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 March 31, 2010




or




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




For the
transition period from ___________ to __________




Commission
file number:000-51553




PLATINUM
ENERGY RESOURCES, INC.


(Exact
name of registrant as specified in its charter)




Delaware
              
              14-1928384(State
      or other jurisdiction of incorporation or
                organization)
              
              (I.R.S.
      Employer Identification No.)11490
      Westheimer Road, Suite 1000
                Houston,
      Texas
                (Address
      of principal executive offices)
              
              77077
                (Zip
      Code)





(281)
649-4500


(Registrant's
telephone number, including area code)




Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yesx
 No ̈




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




Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
See definition of “accelerated filer” “large accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act (check
one).


Large
Accelerated Filer   ̈Accelerated Filer  oNon-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
July 29, 2010, 22,606,478 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
                  
                  20Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  26Item
      4T.
                  Controls
      and Procedures
                  
                  27PART
      II- OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  
                  28Item
      1A.
                  Risk
      Factors
                  
                  29Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  29Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  29Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  
                  30Item
      5.
                  Other
      Information
                  
                  30Item
      6.
                  Exhibits
                  
                  30Signatures
                  
                  31


2




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)





March 31, 2010
                
                
                December 31, 2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                
                $
                5,838,807
                
                
                $
                2,941,939Accounts
      receivable, net of $224,392 allowance for doubtful accounts as of March
      31, 2010 and December 31, 2009Oil
      and gas sales
                
                
                2,592,567
                
                
                
                2,079,201Service
                
                
                3,119,983
                
                
                
                2,961,546Inventory
                
                
                439,157
                
                
                
                410,791Fair
      value of commodity derivatives - current
                
                
                2,480,017
                
                
                
                3,595,144Prepaid
      expenses and other current assets
                
                
                340,022
                
                
                
                610,989Total
      Current Assets
                
                
                14,810,553
                
                
                
                12,599,610Property
      and equipment, at costOil
      and gas properties, full cost method
                
                
                208,162,430
                
                
                
                208,291,206Other
      property and equipment
                
                
                5,593,125
                
                
                
                5,565,746Less
      accumulated depreciation, depletion, amortization and
      impairment
                
                
                (169,363,659
                )
                
                
                (167,973,630
                )Property
      and equipment, net
                
                
                44,391,896
                
                
                
                45,883,322Other
      assetsFair
      value of commodity derivatives
                
                
                2,526,309
                
                
                
                3,190,294Real
      estate held for development
                
                
                2,700,000
                
                
                
                2,700,000Total
      Assets
                
                $
                64,428,758
                
                
                $
                64,373,226LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payableTrade
                
                $
                2,628,465
                
                
                $
                2,154,188Oil
      and gas sales
                
                
                1,264,741
                
                
                
                920,818Unearned
      service revenues
                
                
                1,485,898
                
                
                
                1,525,356Accrued
      liabilities and other
                
                
                1,642,261
                
                
                
                2,508,579Income
      taxes payable
                
                
                298,677
                
                
                
                328,324Current
      portion of asset retirement obligation
                
                
                761,479
                
                
                
                812,670Current
      maturities of long-term debt, capital lease obligations and notes
      payable
                
                
                17,782,910
                
                
                
                17,802,925Total
      Current Liabilities
                
                
                25,864,431
                
                
                
                26,052,860Long-term
      debt and capital lease obligations, net of current portion
                
                
                78,072
                
                
                
                111,315Notes
      payable - acquisitions
                
                
                3,484,840
                
                
                
                3,422,433Other
      accrued liabilities
                
                
                119,735
                
                
                
                119,735Asset
      retirement obligation
                
                
                6,495,778
                
                
                
                6,426,424Total
      Liabilities
                
                
                36,042,856
                
                
                
                36,132,767COMMITMENTS
      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 22,606,476 and  22,070,762 outstanding at March 31, 2010 and
      December 31, 2009, respectively
                
                
                2,407
                
                
                
                2,407Additional
      paid-in capital
                
                
                152,074,577
                
                
                
                155,175,771Accumulated
      deficit
                
                
                (112,229,027
                )
                
                
                (111,276,255
                )Treasury
      stock – 1,462,199 and 1,997,913 shares,  respectively, at
      cost
                
                
                (11,462,055
                )
                
                
                (15,661,464
                )Total
      Stockholders' Equity
                
                
                28,385,902
                
                
                
                28,240,459Total
      Liabilities and Stockholders' Equity
                
                $
                64,428,758
                
                
                $
                64,373,226




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


3





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)





Three Months Ended March 31,2010
                
                
                2009REVENUESOil
      and gas sales
                
                $
                6,056,196
                
                
                $
                3,314,701Service
      revenues
                
                
                4,614,418
                
                
                
                5,520,49510,670,614
                
                
                
                8,835,196COSTS
      AND EXPENSESLease
      and other operating expense
                
                
                2,290,867
                
                
                
                2,730,428Cost
      of service revenues
                
                
                4,281,445
                
                
                
                5,333,701Marketing,
      general and administrative expense
                
                
                1,775,927
                
                
                
                2,230,721Depreciation,
      depletion and amortization expense
                
                
                1,390,029
                
                
                
                1,929,944Accretion
      of asset retirement obligations
                
                
                356,347
                
                
                
                78,713Total
      costs and expenses
                
                
                10,094,615
                
                
                
                12,303,507Operating
      Income (Loss)
                
                
                575,999
                
                
                
                (3,468,311
                )OTHER
      INCOME (EXPENSES)Interest
      income
                
                
                50,412
                
                
                
                3,433Interest
      expense
                
                
                (259,959
                )
                
                
                (295,891
                )Change
      in fair value of commodity derivatives
                
                
                (1,305,806
                )
                
                
                527,445Other
                
                
                —
                
                
                
                2,431Total
      other income (expense)
                
                
                (1,515,353
                )
                
                
                237,418Loss
      Before Income Taxes
                
                
                (939,354
                )
                
                
                (3,230,893
                )Provision
      (Benefit) From Income Taxes
                
                
                13,418
                
                
                
                (1,114,737
                )Net
      Loss
                
                $
                (952,772
                )
                
                $
                (2,116,156
                )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES:Basic
                
                
                22,338,619
                
                
                
                22,070,762Diluted
                
                
                22,338,619
                
                
                
                22,070,762NET
      LOSS PER COMMON SHARE:Basic
                
                $
                (0.04
                )
                
