UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q





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




For the
quarterly period ended September 30, 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
            
            (I.R.S.
      Employer Identification No.)organization)11490
      Westheimer Road, Suite 1000
            
            77077Houston,
      Texas
            
            (Zip
      Code)(Address
      of principal executive offices)





(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
November 11, 2009, 22,070,762 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
                  32Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  32Item
      3.
                  Defaults
      Upon Senior Securities
                  32Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  32Item
      5.
                  Other
      Information
                  33Item
      6.
                  Exhibits
                  33Signatures
                  34


2





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEETS





September 30,
                                                      2009
                                                    
                                                    
                                                    December 31,
                                                      2008(UNAUDITED)
                                                    
                                                    
                                                    *ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                                    
                                                    $
                                                    2,284,435
                                                    
                                                    
                                                    $
                                                    3,668,092Accounts
      receivable, net of $209,392 and $164,392 allowance for doubtful accounts
      as of September 30, 2009 and December 31, 2008,
    respectivelyOil
      and gas sales
                                                    
                                                    
                                                    1,967,962
                                                    
                                                    
                                                    
                                                    1,629,931Service
                                                    
                                                    
                                                    3,357,988
                                                    
                                                    
                                                    
                                                    5,255,041Inventory
                                                    
                                                    
                                                    410,791
                                                    
                                                    
                                                    
                                                    436,477Fair
      value of commodity derivatives - current
                                                    
                                                    
                                                    4,346,453
                                                    
                                                    
                                                    
                                                    1,968,186Prepaid
      expenses and other current assets
                                                    
                                                    
                                                    497,680
                                                    
                                                    
                                                    
                                                    747,225Total
      Current Assets
                                                    
                                                    
                                                    12,865,309
                                                    
                                                    
                                                    
                                                    13,704,952Property
      and equipment, at costOil
      and gas properties, full cost method
                                                    
                                                    
                                                    205,846,115
                                                    
                                                    
                                                    
                                                    204,372,437Other
                                                    
                                                    
                                                    5,531,069
                                                    
                                                    
                                                    
                                                    5,492,072Less
      accumulated depreciation, depletion, amortization and
      impairment
                                                    
                                                    
                                                    (149,754,966
                                                    )
                                                    
                                                    
                                                    (145,016,531
                                                    )Property
      and equipment, net
                                                    
                                                    
                                                    61,622,218
                                                    
                                                    
                                                    
                                                    64,847,978Other
      assetsIntangible
      assets, net
                                                    
                                                    
                                                    4,397,628
                                                    
                                                    
                                                    
                                                    5,061,066Fair
      value of commodity derivatives
                                                    
                                                    
                                                    7,998,398
                                                    
                                                    
                                                    
                                                    18,562,702Real
      estate held for development
                                                    
                                                    
                                                    2,700,000
                                                    
                                                    
                                                    
                                                    2,700,000Total
      Assets
                                                    
                                                    $
                                                    89,583,553
                                                    
                                                    
                                                    $
                                                    104,876,698LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payableTrade
                                                    
                                                    $
                                                    1,283,900
                                                    
                                                    
                                                    $
                                                    2,551,808Oil
      and gas sales
                                                    
                                                    
                                                    980,397
                                                    
                                                    
                                                    
                                                    1,115,114Accrued
      liabilities and other
                                                    
                                                    
                                                    3,704,533
                                                    
                                                    
                                                    
                                                    4,437,995Income
      taxes payable
                                                    
                                                    
                                                    186,880
                                                    
                                                    
                                                    
                                                    119,770Current
      maturities of long-term debt, capital lease obligations and notes
      payable
                                                    
                                                    
                                                    16,902,640
                                                    
                                                    
                                                    
                                                    13,403,731Total
      Current Liabilities
                                                    
                                                    
                                                    23,058,350
                                                    
                                                    
                                                    
                                                    21,628,418Long-term
      debt and capital lease obligations, net of current portion
                                                    
                                                    
                                                    1,142,561
                                                    
                                                    
                                                    
                                                    4,687,423Notes
      payable - acquisitions
                                                    
                                                    
                                                    3,361,143
                                                    
                                                    
                                                    
                                                    3,231,959Other
      accrued liabilities
                                                    
                                                    
                                                    119,735
                                                    
                                                    
                                                    
                                                    148,458Asset
      retirement obligation
                                                    
                                                    
                                                    4,817,625
                                                    
                                                    
                                                    
                                                    4,537,243Deferred
      income taxes
                                                    
                                                    
                                                    5,715,055
                                                    
                                                    
                                                    
                                                    10,459,000Total
      Liabilities
                                                    
                                                    
                                                    38,214,469
                                                    
                                                    
                                                    
                                                    44,692,501COMMITMENTS
      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
                                                    
                                                    
                                                    155,139,130
                                                    
                                                    
                                                    
                                                    155,100,474Accumulated
      deficit
                                                    
                                                    
                                                    (88,110,989
                                                    )
                                                    
                                                    
                                                    (79,257,220
                                                    )Treasury
      stock - 1,997,913 shares, at cost
                                                    
                                                    
                                                    (15,661,464
                                                    )
                                                    
                                                    
                                                    (15,661,464
                                                    )Total
      Stockholders' Equity
                                                    
                                                    
                                                    51,369,084
                                                    
                                                    
                                                    
                                                    60,184,197Total
      Liabilities and Stockholders' Equity
                                                    
                                                    $
                                                    89,583,553
                                                    
                                                    
                                                    $
                                                    104,876,698





*
Derived from the audited financial statements for the year ended December 31,
2008





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


3





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




Three Months Ended September 30,
                                              
                                              
                                              Nine Months Ended September 30,2009
                                              
                                              
                                              2008
                                              
                                              
                                              2009
                                              
                                              
                                              2008RevenuesOil
      and gas sales
                                              
                                              $
                                              4,703,985
                                              
                                              
                                              $
                                              10,907,763
                                              
                                              
                                              $
                                              12,483,989
                                              
                                              
                                              $
                                              28,736,638Service
      revenues
                                              
                                              
                                              4,766,841
                                              
                                              
                                              
