 23, 2008, Ms. Meier, delivered to the Company a communication
indicating her intention to resign her employment with the Company. On November
13, 2008, Ms. Meier delivered a subsequent communication to the Company
indicating her election to remain with the Company in her current
position.




On
June 10, 2009, Ms. Meier, delivered to the Company a written notice
pursuant to her Employment Agreement with the Company dated as of August 11,
2008, of her intention to terminate her employment with the
Company.  Ms. Meier contends that her resignation is for "Good Reason"
as defined in her Employment Agreement in Section 11(c)(i) and Section
11(c)(iv).  The Company does not believe Ms. Meier has grounds to
claim “Good Reason” as defined in her employment agreement.




d. The
Company is obligated for minimum salaries pursuant to all executive and
non-executive employment agreements as follows. This table excludes the cost of
employee health benefits, payments of bonuses that are either discretionary or
contingent upon performance criteria and stock based compensation
arrangements.  Furthermore, the table does not reflect the terms of Ms.
Meier’s employment contract since her resignation was submitted and accepted in
June, 2009.  However, there can be no assurance that the Company will not
be required to pay her under the terms of her employment agreement associated
with her assertion of resignation for “Good Reason”:




Period Ending
      June 30,2010
                      
                      $
                      342,5002011
                      
                      
                      231,0002012
                      
                      
                      45,000$
                      618,500




27




Capital Expenditures   -
Oil and Gas Development




The
reserve report prepared as of December 31, 2008 assumes that we will not spend
any capital expenditures in 2009 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 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 June 30, 2009 we have incurred
capital expenditures of approximately $878,000, primarily related to projects
begun in 2008 but not completed until 2009.




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.




28




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.




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.




Provision
for DD&A




We have
computed our provision for DD&A on a unit-of-production method. Each
quarter, we use the following formulas to compute the provision for
DD&A.




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




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




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




Hedging
Activities




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




For the
three months ended June 30, 2009 and 2008 we reported net losses of $8.4 million
and 23.1 million , respectively, on the change in value of our derivative
contracts.  For the six months ended June 30, 2009 and 2008 we
reported net losses of $7.9 million and $25.1 million respectively, on the
change in value of our derivative contracts.





29





Asset
Retirement Obligation




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




Recent
Accounting Pronouncements




See Recent Accounting
Pronouncements in Note 3 within the financial statements in Item 1 for a
description of Recent Accounting Pronouncements.




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 June
30, 2009 our oil and gas subsidiaries had approximately $13 million in
outstanding borrowings associated with their credit facility with a major bank
and our engineering services subsidiary had $4.6 million in outstanding
borrowings under a revolving credit facility and term notes with the selling
shareholders from whom we acquired Maverick, our engineering services business.
To the extent we have debt outstanding, we will be subject to risk of
interest rate changes that would impact our future results of operations and
cash flows.




Price
Risks




See
Note 5 within the financial statements in Item 1 for a description of our
price risks and price risk management activities.




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 June 30, 2009.  Based on that evaluation, the Company’s Principal
executive officer and Principal Financial Officer concluded that the Company’s
disclosure controls and procedures were not effective as of June 30,
2009




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 second quarter of 2009 that have materially affected, or are
reasonably likely to affect materially, our internal control over financial
reporting.





30




OTHER
INFORMATION




Item 1.     Legal
Proceedings.




Platinum
v. Robert L. Kovar Services, et al





On April
16, 2009, the Company received a written notice of acceleration from Robert L.
Kovar Services, LLC, as the stockholder representative, claiming that the
Company failed to make timely mandatory prepayments in the amount of $110,381
due under the terms of the Cash Flow Notes.  On April 29, 2009,
Maverick received a notice of acceleration (the “Acceleration Letter”) with
respect to the Notes governed by a Loan Agreement and related Security Agreement
originally dated April 30, 2005 and April 29, 2005, respectively. The
Acceleration Letter alleges that Maverick failed to comply with certain
covenants under the terms of the Loan Agreement and that Maverick failed to make
payments due under the Notes. The outstanding principal, accrued interest and
late charges alleged to be owed by Maverick in the Acceleration Letter total
$4,659,227. The Acceleration Letter also contends that interest continues to
accrue at the default rate of 18% per annum. In a separate letter, dated May 1,
2009, Robert L. Kovar Services, LLC, as the stockholder representative for the
sellers, purported to terminate the revolving credit facility under the Loan
Agreement and demanded turnover of all collateral securing indebtedness under
the Loan Agreement, including the Notes. The Company and Maverick have asserted
claims in litigation against the holders of the Notes, Robert L. Kovar Services,
LLC, Robert L. Kovar, individually, and others. These litigations are 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. It is Platinum and Maverick’s
position that the former Maverick Stockholders are obligated under the
Merger Agreement to indemnify Platinum and Maverick for any damages they
suffer as a result of any breach of contract by Maverick, including
a default on any liability existing before the merger of Maverick and
PermSUB. Moreover, by attempting to accelerate and collect on the cashflow
notes and assumed bank debt discussed in the Merger Agreement, WKC has
created a conflict of interest and must resign as the Merger Escrow Agent.
Therefore, Platinum and Maverick intend to offset any liability they may
face in defaulting on payment of the cash flow notes or the assumed bank
debt via the Defendants’ indemnity obligations.  Since this litigation
is in its early stages, the Company cannot predict the outcome of these
matters.




On July
14, 2009, SNP Associates filed suit in the 333rd
District Court of Harris County, Texas against Maverick Engineering, Inc,
Platinum Energy Resources’ wholly owned subsidiary.  SNP is seeking a
Declaratory Judgment, Permanent Injunction, and damages for alleged “trade name
infringement.”  The suit claims that SNP has the legal right to the
name “Maverick Engineering” and that SNP has suffered damages as a result of two
engineering firms having the same name.  We do not believe that any of
SNP’s claims have merit and we intend to vigorously defend ourselves against
these claims.  However, no assurance can be given that we will prevail
in this matter.




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, 2008.




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.




None.




Item 5.     Other
Information.




On July
22, 2009, William Blain delivered to the Board of Platinum Energy Resources,
Inc. (the “Company”) a written notice of his intent to resign from his position
on the Board of Directors of the Company effective July 22, 2009.




31




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 Officer32.1
                      
                      Section
      906 Certification of Principal Executive and Financial
    Officer





32




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: August
      7, 2009
              By:
              /s/
      Al RahmaniAl
      Rahmani
                Interim
      Chief Executive Officer




By:
              /s/
      Michael CunninghamMichael
      Cunningham
                Interim
      Chief Financial Officer





33