                $
                (0.10
                )Diluted
                
                $
                (0.04
                )
                
                $
                (0.10
                )




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


4





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)











Three Months Ended March 31,2010
                
                
                2009Cash
      Flows From Operating ActivitiesNet
      loss
                
                $
                (952,772
                )
                
                $
                (2,116,156
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation,
      depletion and amortization
                
                
                1,390,029
                
                
                
                1,929,944Accretion
      of asset retirement obligation
                
                
                356,347
                
                
                
                78,713Accretion
      of debt discount
                
                
                62,407
                
                
                
                58,055Deferred
      income taxes
                
                
                —
                
                
                
                (1,130,813
                )(Gain)/loss
      on commodity derivatives
                
                
                1,305,806
                
                
                
                (527,445
                )Changes
      in operating assets and liabilities:Accounts
      receivable – Oil and gas
                
                
                (513,366
                )
                
                
                262,538Accounts
      receivable – Service
                
                
                (158,437
                )
                
                
                1,313,106Inventory
                
                
                (28,366
                )
                
                
                (25,410
                )Prepaid
      expenses and other current assets
                
                
                270,967
                
                
                
                137,283Accounts
      payable – Trade
                
                
                289,096
                
                
                
                (761,261
                )Accounts
      payable – Oil and gas
                
                
                343,923
                
                
                
                (594,427
                )Accrued
      liabilities, unearned service revenues and other
                
                
                192,439
                
                
                
                (746,188
                )Income
      taxes payable
                
                
                (29,647
                )
                
                
                59,601Net
      cash provided by (used in) operating activities
                
                
                2,528,426
                
                
                
                (2,062,460
                )Cash
      Flows From Investing ActivitiesAdditions
      to property and equipment
                
                
                (51,608
                )
                
                
                (796,192
                )Cash
      received on settlement of derivative contracts
                
                
                473,306
                
                
                
                837,546Net
      cash provided by (used in) investing activities
                
                
                421,698
                
                
                
                41,354Cash
      Flows From Financing ActivitiesProceeds
      of revolving credit facility
                
                
                —
                
                
                
                1,000,000Payments,
      long-term debt and capital leases
                
                
                (53,256
                )
                
                
                (535,301
                )Net
      cash provided by (used in) financing activities
                
                
                (53,256
                )
                
                
                464,699Net
      Increase (Decrease)  in Cash and
      Cash  Equivalents
                
                
                2,896,868
                
                
                
                (1,556,407
                )Cash
      and Cash Equivalents - Beginning of the Period
                
                
                2,941,939
                
                
                
                3,668,092Cash
      and Cash Equivalents - End of Period
                
                $
                5,838,807
                
                
                $
                2,111,685SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
                
                $
                147,920
                
                
                $
                300,455Income
      taxes
                
                
                —
                
                
                
                50,000Non-Cash
      Investing and Financing ActivitiesIssuance
      of treasury stock to settle accrued liability
                
                $
                1,098,215
                
                
                
                —




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


5




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)





Note
1 - Organization, Business and Operations




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





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





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





Note
2 – Going Concern





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  The Company has incurred
significant losses, resulting in cumulative losses of $112,229,027 through March
31, 2010.  Additionally, the Company’s outstanding loan with the Bank
of Texas matured on June 1, 2010 and remains unpaid as of July 29, 2010. At
March 31, 2010 the loan balance was approximately $13 million.  Since
March 31, 2010, the Company has been able to reduce the Bank of Texas loan
balance to approximately $9.5 million by using excess cash on hand and by using
the cash proceeds received from the liquidation of a portion of the Company’s
derivative positions.  (See Note 6 –“ Derivative Financial
Instruments”)  However, the Company’s current cash on hand is not
adequate to satisfy the Bank of Texas debt. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern.





The
Company’s available options to settle the outstanding loan with the Bank of
Texas may require a combination of actions, including possible further
liquidation of the Company’s hedge positions, use of available cash on hand, a
partial sale of its oil and gas assets, seeking additional equity financing, or
the refinancing of its existing debt.  If the Company is unable to raise
additional equity or to refinance its loan with the Bank of Texas, then it will
have no choice but to sell a portion of its oil and gas properties.
Additionally, no assurance can be given that any such financing or refinancing,
if achievable, will be adequate to meet our ultimate capital needs and to
support our growth. If the Company is not able to obtain additional financing on
a timely basis and on satisfactory terms, or should the Company receive a
foreclosure notice from the Bank of Texas, our operations would be materially
negatively impacted.





As
a result of the above discussed conditions, there exists substantial doubt about
our ability to continue as a going concern. Our consolidated financial
statements are presented on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. The  consolidated financial statements do not include any
adjustments relating to the recoverability of the recorded assets or the
classification of liabilities that may be necessary should the Company be unable
to continue as a going concern.





Note
3 – Basis of Presentation




The
accompanying unaudited interim consolidated financial statements as of
March 31, 2010 and for the three months then ended have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and pursuant to the instructions to
Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange
Commission (“SEC”) and on the same basis as the annual audited consolidated
financial statements. The unaudited interim consolidated balance sheet as of
March 31, 2010, unaudited interim consolidated statements of operations for
the three months ended March 31, 2010 and 2009, and the unaudited interim
consolidated statements of cash flows for the three months ended March 31,
2010 and 2009 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 ended March 31, 2010
are not necessarily indicative of results to be expected for the year ending
December 31, 2010 or for any future interim period. The consolidated
balance sheet at December 31, 2009 has been derived from audited consolidated
financial statements; however, the notes to the consolidated financial
statements do not include all of the information and notes required by
accounting principles generally accepted in the United States of America for
complete consolidated financial statements. The accompanying unaudited interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2009 as filed with the
SEC.





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


6


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)





Note 4 — Summary of Significant
Accounting Policies





Estimates
and Assumptions




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





Cash
and Cash Equivalents





Cash
and cash equivalents include demand deposits and money market funds for purposes
of the statements of cash flows. The Company considers all highly liquid
monetary instruments with original maturities of three months or less to be cash
equivalents.  Financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of cash
deposits.  Accounts at each financial institution are insured by the
Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.   As of
March 31, 2010, the Company had deposits with institutions in excess of the
insured limits totaling $4,820,751.