                                              6,219,904
                                              
                                              
                                              
                                              14,774,555
                                              
                                              
                                              
                                              11,276,5869,470,826
                                              
                                              
                                              
                                              17,127,667
                                              
                                              
                                              
                                              27,258,544
                                              
                                              
                                              
                                              40,013,224Costs
      and expensesLease
      and other operating expense
                                              
                                              
                                              2,159,876
                                              
                                              
                                              
                                              4,169,678
                                              
                                              
                                              
                                              7,093,775
                                              
                                              
                                              
                                              9,490,589Cost
      of service revenues
                                              
                                              
                                              4,149,891
                                              
                                              
                                              
                                              7,042,055
                                              
                                              
                                              
                                              13,764,777
                                              
                                              
                                              
                                              11,001,165Marketing,
      general and administrative expense
                                              
                                              
                                              1,788,802
                                              
                                              
                                              
                                              1,625,540
                                              
                                              
                                              
                                              6,337,261
                                              
                                              
                                              
                                              7,125,980Depreciation,
      depletion and amortization expense
                                              
                                              
                                              1,683,510
                                              
                                              
                                              
                                              3,118,105
                                              
                                              
                                              
                                              5,479,819
                                              
                                              
                                              
                                              7,759,268Accretion
      of asset retirement obligations
                                              
                                              
                                              80,475
                                              
                                              
                                              
                                              74,296
                                              
                                              
                                              
                                              240,022
                                              
                                              
                                              
                                              185,284Total
      costs and expenses
                                              
                                              
                                              9,862,554
                                              
                                              
                                              
                                              16,029,674
                                              
                                              
                                              
                                              32,915,654
                                              
                                              
                                              
                                              35,562,286Operating
      income (loss)
                                              
                                              
                                              (391,728
                                              )
                                              
                                              
                                              1,097,993
                                              
                                              
                                              
                                              (5,657,110
                                              )
                                              
                                              
                                              4,450,938OTHER
      INCOME (EXPENSES)Interest
      income
                                              
                                              
                                              4,201
                                              
                                              
                                              
                                              32,194
                                              
                                              
                                              
                                              8,515
                                              
                                              
                                              
                                              172,377Interest
      expense
                                              
                                              
                                              (353,231
                                              )
                                              
                                              
                                              (276,163
                                              )
                                              
                                              
                                              (983,848
                                              )
                                              
                                              
                                              (520,848
                                              )Change
      in fair value of commodity derivatives
                                              
                                              
                                              950,947
                                              
                                              
                                              
                                              17,884,342
                                              
                                              
                                              
                                              (6,927,447
                                              )
                                              
                                              
                                              (7,244,911
                                              )Other
                                              
                                              
                                              3,208
                                              
                                              
                                              
                                              (176,598
                                              )
                                              
                                              
                                              5,761
                                              
                                              
                                              
                                              329Total
      other income (expense)
                                              
                                              
                                              605,125
                                              
                                              
                                              
                                              17,463,775
                                              
                                              
                                              
                                              (7,897,019
                                              )
                                              
                                              
                                              (7,593,053
                                              )Income
      (Loss) Before Income Taxes
                                              
                                              
                                              213,397
                                              
                                              
                                              
                                              18,561,768
                                              
                                              
                                              
                                              (13,554,129
                                              )
                                              
                                              
                                              (3,142,115
                                              )Provision
      (Benefit) For Income Taxes
                                              
                                              
                                              89,086
                                              
                                              
                                              
                                              6,523,502
                                              
                                              
                                              
                                              (4,700,360
                                              )
                                              
                                              
                                              (1,108,238
                                              )Net
      Income (Loss)
                                              
                                              $
                                              124,311
                                              
                                              
                                              $
                                              12,038,266
                                              
                                              
                                              $
                                              (8,853,769
                                              )
                                              
                                              $
                                              (2,033,877
                                              )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
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.55
                                              
                                              
                                              $
                                              (0.40
                                              )
                                              
                                              $
                                              (0.09
                                              )Diluted
                                              
                                              $
                                              0.01
                                              
                                              
                                              $
                                              0.55
                                              
                                              
                                              $
                                              (0.40
                                              )
                                              
                                              $
                                              (0.09
                                              )





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)









Nine Months
                                                                Ended
                                                                September 30,
    2009
                                                              
                                                              
                                                              Nine Months
                                                                Ended
                                                                September 30,2008Cash
      Flows From Operating ActivitiesNet loss
                                                              
                                                              $
                                                              (8,853,769
                                                              )
                                                              
                                                              $
                                                              (2,033,877
                                                              )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Bad
      debt expense
                                                              
                                                              
                                                              45,000
                                                              
                                                              
                                                              
                                                              —Depreciation,
      depletion and amortization of property, plant and
equipment
                                                              
                                                              
                                                              4,816,381
                                                              
                                                              
                                                              
                                                              7,759,268Accretion
      of asset retirement obligation and debt discount
                                                              
                                                              
                                                              417,383
                                                              
                                                              
                                                              
                                                              278,051Amortization
      of intangible assets/write-off of bank loan fees
                                                              
                                                              
                                                              663,438
                                                              
                                                              
                                                              
                                                              —Stock
      based compensation
                                                              
                                                              
                                                              38,656
                                                              
                                                              
                                                              
                                                              856,515Deferred
      income taxes
                                                              
                                                              
                                                              (4,743,945
                                                              )
                                                              
                                                              
                                                              (1,058,254
                                                              )Unrealized
      change in fair value of commodity derivatives
                                                              
                                                              
                                                              8,186,037
                                                              
                                                              
                                                              
                                                              2,521,928Changes
      in operating assets and liabilities:Accounts
      receivable
                                                              
                                                              
                                                              1,514,022
                                                              
                                                              
                                                              
                                                              (1,410,614
                                                              )Inventory
                                                              
                                                              
                                                              25,686
                                                              
                                                              
                                                              