Allowance
for Doubtful Accounts





The
Company’s reported balance of accounts receivable, net of allowance for doubtful
accounts, represents management’s estimate of the amount that ultimately will be
realized in cash.  The Company reviews the adequacy of the allowance
for doubtful accounts on an ongoing basis, using historical payment trends, the
age of the receivables and knowledge of the individual
customers.  When the analyses indicate, management increases or
decreases the allowance accordingly.  If the financial condition of
our customers were to deteriorate, additional allowances may be
required.  The Company did not change its allowance for doubtful
accounts during the quarter ended March 31, 2010.





Oil and Gas
Properties





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





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





Under the
full cost method of accounting, a ceiling test is performed quarterly. The full
cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule
4-10. The ceiling test determines a limit on the carrying value of oil and gas
properties.  The capitalized costs of proved oil and gas properties,
net of accumulated depreciation, depletion, amortization, and
impairment and the related deferred income taxes, may not exceed the
estimated future net cash flows from proved oil and gas reserves, excluding
future cash outflows associated with settling asset retirement obligations that
have been accrued on the balance sheet, generally using average prices for the
preceding 12 months held flat for the life of production and including the
effect of derivative instruments that qualify as cash flow hedges, if any,
discounted at 10%, net of related tax effects, plus the cost of unevaluated
properties and major development projects excluded from the costs being
amortized. If capitalized costs exceed this limit, the excess is charged to
expense and reflected as additional accumulated depreciation, depletion,
amortization and impairment.


7


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





Contingencies





Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and its
legal counsel assess such contingent liabilities, and such 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.




Recently
Issued Accounting Pronouncements





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 the date at which the financial statements were
available to be issued and has determined that, except as disclosed in Note 16,
no such events have occurred that would require adjustment to or disclosure in
the financial statements.





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 or results of
operations.




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.




In June
2008, the FASB ratified Emerging Issue Task Force (“EITF”) 07-5,Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock
  (“EITF 07-5”). EITF 07-5 provides framework for determining whether
an instrument is indexed to an entity’s own stock. EITF 07-5 is effective for
fiscal years beginning after December 15, 2008. The implementation of EITF 07-5
did not  have a material effect on the Company’s consolidated
financial statements.




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.


8





Note
5 - Oil and Gas Properties




The
following table sets forth the Company’s costs incurred in oil and gas property
acquisition, exploration and development activities for the three months ended
March 31, 2010 (stated in thousands):





2010Balance
      at January 1,
                    
                    $
                    208,291Acquisition
      of properties:Proved
                    
                    
                    —Unproved
                    
                    
                    —Adjustment
      to purchase price of oil and gas properties
                    
                    
                    —Exploration
      Costs
                    
                    
                    —Revision
      to asset retirement obligation
                    
                    
                    (153
                    )Development
      costs
                    
                    
                    24Balance
      at March 31,
                    
                    $
                    208,162





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





March 31,
                      2010
                    
                    
                    December 31,
                      2009Properties
      subject to depletion
                    
                    $
                    208,162
                    
                    
                    $
                    208,291Properties
      not subject to depletion
                    
                    
                    —
                    
                    
                    
                    —208,162
                    
                    
                    
                    208,291Accumulated
      depletion and impairment
                    
                    
                    (165,722
                    )
                    
                    
                    (164,497
                    )Net
      capitalized costs at March 31
                    
                    $
                    42,440
                    
                    
                    $
                    43,794




Note
6 – Derivative Financial Instruments




The
Company engages in price risk management activities from time to
time.  We utilize derivative instruments, consisting of swaps, floors
and collars, to attempt to reduce our exposure to changes in commodity prices.
All derivative instruments are recognized as assets or liabilities in the
balance sheet, measured at fair value. The accounting for changes in the fair
value of a derivative depends on both the intended purpose and the formal
designation of the derivative. Designation is established at the inception of a
derivative, but subsequent changes to the designation are permitted. We have
elected not to designate any of our derivative financial contracts as accounting
hedges 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.


9





For the
three months ended March 31, 2010 and 2009, the Company included in other income
(expenses) realized and unrealized losses related to its derivative contracts as
follows (stated in thousands):





Three Months
                        Ended March 31,
                        2010
                      
                      
                      Three Months
                        Ended March 31,
                        2009Crude
      oil derivative realized gains (losses)
                      
                      $
                      52
                      
                      
                      
                      837Crude
      oil derivative change in unrealized gains (losses)
                      
                      
                      (1,357
                      )
                      
                      
                      (310
                      )Gain
      (loss) on derivatives
                      
                      $
                      (1,305
                      )
                      
                      
                      527





Presented
below is a summary of the Company’s crude oil derivative financial contracts at
March 31, 2010:




Period
                            Ended
                            March 31,
                          
                          Instrument
                            Type
                          
                          
                          Total Volumes
                            (MMBTU/BBL)
                          
                          
                          Contract
                            Price
                          
                          
                          Fair Value Asset
                            (stated in thousands)2011
                          
                          Puts
                          
                          
                          
                          80,000
                          
                          
                          
                          75.00
                          
                          
                          $
                          174Puts
                          
                          
                          
                          80,000
                          
                          
                          
                          80.00
                          
                          
                          
                          482Puts
                          
                          
                          
                          80,000
                          
                          
                          
                          85.00
                          
                          
                          
                          451Swaps
                          
                          
                          
                          100,000
                          
                          
                          
                          95.50
                          
                          
                          
                          1,090Swaps
                          
                          
                          
                          30,000
                          
                          
                          
                          95.25
                          
                          
                          
                          2832012
                          
                          Swaps
                          
                          
                          
                          90,000
                          
                          
                          
                          95.25
                          
                          
                          
                          808Swaps
                          
                          
                          
                          30.000
                          
                          
                          
                          95.00
                          
                          
                          
                          251Puts
                          
                          
                          
                          90,000
                          
                          
                          
                          80.00
                          
                          
                          
                          7382013
                          
                          Swaps
                          
                          
                          
                          90,000
                          
                          
                          
                          95.00
                          
                          
                          
                          729Total
      fair value
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          5,006




Note
7 – Fair Value Measurements





As
defined in ASC 820, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). In determining the fair value
of its derivative contracts the Company evaluates its counterparty and third
party service provider valuations and adjusts for credit risk when
appropriate.  ASC 820 establishes a framework for measuring fair value
and expands disclosure about fair value measurements. The statement requires
fair value measurements be classified and disclosed in one of the following
categories:





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





Level
      2:
            Quoted
      prices in markets that are not active, or inputs which are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability. This category includes those derivative instruments
      that are valued using observable market data. Substantially all of these
      inputs are observable in the marketplace throughout the full term of the
      derivative instrument, can be derived from observable data, or supported
      by observable levels at which transactions are executed in the
      marketplace.