                                                              (453,480
                                                              )Prepaid
      expenses and other current assets
                                                              
                                                              
                                                              249,544
                                                              
                                                              
                                                              
                                                              (397,003
                                                              )Accounts
      payable
                                                              
                                                              
                                                              (1,402,625
                                                              )
                                                              
                                                              
                                                              2,236,220Accrued
      liabilities and other
                                                              
                                                              
                                                              (762,185
                                                              )
                                                              
                                                              
                                                              (199,316
                                                              )Income
      taxes payable
                                                              
                                                              
                                                              67,110
                                                              
                                                              
                                                              
                                                              (188,727
                                                              )Commodity
      derivatives
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (1,008,566
                                                              )Net
      cash provided by operating activities
                                                              
                                                              
                                                              260,733
                                                              
                                                              
                                                              
                                                              6,902,145Cash
      Flows From Investing ActivitiesAdditions
      to property and equipment
                                                              
                                                              
                                                              (1,550,261
                                                              )
                                                              
                                                              
                                                              (16,757,657
                                                              )Acquisition
      of other businesses - oil and gas properties
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (7,939,139
                                                              )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
                                                              
                                                              
                                                              (1,550,261
                                                              )
                                                              
                                                              
                                                              (27,814,758
                                                              )Cash
      Flows From Financing ActivitiesProceeds
      of revolving credit facility
                                                              
                                                              
                                                              1,000,000
                                                              
                                                              
                                                              
                                                              9,225,090Payments,
      long-term debt and capital leases
                                                              
                                                              
                                                              (1,094,129
                                                              )
                                                              
                                                              
                                                              (180,029
                                                              )Net
      cash (used in) provided by financing activities
                                                              
                                                              
                                                              (94,129
                                                              )
                                                              
                                                              
                                                              9,045,061Net
      Decrease in Cash
                                                              
                                                              
                                                              (1,383,657
                                                              )
                                                              
                                                              
                                                              (11,867,552
                                                              )Cash
      - Beginning of the Period
                                                              
                                                              
                                                              3,668,092
                                                              
                                                              
                                                              
                                                              16,429,619Cash
      - End of Period
                                                              
                                                              $
                                                              2,284,435
                                                              
                                                              
                                                              $
                                                              4,562,067SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
                                                              
                                                              $
                                                              752,272
                                                              
                                                              
                                                              $
                                                              239,391Income
      taxes
                                                              
                                                              $
                                                              70,000
                                                              
                                                              
                                                              $
                                                              99,000Non-Cash
      Investing and Financing Activities:Issuance
      of notes payable - Pleasanton acquisition
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              550,000Asset
      retirement cost and obligation
                                                              
                                                              $
                                                              40,269
                                                              
                                                              
                                                              $
                                                              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


September
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
September 30, 2009 and for the three and nine months then ended have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and pursuant to the
instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and
Exchange Commission (“SEC”) and on the same basis as the annual audited
consolidated financial statements. The unaudited interim condensed consolidated
balance sheet as of September 30, 2009, unaudited interim condensed consolidated
statements of operations for the three months and nine months ended September
30, 2009 and 2008, and the unaudited interim condensed consolidated statements
of cash flows for the nine months ended September 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 nine months ended September 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.





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.


6





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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.





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
the Accounting Standards Codification Topic 815 “Derivatives and Hedging” (ASC
815), (formerly SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”).  ASC 815 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.





Recent
Accounting Guidance




In July
2009, the FASB issued new accounting guidance under the Accounting Standards
Codification (ASC) Topic 105 (ASC 105), (formerly, Statement of Financial
Accounting Standards (SFAS) No. 168, “The FASB Accounting Codification and
the Hierarchy of Generally Accepted Accounting Principles”). Under this
guidance, the ASC became the single 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 ASC superseded all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the ASC will become non-authoritative.   This Statement is
effective for interim and annual periods ending after September 15, 2009. Other
than the manner in which new accounting guidance is referenced, the adoption of
this guidance did not materially impact the Company’s condensed consolidated
financial statements.


7





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 805 (ASC 805) on business combinations, (formerly SFAS No. 141 (R),
“Business Combinations”
which replaced SFAS No. 141“Business
Combinations”).  ASC 805 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. ASC 805 requires an acquirer in a business
combination, including business combinations achieved in stages (step
acquisition), to recognize the assets acquired, liabilities assumed, and any
non-controlling 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, ASC 805 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 ASC 805 did not have a material impact on the Company’s
condensed consolidated financial statements. The provisions of ASC 805 will be
applied at such time when measurement of a business acquisition is
required.




On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 820 (ASC 820) on fair value measurements (formerly SFAS No. 157,
“Fair Value
Measurements”),  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. ASC 820
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 ASC 820
apply to other topics that require or permit fair value measurements and are to
be applied prospectively with limited exceptions. The adoption of ASC 820, as it
relates to nonfinancial assets and nonfinancial liabilities had no impact on the
Company’s condensed consolidated financial statements. The provisions of ASC 820
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
ASC 820.




On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 810 (ASC 810) on consolidation (formerly SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB
No. 51”).   ASC 810 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. This topic 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. ASC 810 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
ASC 810 were applied retrospectively. The adoption of ASC 810 had no impact on
the Company’s condensed consolidated financial statements.




On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 815 (ASC 815) on derivatives and hedging (formerly SFAS No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement
No. 133”). ASC 815 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 ASC 815, and (iii) how derivative instruments
and related hedged items affect an entity’s financial position, financial
performance, and cash flows. The adoption of ASC 815 had no impact on the
Company’s condensed consolidated financial statements.




On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 350-35 (ASC 350-35) on intangibles (formerly FASB Staff Position (FSP) No.
FAS 142-3, “Determination of
the Useful Life of Intangible Assets”).  ASC
350-35  identifies the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset on goodwill and other intangibles in order to
improve the consistency between the useful life of a recognized intangible asset
and the period of expected cash flows used to measure the fair value of the
asset. The adoption of ASC 350-35 had no impact on the Company’s condensed
consolidated financial statements.