Level
      3:
            Measured
      based on prices or valuation models that require inputs that are both
      significant to the fair value measurement and less observable from
      objective sources (i.e., supported by little or no market activity). Level
      3 instruments can include derivative instruments where the Company does
      not have sufficient corroborating market evidence of significant inputs to
      the valuation model to support classifying these instruments as Level 1 or
      Level 2.


10





As
required by ASC 815, financial assets and liabilities are classified based on
the lowest level of input that is significant to the fair value measurement. The
Company’s assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of the fair value of
assets and liabilities and their placement within the fair value hierarchy
levels.





The
following table presents information about the Company’s assets and liabilities
that are measured at fair value on a recurring basis as of March 31, 2010, and
indicates the fair value hierarchy of the valuation techniques utilized by the
Company to determine such fair value.  The fair value of derivative
financial instruments is determined based on counterparties’ valuation models
that utilize market-corroborated inputs.





As of March 31, 2010(in thousands)Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    TotalOil
      and natural gas derivatives
                    
                    
                    —
                    
                    
                    $
                    5,006
                    
                    
                    
                    —
                    
                    
                    $
                    5,006




The
determination of the fair values above incorporates various factors required
under ASC 815. These factors include the impact of our nonperformance risk and
the credit standing of the counterparties involved in the Company’s derivative
contracts.




Gains and
losses (realized and unrealized) included in earnings for the three months ended
March 31, 2010 and 2009 are reported in other income on the consolidated
statement of operations.


11





PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)




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





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





Note 8 – Commitments and
Contingencies




Lance
Duncan Consulting Agreement





Effective
with the Tandem acquisition on October 26, 2007, the Company entered into a
consulting agreement with Mr. Lance Duncan, for consulting services, including
investigation and evaluation of possible future acquisitions for the Company.
Under the terms of the consulting agreement, the Company agreed to issue to Mr.
Duncan a total of 714,286 shares of the Company’s restricted common stock as
consideration over the period of service. These shares 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. The Company did not issue these shares due to a
dispute between the Company and Mr. Duncan.  In February 2010, all
claims between the Company and Mr. Duncan were resolved and the balance of the
shares was distributed accordingly.  See Note 14.




Note
9 - Long-Term Debt and Capital Lease Obligations




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





March31,
                      2010
                    
                    
                    December31,
                      2009Oil
      and gas revolving line of credit
                    
                    (a)
                    
                    $
                    13,009
                    
                    
                    $
                    13,029Notes
      payable - acquisitions
                    
                    (b)
                    
                    
                    3,485
                    
                    
                    
                    3,422Revolving
      line of credit to former shareholders – Maverick
                    
                    (c)(f)
                    
                    
                    2,917
                    
                    
                    
                    2,917Term
      note to former shareholders - Maverick
                    
                    (d)(f)
                    
                    
                    252
                    
                    
                    
                    252Second
      term note to former shareholders - Maverick
                    
                    (e)(f)
                    
                    
                    1,404
                    
                    
                    
                    1,404Capital
      lease obligations
                    
                    
                    
                    
                    279
                    
                    
                    
                    312$
                    21,346
                    
                    
                    
                    21,336Less:
      Current maturities
                    
                    
                    
                    
                    17,783
                    
                    
                    
                    17,802Long-term
      debt
                    
                    
                    
                    $
                    3,563
                    
                    
                    
                    3,534


12




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)




(a)   On March
14, 2008, Tandem and PER Gulf Coast, Inc. (“Borrower”) which are wholly-owned
subsidiaries of the Company, entered into a Senior Secured Revolving Credit
Facility (“Senior Credit Facility”) with Bank of Texas. The Senior Credit
Facility provided for a revolving credit facility up to the lesser of the
borrowing base and $100 million. The initial borrowing base was set at $35
million.  The facility is collateralized by substantially all of the
Company’s proved oil & gas assets as well as substantially all of the
derivative financial instruments discussed in Note 6.  The Senior
Credit Facility was originally to mature on March 14, 2012, at which time all
outstanding borrowings would have to be repaid.





Under the
terms of the Senior Credit Facility, the Borrower must maintain certain
financial ratios, must repay any amounts due in excess of the borrowing base,
and may not declare any dividends or enter into any transactions resulting in a
change in control, without the bank’s consent.  A financial covenant under
the Senior Credit Facility requires us to maintain a ratio of indebtedness to
cash flow of no more than 3 to 1. The Company, as the parent company, is not a
co-borrower or guarantor of the line, and transfers from the Borrower to the
parent company are limited to (i) $1 million per fiscal year to the parent for
management fees, and (ii) the repayment of up to $2 million per fiscal year in
subordinate indebtedness owed to the parent.





In June
2009, the borrowing base was reduced to $15 million and the Senior Credit
Facility was amended to change the interest rate provisions. Under the amended
loan agreement, outstanding debt bears interest at LIBOR, plus a margin, which
varies according to the ratio of the Borrower’s outstanding borrowings against
the defined borrowing base, ranging from 2.5% to 3.50%, provided the interest
rate does not fall below a floor rate of 4.5% 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 0.50% per annum.  The maturity date
was also modified to June 1, 2010.  As of March 31, 2010, the $13 million
outstanding under the revolving line of credit was bearing interest at the
bank’s base rate, which was 4.5%.





On June
1, 2010, the Senior Credit Facility matured and the Borrower has not repaid the
amounts due under the Senior Credit Facility and is currently in
default.  Additionally, the Borrower is in default of the financial
reporting covenant, requiring the timely reporting of financial information, due
no more than 90 days after the end of the fiscal period.  The Borrower
is also in default of quarterly financial covenant 9.1(b), which requires us to
maintain a ratio of indebtedness to cash flow of no more than 3 to 1. As of July
29, 2010, the Borrowers have not received any notice of foreclosure on the
assets collateralizing the Senior Credit Facility.  Since March 31,
2010, the Company has been able to reduce the Bank of Texas loan balance to
approximately $9.5 million by using excess cash on hand and by using the cash
proceeds received from the liquidation of a portion of the Company’s derivative
positions.  The default interest rate under the Senior Credit Facility
is 10.0%.   The Company is negotiating directly with Bank of
Texas to determine an amount of cash collateral that will avoid any possible
actions of foreclosure by Bank of Texas.