On
January 1, 2009, the Company adopted new accounting guidance under ASC
Topic 260 (ASC 260) on earnings per share which established 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 this guidance did not have a material impact
on the Company’s condensed consolidated financial statements.


8





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





On
January 1, 2009 the Company adopted new accounting guidance under ASC Topic
815 (ASC 815) on derivatives and hedging which 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 this guidance did
not have a material impact on the Company’s condensed consolidated financial
statements.




In May,
2009 the Company adopted new accounting guidance under ASC Topic 855 (ASC 855)
on subsequent events, (formerly, SFAS No. 165, “Subsequent Events”). ASC 855
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. ASC 855 was effective for interim or annual periods
ending after June 15, 2009. Management has evaluated subsequent events to
determine if events or transactions occurring through November 11, 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. This standard has not yet been
integrated into the Accounting Standards Codification.




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.  This
standard has not yet been integrated into the Accounting Standards
Codification.





In August
2009, FASB issued Accounting Standards Update 2009-05 which includes amendments
to Subtopic 820-10, Fair Value Measurements and Disclosures—Overall. The update
provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the techniques provided
for in this update. The amendments in this Update clarify that a reporting
entity is not required to include a separate input or adjustment to other inputs
relating to the existence of a restriction that prevents the transfer of the
liability and  also clarifies  that both a quoted price in
an active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. The adoption of this standard is not
expected to have a material impact on the Company’s consolidated financial
position and 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


September
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. On October 30, 2009, the SEC issued Staff Accounting
Bulletin No. 113 which revised or rescinds portions of the interpretive guidance
included in the section of the Staff Accounting Bulletin Series titled “Topic 12: Oil and Gas Producing
Activities” (Topic 12) and revised a technical reference in “Topic 3: Senior Securites”
(Topic 3).  This update is intended to make the relevant interpretive
guidance consistent with current authoritative accounting and auditing guidance
and SEC rules and regulations.  The principal changes involve revision
or removal of material due to recent SEC rulemaking. The Company is currently
evaluating the effects of the new rules regarding the “Modernization of Oil and Gas
Reporting” on its financial statements.





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 nine months ended
September 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
                        
                        
                        16Development
      costs
                        
                        
                        1,458Balance
      at September 30, 2009
                        
                        $
                        205,846




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




September 30,
                                  2009Proved
      oil and gas properties
                                
                                $
                                204,583Unproved
      oil and gas properties
                                
                                
                                1,263205,846Accumulated
      depletion and impairment
                                
                                
                                (146,758
                                )Net
      capitalized costs at September 30, 2009
                                
                                $
                                59,088


10





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





Note
5 – Derivative Financial Instruments




The
Company engages in price risk management activities from time to
time.  The Company utilizes derivative instruments, consisting of
swaps, floors and collars, to attempt to reduce its exposure to changes in
commodity prices. The Company accounts for its derivatives in accordance with
ASC  815, “Derivatives and Hedging”.  The Company has
elected not to designate any of its 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 September 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):





Three Months
      Ended
                              September
      30,2009
                            
                            
                            2008Crude
      oil derivative realized settlements
                            
                            $
                            93
                            
                            
                            
                            (2,243
                            )Crude
      oil derivative change in unrealized gains (losses)
                            
                            
                            858
                            
                            
                            
                            20,127Gain
      (loss) on derivatives
                            
                            $
                            951
                            
                            
                            
                            17,884





For the
nine months ended September 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):





Nine Months Ended
                                September 30,2009
                              
                              
                              2008Crude
      oil derivative realized settlements
                              
                              $
                              1,259
                              
                              
                              
                              (5,009
                              )Crude
      oil derivative change in unrealized gains (losses)
                              
                              
                              (8,186
                              )
                              
                              
                              (2,236
                              )Loss
      on derivatives
                              
                              $
                              (6,927
                              )
                              
                              
                              (7,245
                              )


11


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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





Period Ended
                            September 30,
                          
                          Instrument
                            Type
                          
                          Total Volumes
                            (bBbl)
                          
                          
                          Contract
                            Price
                          
                          
                          Fair Value
                            (stated in
                            thousands)2010
                          
                          Swaps
                          
                          
                          30,000
                          
                          
                          
                          71.00
                          
                          
                          $
                          (2
                          )Swaps
                          
                          
                          90,000
                          
                          
                          
                          95.50
                          
                          
                          
                          1,951Puts
                          
                          
                          90,000
                          
                          
                          
                          75.00
                          
                          
                          
                          914Puts
                          
                          
                          90,000
                          
                          
                          
                          85.00
                          
                          
                          
                          1,4832011
                          
                          Swaps
                          
                          
                          30,000
                          
                          
                          
                          95.50
                          
                          
                          
                          585Puts
                          
                          
                          30,000
                          
                          
                          
                          75.00
                          
                          
                          
                          348Puts
                          
                          
                          30,000
                          
                          
                          
                          85.00
                          
                          
                          
                          519Puts
                          
                          
                          140,000
                          
                          
                          
                          80.00
                          
                          
                          
                          2,062Swaps
                          
                          
                          90,000
                          
                          
                          
                          95.25
                          
                          
                          
                          1,6312012
                          
                          Swaps
                          
                          
                          30,000
                          
                          
                          
                          95.25
                          
                          
                          
                          514Puts
                          
                          
                          30,000
                          
                          
                          
                          80.00
                          
                          
                          
                          459Swaps
                          
                          
                          90,000
                          
                          
                          
                          95.00
                          
                          
                          
                          1,4332013
                          
                          Swaps
                          
                          
                          30,000
                          
                          
                          
                          95.00
                          
                          
                          
                          448Total
      fair value
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          12,345





Note
6 – Fair Value Measurements





The
Company adopted ASC 820 “Fair
Value Measurements and Disclosures”, (formerly SFAS No. 157, “Fair Value
Measurements”).  As defined in ASC 820, fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit
price). In determining the fair value of its derivative contracts the Company
evaluates its counterparty and third party service provider valuations and
adjusts for credit risk when appropriate, ASC 820 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.