(b)Maverick-As part of the
acquisition of Maverick, the Company agreed to pay $5 million over 5 years
pursuant to non-interest bearing cash flow notes, subject to certain escrows,
holdbacks and post-closing adjustments (“Cash Flow Notes”). The Cash Flow Notes
are payable quarterly at the rate of 50% of pre-tax net income generated by the
Maverick business on a stand-alone basis in the preceding quarter. At the five
year anniversary of the Cash Flow Notes, if the aggregate quarterly payments
made pursuant to the formula described in the preceding sentence are less than
$5 million, any shortfall will be converted into a one year term note, bearing
interest at the prime rate plus 2% per annum, with principal and interest due in
equal monthly installments over the twelve month
term.    The Cash Flow Notes can be accelerated by certain
events, including change in control of Maverick.  The Company’s
believes that no events since the acquisition of Maverick have triggered an
acceleration in the due date of the Cash Flow Notes.





The
purchase price was subject to adjustment for any change in working capital as
defined in the agreement, between October 31, 2007 and the closing date, as well
as other adjustments associated with changes in indebtedness. The Cash Flow
Notes were reduced by the amount of the working capital post closing adjustment,
which was determined by the Company to be $645,596. 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 Cash Flow Notes on April 29, 2008 was
$3,034,000.  During the three months ended March 31, 2010 and 2009,
accretion of the discount related to the Cash Flow Notes of $62,407 and $58,055,
respectively, was recognized as interest expense.





On April
16, 2009, the Company received a written notice of acceleration from Robert L.
Kovar Services, LLC, as the stockholder representative, claiming that the
Company failed to make timely mandatory prepayments in the amount of $110,381
due under the terms of the Cash Flow Notes.   The Company has not
reclassified the long-term portion of these Cash Flow Notes included in Notes
payable – acquisitions to current liabilities.  It is the Company’s
position that Maverick generated a pretax loss during the period April 29, 2008
through March 31, 2010, and as such the Company was not obligated to make a
mandatory payment to the note holders.   Generally Accepted
Accounting Principles in the United States of America (“GAAP”) require
intangible assets to be amortized over their useful lives.  In
addition, goodwill and intangible assets are evaluated annually for potential
impairment.  The pretax income as calculated by Robert L. Kovar
Services, LLC, as the stockholder representative, did not include amortization
expense or impairment charges related to intangible assets and goodwill in
accordance with GAAP.  These Cash Flow Notes are now the subject of
litigation between Kovar and the Company as further described in Note
15.


13




(c) $2,917,000 revolving line
of credit, payable to the Maverick former shareholders in monthly interest
payments at prime plus .25%, principal and unpaid interest due at maturity in
September 2010.   No payments were made during 2010.  The
interest rate applicable under this agreement is currently 3.5%.





(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 was due
at maturity in May 2009. No payments were made in 2010.





(e) Second term note, payable
to the Maverick former shareholders in monthly interest payments at prime plus
..50% beginning in April 2008, and beginning in October 2008, principal payments
of $23,390 plus interest until maturity in April 2013. No payments were made in
2010.  The current interest rate applicable under this agreement is
3.75%.





(f) On April 29, 2009,
Maverick received a notice of acceleration (the “Acceleration Letter”) with
respect to the revolving line of credit, the term note and the second term note
payable to the Maverick former shareholders (the”Maverick Notes”) and governed
by a Loan Agreement and related Security Agreement originally dated April 30,
2005 and April 29, 2005, respectively.  The Acceleration Letter
alleges that Maverick failed to comply with certain covenants under the terms of
the Loan Agreement and that Maverick failed to make payments due under the
Notes.  The outstanding principal, accrued interest and late charges
alleged to be owed by Maverick in the Acceleration Letter total
$4,659,227.  The Acceleration Letter also contends that interest
continues to accrue at the default rate of 18% per annum.  In a
separate letter, dated May 1, 2009, Robert L. Kovar Services, LLC, as the
stockholder representative for the sellers, purported to terminate the revolving
credit facility under the Loan Agreement and demanded turnover of all collateral
securing indebtedness under the Loan Agreement, including the Maverick Notes. No
payments were made in 2009 or through March 31, 2010.





The
Company and Maverick have asserted claims in litigation against the holders of
the Maverick Notes, Robert L. Kovar Services, LLC, Robert L. Kovar,
individually, and others.  The litigation is in its early stages and,
accordingly, the Company cannot predict the outcome of these
matters.  See Note 15.  The Company is accruing interest on
the Maverick Notes while the claims are being resolved.





Annual
maturities of indebtedness at March 31, 2010 are as follows (stated in
thousands):




For
      the Year Ended March 31,2011
                    
                    $
                    17,5822012
                    
                    
                    —2013
                    
                    
                    —2014
                    
                    
                    3,485Thereafter
                    
                    
                    —$
                    21,067




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
March 31, 2010 (stated in thousands):




For
      the Year Ended March 31,2011
                    
                    $
                    1482012
                    
                    
                    1232013
                    
                    
                    46Thereafter
                    
                    
                    —Total
      minimum lease payments
                    
                    
                    317Less:  Amount
      representing interest
                    
                    
                    (38
                    )Current
      value of minimum lease payments
                    
                    
                    279Less:  Current
      maturities
                    
                    
                    (201
                    )$
                    78





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


14


PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)





Note
10 – Asset Retirement Obligation





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





The
following table describes changes in the asset retirement liability as of
March 31, 2010. The ARO liability in the table below includes amounts
classified as long-term at March 31, 2010 (stated in
thousands):





Three Months
                    Ended March
                    31, 2010ARO
      liability at beginning of period
                  
                  $
                  7,239Abandonments
      during period
                  
                  
                  (185
                  )Accretion
      expense
                  
                  
                  356Obligations
      arising during period
                  
                  
                  —Changes
      in estimates
                  
                  
                  (153
                  )ARO
      liability at end of period
                  
                  $
                  7,257




Note 11 – Earnings
per Share




The Company accounts for earnings per share in accordance with ASC 260 Earnings Per Share, which
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):





Three Months Ended March 31,2010
                
                
                2009Numerator:Net
      loss applicable to common stockholders
                
                $
                (952,772
                )
                
                $
                (2,116,156
                )Denominator:Denominator
      for basic (loss) per share — weighted-average shares
      outstanding
                
                
                22,338,619
                
                
                
                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
                
                
                22,338,619
                
                
                
                22,070,762Basic
      loss per share
                
                $
                (0.04
                )
                
                $
                (0.10
                )Diluted
      loss per share
                
                $
                (0.04
                )
                
                $
                (0.10
                )


15





The increasein weighted-average shares
outstanding at March 31, 2010, is the result of issuing 535,714 shares, to Lance
Duncan, (see Note 14).For the three months ended
March 31, 2010 and 2009, the Company excluded options to purchase 151,000 and
156,000 shares of common stock, respectively, as the effect would be
anti-dilutive.