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.


12




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





As
required by ASC 820, 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 September
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 September 30, 2009(in thousands)Level 1
                      
                      
                      Level 2
                      
                      
                      Level 3
                      
                      
                      TotalOil
      and natural gas derivatives
                      
                      
                      —
                      
                      
                      $
                      12,345
                      
                      
                      
                      —
                      
                      
                      $
                      12,345




The
determination of the fair values above incorporates various factors required
under ASC 820. These factors include the impact of our nonperformance risk and
the credit standing of the counterparties involved in the Company’s derivative
contracts.




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




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





Cash and
cash equivalents, receivables, accounts payable and accrued liabilities were
each estimated to have a fair value approximating the carrying amount due to the
short maturity of those instruments.  Indebtedness under the Company’s
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 were to be
issued in semi-annual installments over the eighteen month term of the agreement
beginning with the closing of the Tandem acquisition.





On
October 26, 2007, the first installment of 178,572 of irrevocable shares was
issued to Mr. Duncan.  These shares were valued at $1,250,000 which
was charged to operations during the year ended December 31,
2007.  The Company was required to issue the remaining 535,714 shares
of its common stock in 2008 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 September 30, 2009, respectively,
related to these unissued 535,714 shares of common stock.


13





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
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 September
30, 2009 (stated in thousands):





Oil
      and gas revolving line of credit
                            
                            (a)
                            
                            $
                            13,009Notes
      payable - acquisitions
                            
                            (b)
                            
                            
                            3,498Revolving
      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)
                            
                            
                            1,403Capital
      lease obligations
                            
                            
                            
                            
                            328$
                            21,407Less:
      Current maturities
                            
                            
                            
                            
                            16,903Long-term
      debt
                            
                            
                            
                            $
                            4,504





(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 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 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 September 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 classified 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.


14





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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 $3,361,143 at September 30, 2009 after the accretion of
the discount in the amount of $177,360 during the first nine 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 September 30, 2009 the unpaid balance of $134,705 is classified
as a current liability.





(c) $3,250,000 revolving line
of credit, payable to the Maverick former shareholders in monthly interest
payments at prime plus 0.25%, 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.  Due to the ongoing litigation related to
Maverick, this note was not paid on the due date.  For more
information see Note 12 Litigation.





(e) Second term note, payable
to the Maverick former shareholders in monthly interest payments at prime plus
0.50% 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.


15





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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




For
      the Twelve Months Ended September 30,2010
                          
                          $
                          16,9032011
                          
                          
                          2812012
                          
                          
                          2812013
                          
                          
                          3,942$
                          21,407




The
following is a schedule of future minimum lease payments under capitalized
leases together with the present value of the net minimum lease payments at
September 30, 2009 (stated in thousands):




For
      the Twelve Months Ended September 30,2010
                            
                            $
                            1942011
                            
                            
                            1432012
                            
                            
                            64Total
      minimum lease payments
                            
                            
                            401Less:  Amount
      representing interest
                            
                            
                            (73
                            )Current
      value of minimum lease payments
                            
                            
                            328Less:  Current
      maturities
                            
                            
                            (169
                            )$
                            159





The
effective interest rate on capitalized leases ranges from 1% - 27%.





Note 9 –
Earnings per
Share




Computation
of Earnings per Share —The Company accounts for earnings per share in
accordance with ASC 260 “Earnings Per Share”,
(formerly SFAS No. 128, "Earnings per Share"), which
establishes the requirements for presenting earnings per share ("EPS"). ASC 260
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.





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):


16





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





Three Months Ended Sept. 30,2009
                        
                        
                        2008Numerator:Net
      income applicable to common stockholders
                        
                        $
                        124,311
                        
                        
                        $
                        12,038,266Denominator:Denominator
      for basic net income 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 net income per share — weighted-average shares
      outstanding and assumed conversions
                        
                        
                        22,070,762
                        
                        
                        
                        22,070,762Basic
      net income per share
                        
                        $
                        0.01
                        
                        
                        $
                        0.55Diluted
      net income per share
                        
                        $
                        0.01
                        
                        
                        $
                        0.55





Nine Months Ended Sept. 30,2009
                        
                        
                        2008Numerator:Net
      (loss) applicable to common stockholders
                        
                        $
                        (8,853,769
                        )
                        
                        $
                        (2,033,877
                        )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
      (loss) per share
                        
                        $
                        (0.40
                        )
                        
                        $
                        (0.09
                        )Diluted
      (loss) per share
                        
                        $
                        (0.40
                        )
                        
                        $
                        (0.09
                        )





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 nine months ending September 30, 2009 and 2008.
On October 23, 2009 the warrants expired by their own terms.  None of the
original warrants were exercised.  For the nine months and three months
ended September 30, 2009 and 2008, options to purchase 156,000 and 110,000
shares of common stock, respectively, were not considered in calculating
diluted EPS because the effect would be anti-dilutive.


17





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





Note
10 – Income Taxes




The
Company utilizes an asset liability approach to determine the extent of any
deferred income taxes, as described in ASC Topic 740 “Income Taxes” (ASC 740),
(formerly, 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.




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 ASC 740. Therefore, the Company has established a valuation allowance of
$3.0 million on its deferred tax assets at September 30, 2009 and December
31, 2008.




There are
no uncertain income tax positions required to be recorded pursuant to ASC 740.
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 September 30,
2009.





Note
11 - Segment Information




With the
consummation of the Maverick acquisition, in accordance with ASC Topic 280
“Segment Reporting”(ASC 280), (formerly, 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 nine months ended September
      30, 2009, three customers accounted for approximately 39%, 15% and
      12% of the Company’s crude oil and natural gas revenues.  The
      Company believes that the loss of any of its oil and gas purchasers would
      not have a material adverse effect on its results of operations due to the
      availability of other
purchasers.