Note
12 – Income Taxes




Deferred
income taxes are provided on a liability method whereby deferred tax assets and
liabilities are established for the difference between the financial
reporting and income tax basis of assets and liabilities as well as operating
loss and tax credit carry forwards.  Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.





The
Company has computed the tax provision for the three months ended March 31, 2010
in accordance with the provisions of ASC 740 – Income Taxes and ASC 270 –
Interim
Reporting.  The Company has estimated that its effective tax
rate for US purposes will be zero for 2010, and consequently, recorded no U.S.
income tax benefit for the quarter ended March 31, 2010 due to the substantial
uncertainty regarding ultimate realization.




At March
31, 2010, the Company had, subject to the limitations discussed below,
approximately $28 million of net operating loss carryforwards for U.S. purposes.
These loss carryforwards will expire from 2026 through 2030 if not
utilized.




In
addition to any Section 382 limitations for change of control, uncertainties
exist as to the future utilization of the operating loss carryforwards under the
criteria set forth under ASC 740. Therefore, the Company has increased its
valuation allowance at March 31, 2010 to approximately $8.8 million, an increase
of roughly $0.1 million from December 31, 2009.





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





Note
13 - Segment Information




The
Company considers itself to be in two lines of business - (i) as an independent
oil and gas exploration and production company and (ii) as an engineering
services company.




(i)
            The
      Company sells substantially all of its crude oil production under
      short-term contracts based on prices quoted on the New York Mercantile
      Exchange (“NYMEX”) for spot West Texas Intermediate contracts, adjusted by
      agreed-upon increases or decreases which vary by grade of crude oil. The
      majority of the Company’s natural gas production is sold under short-term
      contracts based on pricing formulas which are generally market responsive.
      From time to time, the Company may also sell a portion of the gas
      production under short-term contracts at fixed prices. For the three
      months ended March 31, 2010, three customers accounted for approximately
      47%, 16% and 11% of the Company’s crude oil and natural gas
      revenues.  The Company believes that the loss of any of its oil
      and gas purchasers would not have a material adverse effect on its results
      of operations due to the availability of other
  purchasers.




(ii)
            Maverick
      provides engineering and construction services primarily for three types
      of clients: (1) upstream oil & gas, domestic oil and gas producers and
      pipeline companies; (2) industrial, petrochemical and refining plants; and
      (3) infrastructure, private and public sectors, including state
      municipalities, cities, and port authorities. Maverick operates out of
      facilities headquartered in Victoria, Texas and operates primarily in
      Texas. The types of services provided include project management,
      engineering, procurement, and construction management services to both the
      public and private sectors, including the oil and gas business in which
      the Company is engaged.  For the three months ended March 31,
      2010, three customers accounted for approximately 40%, 24% and 16%. of the
      Company’s service revenues




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


16




PLATINUM
ENERGY RESOURCES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(UNAUDITED)




Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Three Months Ended March 31, 2010:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                6,056
                
                
                $
                4,614
                
                
                $
                —
                
                
                $
                10,670Intersegment
      revenues
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
      revenues
                
                $
                6,056
                
                
                $
                4,614
                
                
                $
                —
                
                
                $
                10,670Income
      (loss) before income taxes
                
                $
                989
                
                
                $
                (119
                )
                
                $
                (1,809
                )
                
                $
                (939
                )As
      of March 31, 2010:Total
      assets
                
                $
                59,900
                
                
                $
                3,938
                
                
                $
                591
                
                
                $
                64,429




Exploration
                
                
                
                
                
                
                
                
                ConsolidatedFor the Three Months Ended March 31, 2009:
                
                and Production
                
                
                Engineering
                
                
                Parent
                
                
                TotalRevenues
                
                $
                3,329
                
                
                $
                5,506
                
                
                $
                —
                
                
                $
                8,835Intersegment
      revenues
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
      revenues
                
                $
                3,329
                
                
                $
                5,506
                
                
                $
                —
                
                
                $
                8,835Income
      (loss) before income taxes
                
                $
                (1,646
                )
                
                $
                (967
                )
                
                $
                (618
                )
                
                $
                (3,231
                )As
      of March 31, 2009:Total
      assets
                
                $
                80,850
                
                
                $
                9,683
                
                
                $
                9,706
                
                
                $
                100,239





Note
14 – Treasury Stock





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





Note
15 – 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.





Exxon
Litigation





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


17





Hyman
Litigation





On
November 11, 2008, Mr. Hyman, a former employee of KD Resources, filed a claim
against KD Resources and Platinum Energy stating that he was discharged from KD
Resources in violation of the Sarbanes-Oxley Act of 2002, Section 806,
Protection for Employees of Publicly Traded Companies Who Provide Evidence of
Fraud.  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 was ordered to show why his case should
not have been dismissed.  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 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.  On March 31, 2010, in a split decision, the Administrative Review
Board reversed the decision of the Administrative Law Judge and Remanded the
case for further consideration.  It is the Company's contention that Mr.
Hyman did not file his complaint within the time required by Sarbanes-Oxley, and
in any case, 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
former 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.  The case is currently in the
discovery phase and the judge imposed a deadline of September 1, 2010 to present
briefs.  We believe the likelihood of any loss related to this
litigation is remote.





Kovar
Litigation





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




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





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


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





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





Currently
trial date has been set for November 30, 2010.


18





Citgo
Litigation





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





Meier
Litigation





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





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





Note
16 – Subsequent Events




In May 2010, the Company paid down $1.5
million on the Bank of Texas Senior Credit Facility.  In June 2010,
the Company liquidated sixty put contracts at $85 per barrel and an
additional  fifty put contracts at $80 per barrel.  These
put contracts had settlement dates through December 2010, and the total fair
value of these contracts at March 31, 2010 was $672,900.  The net
proceeds to the Company were $1.16 million in cash.  The Company used
all proceeds from the liquidation of the contracts to pay down an additional $2
million on the Senior Credit Facility.