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


18





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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




Exploration
                              
                              
                              
                              
                              
                              
                              
                              
                              ConsolidatedFor the Three Months Ended September 30, 2009:
                              
                              and Production
                              
                              
                              Engineering
                              
                              
                              Corporate
                              
                              
                              TotalRevenues
                              
                              $
                              4,714
                              
                              
                              $
                              4,756
                              
                              
                              $
                              —
                              
                              
                              $
                              9,471Intersegment
      revenues
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Total
      revenues
                              
                              $
                              4,714
                              
                              
                              $
                              4,756
                              
                              
                              $
                              —
                              
                              
                              $
                              9,471Income
      (loss) before income taxes
                              
                              $
                              730
                              
                              
                              $
                              (240
                              )
                              
                              $
                              (277
                              )
                              
                              $
                              213As of September 30, 2009 :Total
      assets
                              
                              $
                              80,750
                              
                              
                              $
                              8,801
                              
                              
                              $
                              33
                              
                              
                              $
                              89,584





Exploration
                          
                          
                          
                          
                          
                          
                          
                          
                          ConsolidatedFor the Nine Months Ended September 30, 2009:
                          
                          and Production
                          
                          
                          Engineering
                          
                          
                          Corporate
                          
                          
                          TotalRevenues
                          
                          $
                          12,521
                          
                          
                          $
                          14,738
                          
                          
                          $
                          —
                          
                          
                          $
                          27,259Intersegment
      revenues
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —Total
      revenues
                          
                          $
                          12,521
                          
                          
                          $
                          14,738
                          
                          
                          $
                          —
                          
                          
                          $
                          27,259Income
      (loss) before income taxes
                          
                          $
                          (9,574
                          )
                          
                          $
                          (2,045
                          )
                          
                          $
                          (1,975
                          )
                          
                          $
                          (13,554
                          )




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.  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. Miles Hyman, a former employee of KD Resources, LLC,
filed a claim against KD Resources, LLC and Platinum Energy stating that he was
discharged from KD Resources, LLC 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 forReview 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
filed his initial brief and the Company filed its brief.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.


19





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)




On
December 3, 2008, Mr. Robert Kovar, the Company’s  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.   It is the Company’s
contention that Mr. Kovar resigned his position without good reason and is
therefore, not entitled to severance or accelerated vesting of
options.  It is the Company’s  additional conviction that
the Cash Flow Note has been cancelled and that Platinum Energy in no longer
obligated to make any payments thereunder, pursuant to the terms of Mr. Kovar’s
employment agreement. The Company believes that Mr. Kovar did not have Good
Reason to resign and that the lawsuit has no merit.  The Company intends to
vigorously defend itself in this action.





On
December 3, 2008, Mr. Lance Duncan filed suit against Platinum Energy Resources,
Inc.  Mr. Duncan is seeking compensation for 515,713 shares of Platinum
stock, $13,857 for use of his private plane, and consummation of an agreement to
purchase a drilling rig for the sum of $2,478,000.  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.  The
Company believes that Mr. Duncan’s claims are without merit and the Company
intends to vigorously defend itself 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 Perm SUB
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 Perm
SUB. Moreover, by attempting to accelerate and collect on the cash flow
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.


20





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





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





On July
14, 2009, SNP Associates filed suit in the 333 rd
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.  The Company does not believe that
any of SNP’s claims have merit and the Company intends to vigorously defend
itself against these claims.  However, no assurance can be given that the
Company will prevail in this matter.





On
October 14, 2009, Maverick Engineering filed suit in Harris County against CITGO
Refining & Chemical Company, LP for Breach of Contract.  According
to the Petition, Maverick provided engineering services to CITGO and CITGO has
refused to pay for those services.  Maverick is suing for $357,538
plus damages, costs, attorney fees, interest, and other relief.  While
Maverick has performed all terms, conditions, and covenants required under its
contract with CITGO, it is too early in this litigation to be able to predict
the outcome.




On
October 20, 2009, Lisa Meier filed suit for breach of her employment
contract.  According to the Petition, Ms. Meier resigned for “good
cause” and she is seeking severance pay.  On June 10, 2009, Ms. Meier
delivered to the Board of Directors of Platinum Energy Resources, her second
notice of intent to resign for “Good Reason.” Ms. Meier’s first notice was
submitted on October 23, 2008, less than three months after entering into her
employment agreement, and subsequently withdrawn.  The Board of
Directors accepted Ms. Meier’s resignation, but stated that “good reason” did
not exist.  This matter is currently is the early phase of
litigation.  The Company believes that Ms. Meier’s claims are without
merit and the Company intends to vigorously defend itself 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 nine months ended September 30, 2009 as
compared to the three and nine months ended September 30, 2008


(B)
  A discussion of the results of operations for our oil and gas operations
for the three and nine months ended September 30, 2009 as compared to the three
and nine months ended September 30, 2008


(C) 
We purchased Maverick Engineering on April 29, 2008.  Accordingly, since we
did not own that business during the full nine month period ended September 30,
2008, we have included a comparison of certain summarized historical
information of Maverick for the three months ended September 30, 2009 compared
with the three months ended June 30, 2009 in order to provide relevant
information.  No comparison is presented for the comparable nine month
periods ending September 30, 2009 and 2008, because of the lack of
relevance.





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 and 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 September 30, 2009 as compared to the three months ended
September 30, 2008




On a
consolidated basis we had net income of approximately $0.1 million during the
three months ending September 30, 2009 compared to net income of approximately
$12.0 million during the comparative period ending September 30, 2008.  The
primary components of the change in net income between the two periods was
related to the change in the fair value of our commodity hedge positions during
the periods reported and to the change in commodity pricing.  For further
discussion regarding the income generated by the changes in fair value and
commodity pricing, refer to our discussion of “Results of Operations - Oil and
Gas” later in this section.




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 September 30, 2009 was
$277,000 as compared to approximately $841,000 for the three months ended
September 30, 2008.  The decrease was due primarily to a decrease in legal
and accounting costs related to our filing of the S-1 in 2008 for the
registration of the shares issued in conjunction with the TEC
purchase.