19




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




This
Quarterly Report on Form 10-Q includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,”
or the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other Securities and Exchange Commission filings.




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




Overview




We
consider ourselves to be in two lines of business - (i) as an independent oil
and gas exploration and production company and (ii) as an engineering and
construction services company.




i)
            In
      our oil and gas operations, we conduct oil and natural gas exploration,
      development, acquisition, and production. Our basic business model is to
      find and develop oil and gas reserves through development activities, and
      sell the production from those reserves at a profit. To be successful, we
      must, over time, be able to find oil and gas reserves and then sell the
      resulting production at a price that is sufficient to cover our finding
      costs, operating expenses, administrative costs and interest expense,
      plus offer an acceptable rate of return on our capital investment. We sell
      substantially all of our crude oil production under short-term contracts
      based on prices quoted on the New York Mercantile Exchange (“NYMEX”) for
      spot West Texas Intermediate contracts, less agreed-upon deductions which
      vary by grade of crude oil. The majority of our natural gas production is
      sold under short-term contracts based on pricing formulas which are
      generally market responsive. From time to time, we may also sell a portion
      of the gas production under short-term contracts at fixed
      prices.


20




(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.





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.


21




Results
of Operations





Set forth
below are:





(A)
            A
      discussion of the results of operations for Platinum Energy Resources,
      Inc. ("Platinum") for the three months ended March 31, 2010 as compared to
      the three months ended March 31,
2009;





(B)
            A
      discussion of the results of operations for our oil and gas entities for
      the comparative periods March 31, 2010 and March 31, 2009;
    and





(C)
            A
      discussion of the results of operations for our engineering and
      constructing services business for the comparative periods of March 31,
      2010 and March 31, 2009.





(A)
- Results of Operations - Platinum




For
the three months ended March 31, 2010 as compared to the three months ended
March 31, 2009





On a
consolidated basis we had a net loss of approximately $1.0 million during the
first three months ended March 31, 2010 compared to a net loss of approximately
$2.1 million during the comparative period ended March 31,
2009.





Our
general and administrative expenses, other than those attributable to our oil
and natural gas assets and our engineering services business, for the three
months ended March 31, 2010 was $539,000, as compared to approximately $619,000
for the three months ended March 31, 2009.  The decrease of $80,000
was due to tighter cost control measures and reduced payroll.




We also
recognized losses (realized and unrealized) on our commodity derivatives of $1.3
million for the three months ended March 31, 2010, as compared to a gain of
$0.5 million in the comparable 2009 period. We have experienced great volatility
in the value of these derivative instruments as a result of the fluctuation
in the price of crude oil.


22





(B)
- Results of Operations - Oil and Gas




For
the Three Months Ended March 31, 2010 as compared to the Three
Months Ended March 31, 2009




Our
revenues from oil and gas sales for the three months ended March 31, 2010 were
$6.1 million. Oil and gas sales for the three months ended March 31, 2009 were
$3.3 million. The 85% increase in oil and gas revenues of $2.8 million was due
to an increase in commodity prices during the three months ended March 31, 2010.
The average oil price we obtained on our product sales for the three months
ended March 31, 2010 was $75.19, compared to $37.37 for the three months ended
March 31, 2009. The average gas price we obtained for our product for the three
months ended March 31, 2010 was $5.74 per Mcf, as compared to $3.37 for the
three months ended March 31, 2009. Production on a BOE basis decreased 11.2%
from 104,558 BOE’s during the three months ended March 31, 2009, to 92,821 BOE’s
during the three months ended March 31, 2010.





Oil and
gas production costs in the form of lease operating expense on a BOE basis
decreased  by $1.43 per BOE, or 5.48%, from $26.11 per BOE during
the three months ended March 31, 2009 to $24.68 per BOE during the
three months ended March 31, 2010. The decrease was due primarily to efforts to
control costs in marginally economic areas.. Other factors outside management
control, such as third party service availability and the availability of
adequate technical and field staff, could have an adverse effect on lease
operating costs in the future.





Depletion
expense for oil and gas properties was $1,225,000 and $1,547,272 for the three
months ended March 31, 2010 and 2009, respectively.  This represents a
decrease of $322,272, or 21%, during the three months ended March 31, 2010
compared to the three months ended March 31, 2009. 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, 2009.





We also
incurred unrealized losses of $35,302 for the three months ended March 31, 2010
as compared to unrealized gains of approximately $27,000 during the three
months ended March 31, 2009 on the value of certain hedge contracts on crude
oil. The change was due to the volatility in the price of oil.




Supplemental
Oil and Gas Information




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




Three Months Ended March 31,2010
                    
                    
                    2009ProductionOil
      (Bls)
                    
                    
                    67,099
                    
                    
                    
                    69,930Gas
      (Mcf)
                    
                    
                    154,332
                    
                    
                    
                    207,766Boe
      (Bls)
                    
                    
                    92,821
                    
                    
                    
                    104,558Average
      PricesOil
      ($/Bbl)
                    
                    $
                    75.19
                    
                    
                    $
                    37.37Gas
      ($/Mcf)
                    
                    $
                    5.74
                    
                    
                    $
                    3.37Average
      Lifting CostPer
      Boe
                    
                    $
                    24.68
                    
                    
                    $
                    26.11




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




For
the three months ended March 31, 2010 as compared to the three months ended
December 31, 2009




Revenues
for the three months ended March 31, 2010 and the three months
ended March 31, 2009 were $4.6 million and $5.5 million,
respectively.  Gross margin performance for these periods was -0.17%
and -16.6%, respectively.  The decline in first quarter gross margin
was caused by a simultaneous work slowdown in our three largest business
segments (Industrial, Oil & Gas and Survey), largely as a result of project
curtailments as clients adjusted to the slowdown in the U.S.
economy.  In the first quarter, the Infrastructure business stream was
the only business line that achieved its budgeted
revenue.  Engineering services reported pretax losses of $119,234 and
$966,796 in the three months ended March 31, 2010 and the three months
ended March 31, 2009, respectively.