We also
incurred unrealized gains of $465,000 for the three months ended September
30, 2009, as compared to gains of $1.7 million in the comparable 2008 period on
the increase 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 nine months ended September 30, 2009 as compared to the nine months ended
September 30, 2008




On a
consolidated basis we had a net loss of approximately $8.9 million during the
first nine months ending September 30, 2009 compared to a net loss of
approximately $2.0 million during the comparative period ending September 30,
2008.  The primary components of the change in net income between the two
periods was related to the change in the fair value of our commodity hedge
positions during the periods reported and to the change in commodity
pricing.  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.




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 nine months ending September 30, 2009 was
$2.0 million as compared to approximately $3.1 million for the nine months
ending September 30, 2008.  The higher expense during the 2008 period was
due primarily to an increase in legal and accounting costs related to our filing
of the S-1 in 2008 for the registration of the shares issued in conjunction with
the TEC purchase.


23





We also
incurred unrealized losses of $3.5 million for the nine months ending September
30, 2009, as compared to a gain of $142,000 in the comparable 2008 period
related to the change 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 September 30, 2009 as compared to the
Three Months Ended September 30, 2008




Our
revenues from oil and gas sales for the three months ended September 30, 2009
were $4.7 million. Oil and gas sales for the three months ended September 30,
2008 were $10.9 million. The 57% decrease in oil and gas revenues was due to a
decrease in commodity prices combined with a decrease in production on a Boe
basis during the three months ended September 30, 2009. The average oil price
for the three months ended September 30, 2009 was $65.07 compared to $115.40 for
the three months ended September 30, 2008. The average gas price for the three
months ended September 30, 2009 was $3.54 per Mcf compared to $9.53 for the
three months ended September 30, 2008.  Production on a Boe basis
decreased 19% from 115,038 Boe’s during the three months ended September
30, 2008 to 93,014 Boe’s during the three months ended September 30,
2009.  Commodity prices are affected by factors beyond our
control.  National and global demand and supply issues are the primary
components affecting the price of oil and gas we receive as a
company.  The decline in production between the periods is primarily
related to the normal decline we expect to see assuming no continuous drilling
program.





Oil and
gas production costs in the form of lease operating expense on a Boe basis
decreased 36% from $36.25 per Boe during the three months ended
September 30, 2008 to $23.22 per Boe during the three months ended
September 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 52% or approximately $1.4
million, during the three months ended September 30, 2009 compared to the three
months ended September 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 and to the 19% decrease in production between
the comparative periods.





We also
incurred a gain of approximately $951 thousand for the three months ended
September 30, 2009 as compared to a gain of approximately $17.9 million
during the three months ended September 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 Nine Months Ended
September 30, 2009 as compared to the Nine Months Ended September 30,
2008




Our
revenues from oil and gas sales for the nine months ended September 30, 2009
were $12.5 million. Oil and gas sales for the nine months ended September 30,
2008 were $28.7 million. The 57% decrease in oil and gas revenues was
essentially due to a decrease in average commodity prices.  The
average oil price for the nine months ended September 30, 2009 was $52.17
compared to $112.44 for the nine months ended September 30, 2008. The average
gas price for the nine months ended September 30, 2009 was $3.28 per Mcf
compared to $9.60 for the nine months ended September 30, 2008. Production on a
Boe basis decreased 1% from 304,107 Boe’s during the nine months ended September
30, 2008 to 300,836 Boe’s during the nine months ended September 30,
2009.





Oil and
gas production costs in the form of lease operating expense on a Boe basis
decreased 24% from $31.21 per Boe during the nine months ended
September 30, 2008 to $23.58 per Boe during the nine months ended September
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 $2.7 million, or 37%, during
the nine months ended September 30, 2009 compared to the nine months ended
September 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 losses of approximately $6.9 million for the nine months ended
September 30, 2009 as compared to losses of approximately $7.2 million
during the nine months ended September 30, 2008 on the value of certain hedge
contracts on crude oil and natural gas.


24





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 September
      30,2009
                        
                        
                        2008ProductionOil
      (Bls)
                        
                        
                        62,201
                        
                        
                        
                        73,554Gas
      (Mcf)
                        
                        
                        184,878
                        
                        
                        
                        248,904Boe
      (Bls)
                        
                        
                        93,014
                        
                        
                        
                        115,038Average
      PricesOil
      ($/Bbl)
                        
                        $
                        65.07
                        
                        
                        $
                        115.40Gas
      ($/Mcf)
                        
                        $
                        3.54
                        
                        
                        $
                        9.53Average
      Lifting CostPer
      Boe
                        
                        $
                        23.22
                        
                        
                        $
                        36.25





Nine Months Ended September
      30,2009
                        
                        
                        2008ProductionOil
      (Bls)
                        
                        
                        201,900
                        
                        
                        
                        203,769Gas
      (Mcf)
                        
                        
                        593,617
                        
                        
                        
                        602,029Boe
      (Bls)
                        
                        
                        300,836
                        
                        
                        
                        304,107Average
      PricesOil
      ($/Bbl)
                        
                        $
                        52.17
                        
                        
                        $
                        112.44Gas
      ($/Mcf)
                        
                        $
                        3.28
                        
                        
                        $
                        9.60Average
      Lifting CostPer
      Boe
                        
                        $
                        23.58
                        
                        
                        $
                        31.21





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




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




Revenues
for the three months ended September 30, 2009 and the three months ended
June 30, 2009 were $4.8 million and $4.5 million, respectively. Gross
margin performance for these periods was 12.6% and 4.4%, respectively. The
improvement in third quarter gross margin is attributable to elimination of
non-billable positions, resulting in improved personnel
utilization.  Third quarter gross margin also benefited from an
increase in total revenue volume, while fixed costs remained flat, and by the
replacement of certain lower margin Industrial business with higher margin work
for new clients.  Engineering services reported pretax losses of
$239,973 and $798,520 in the three months ended September 30, 2009 and the three
months ended June 30, 2009 respectively.




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 23,
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. On October 23, 2009 the warrants expired by their own
terms.  None of the original warrants were exercised.





The
following additional events occurred or had an impact during the nine months
ended September 30, 2009 or may have an impact on our liquidity in future
periods:


25





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 September 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 September 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.




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.


26


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. 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.





On
October 20, 2009, Lisa Meier filed suit for breach of her employment
contract.  According to the Petition, Ms. Meier resigned for “good
cause” and she is seeking severance pay.  On June 10, 2009, Ms. Meier
delivered to the Board of Directors of Platinum energy Resources, her second
notice of intent to resign for “Good Reason.” Ms. Meier’s first notice was
submitted on October 23, 2008, less than three months after entering into her
employment agreement, and subsequently withdrawn.  The Board of
Directors accepted Ms. Meier’s resignation, but stated that “good reason” did
not exist.  This matter is currently is the early phase of
litigation.  We believe that Ms. Meier’s claims are without merit and
we intend to vigorously defend ourselves against these claims. However, no
assurance can be given that we will prevail in this matter.




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 September 30,2010
                                
                                $
                                342,5002012
                                
                                
                                190,000$
                                532,500


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 September 30, 2009 we have
incurred capital expenditures of approximately $1.4 million, primarily related
to  projects begun in 2008 but not completed until
2009.  Additionally, we drilled one successful well in our Ball/Bird
field in Palo Pinto County, Texas.




Off-Balance
Sheet Arrangements




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




Critical
Accounting Policies:




Use
of Estimates




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




Full
Cost and Impairment of Assets




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




There is
a risk that we will be required to write down the carrying value of our oil and
natural gas properties when oil and natural gas prices decline. If commodity
prices deteriorate, it is possible that we could incur impairment in future
periods.




Depletion




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




Significant
Estimates and Assumptions




Oil
and Gas Reserves




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


28





(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 ASC 815 “Derivatives and Hedging”,
(formerly SFAS No. 133,” Accounting for Derivative
Instruments and Hedging Activities”, as amended).  ASC
815requires 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 September 30, 2009 and 2008 we reported net gains of $858,000
thousand and $17.9 million , respectively, on the change in value of our
derivative contracts.  For the nine months ended September 30, 2009
and 2008 we reported net losses of $8.2 million and $7.2 million respectively,
on the change in value of our derivative contracts.


29





Asset
Retirement Obligation




We follow
the provisions of ASC  Topic 410 “Asset Retirement and Environmental
Obligations”( ASC 410), (formerly, SFAS No. 143, “Accounting for Asset Retirement
Obligations”). ASC 410 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 Guidance




See Recent Accounting Guidance 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
September 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 September 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 September
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




On
September 15, 2009, Michael Cunningham stepped down as Platinum’s Interim Chief
Financial Officer and was succeeded by Steven Chaloupka as the Chief Financial
Officer. On October 15, 2009, Mr. Chaloupka resigned as the Company’s Chief
Financial Officer.  No reason was given by Mr. Chaloupka for the
resignation.  Otherwise, there were no changes in internal control
over financial reporting that occurred during the third 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.





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.  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. Miles Hyman, a former employee of KD Resources, LLC,
filed a claim against KD Resources, LLC and Platinum Energy stating that he was
discharged from KD Resources, LLC 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 filed his
initial brief and the Company filed its brief.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, LLC.  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.




On
December 3, 2008, Mr. 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.   It is our contention that
Mr. Kovar resigned his position without good reason and is therefore, not
entitled to severance or accelerated vesting of options.  It is our
additional conviction that the Cash Flow Note has been cancelled and that
Platinum Energy in no longer obligated to make any payments thereunder, pursuant
to the terms of Mr. Kovar’s employment agreement. We believe that Mr. Kovar 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, Mr. Lance Duncan filed suit against Platinum Energy Resources,
Inc.  Mr. Duncan is seeking compensation for 515,713 shares of Platinum
stock, approximately $14 thousand 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.


31


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 Perm SUB
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 Perm
SUB. Moreover, by attempting to accelerate and collect on the cash flow
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.





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





On July
14, 2009, SNP Associates filed suit in the 333 rd
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.  The Company does 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 the Company
will prevail in this matter.





On
October 14, 2009, Maverick Engineering filed suit in Harris County against CITGO
Refining & Chemical Company, LP for Breach of Contract.  According
to the Petition, Maverick provided engineering services to CITGO and CITGO has
refused to pay for those services.  Maverick is suing for $357,538.16
plus damages, costs, attorney fees, interest, and other relief.  While
Maverick has performed all terms, conditions, and covenants required under its
contract with CITGO, it is too early in this litigation to be able to predict
outcome.




On
October 20, 2009, Lisa Meier filed suit for breach of her employment
contract.  According to the Petition, Ms. Meier resigned for “good
cause” and she is seeking severance pay.  On June 10, 2009, Ms. Meier
delivered to the Board of Directors of Platinum energy Resources, her second
notice of intent to resign for “Good Reason.” Ms. Meier’s first notice was
submitted on October 23, 2008, less than three months after entering into her
employment agreement, and subsequently withdrawn.  The Board of
Directors accepted Ms. Meier’s resignation, but stated that “good reason” did
not exist.  This matter is currently is the early phase of
litigation.  We believe that Ms. Meier’s claims are without merit and
we intend to vigorously defend ourselves against these claims. 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.


32





Item 5.     Other
Information.




None.





Item 6.     Exhibits.




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




Exhibit
                  Number
                
                Exhibit Description31.1
                
                Section
      302 Certification of Principal Executive Officer31.2
                
                Section
      302 Certification of Principal Financial Officer32.1
                
                Section
      906 Certification of Principal Executive and Financial
    Officer


33




SIGNATURES




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




PLATINUM
      ENERGY RESOURCES, INC.Date: November
      11, 2009
              By:
              /s/
      Al RahmaniAl
      Rahmani
                Interim
      Chief Executive Officer and Principal Financial
  Officer


34