23





Liquidity
and Capital Resources





Going
Concern





The
accompanying consolidated financial statements have been prepared assuming we
will continue as a going concern.   We have incurred significant
losses since inception, resulting in cumulative losses of $112,229,025 through
March 31, 2010. Substantially all of these losses were a result of non-cash
writedowns associated with the valuation of our oil and gas properties when the
product prices used to value our oil and gas properties were significantly lower
than current prices.  Additionally, the outstanding loan with the Bank
of Texas matured on June 1, 2010 and remains unpaid as of July 29,
2010.   At March 31, 2010, the loan balance was approximately $13
million.  Since March 31, 2010, we have paid down that debt to
approximately $9.5 milllion by using excess cash on hand and by using the cash
proceeds received from the liquidation of a portion of our derivative positions.
The Bank of Texas loan is collateralized by substantially all of our proved oil
& gas assets, as well as substantially all of the derivative financial
instruments.  As of July 29, 2010, we have not received a notice of
foreclosure from the Bank of Texas.  Our current cash on hand is not
adequate to satisfy the Bank of Texas loan.





The
options available to us to settle the outstanding loan with the Bank of Texas
include further liquidation of our hedge positions, use of available cash, a
partial sale of our oil and gas assets, seeking additional equity financing, or
the refinancing of our existing debt.  There is no assurance that we will
be able to obtain such additional funds through equity or debt refinancing, or
any combination thereof. Additionally, no assurance can be given that any such
refinancing, if achievable, will be adequate to meet our ultimate capital needs
and to support our growth. If the Company is not able to obtain additional
financing on a timely basis and on satisfactory terms, or should the Bank of
Texas issue us a notice of foreclosure with respect to the assets
collateralizing the loan, our operations would be materially negatively
impacted.  However, at current product prices, our cash flow
associated with our oil and gas operations continues to be strong. Although the
options available to us to liquidate the bank debt are not attractive, we do
believe that we have the assets in place to satisfy this obligation.





Capital
Resources





At March
31, 2010, we had cash and cash equivalents of $5,838,807 and negative working
capital of $11,053,876, compared to cash and cash equivalents of $2,941,939 and
negative working capital of $13,453,250.  The improved working capital
was primarily attributable to increased cash on hand attributable to improved
cash flow from operations and cash received in settlement of derivative
contracts.





Operating
activities provided cash during 2010 of $2,528,426, versus cash used in
operations of $2,062,460 during the 2009 quarter.  The improved
operating cash flow for the quarter ended March 31, 2010, was primarily
attributable to the lower net loss for the 2010 period, favorable changes in
working capital items for the 2010 period and the noncash loss attributable to
changes in the fair value of commodity derivatives during 2010.





Investing activities provided cash
during 2010 of $421,698, versus $41,354 during the 2009 period.  The
improved cash flow from investing activities for 2010 was primarily attributable
to reduced capital expenditures during the 2010 period.  The Company
had additions to property and equipment in the 2010 period of $51,608 versus
$796,192 of additions during the 2009 period.





Financing activities used cash of
$53,256 during the 2010 quarter, versus providing cash of $464,699 during the
2009 period.  The 2009 period includes the impact of $1,000,000 in
proceeds received from the Company’s revolving credit facility.  No
such proceeds were received in the 2010 quarter.




Capital
Expenditures- Oil and Gas Development





The
reserve report prepared as of December 31, 2009 assumes that we will not spend
any capital expenditures in 2010 to exploit oil and gas opportunities. Our
primary focus since the beginning of the year has been to control our operating
costs.   As cash flow allows, we may commence a limited drilling
or 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 March 31, 2010 we have incurred
capital expenditures of approximately $24,000, primarily related to a gathering
system upgrade project.





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.


24





Critical
Accounting Policies:




Use
of Estimates




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




Full
Cost and Impairment of Assets




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




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




Depletion




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




Significant
Estimates and Assumptions




Oil
and Gas Reserves




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




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




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




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;


25





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




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




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


Provision
for DD&A




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




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




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




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




Hedging
Activities




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




For the
three months ended March 31, 2010 and 2009, we reported net gains (losses) of
$(1,305,806) and $527,445  on the change in value of our derivative
contracts.





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 March
31, 2010 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 $8.1 million in outstanding
borrowings under term notes with the selling shareholders from whom we acquired
Maverick, our engineering services business.




Price
Risks




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


26





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
March 31, 2010.  Based on that evaluation, the Company’s Principal
executive officer concluded that the Company’s disclosure controls and
procedures were not effective as of March 31, 2010 due to material weaknesses in
our internal controls related to inadequate staffing within our accounting
department and upper management, lack of consistent policies and procedures,
inadequate monitoring of controls, inadequate disclosure controls and
significant turnover among the staff and officers of the Company.  It
is Management’s plan to remediate the internal control material weakness by
implementing new controls and procedures that combined will improve the quality
of the financial reporting process.




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





Changes
in Internal Control Over Financial Reporting




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


27





OTHER
INFORMATION




Item 1.   Legal
Proceedings.




Exxon Mobil Corporation
f/k/a Exxon Corporation v. Tandem Energy Corporation f/k/a Merit Energy
Corporation, et al





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





Miles Hyman v. KDR, et
al




On
November 11, 2008, Mr. Hyman, a former employee of KD Resources, filed a claim
against KD Resources and Platinum Energy stating that he was discharged from KD
Resources in violation of the Sarbanes-Oxley Act of 2002, Section 806,
Protection for Employees of Publicly Traded Companies Who Provide Evidence of
Fraud.  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 was ordered to show why his case should
not have been dismissed.  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 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.  On March 31, 2010, in a split decision, the Administrative Review
Board Reversed the decision of the Administrative Law Judge and Remanded the
case for further consideration.  It is the Company's contention that Mr.
Hyman did not file his complaint within the time required by Sarbanes-Oxley, and
in any case, 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.





Robert L. Kovar v. Platinum
Energy Resources





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


28





Platinum v. Robert L. Kovar
Services, et al





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





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


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





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





SNP Associates, Inc. D/B/A
Maverick Engineering v. Maverick Engineering, Inc.





On July
14, 2009, SNP Associates filed suit in the 333rd
District Court of Harris County, Texas against Maverick Engineering, Inc,
Platinum Energy Resources’ wholly owned subsidiary.  SNP is seeking a
Declaratory Judgment, Permanent Injunction, and damages for alleged “trade name
infringement.”  The suit claims that SNP has the legal right to the
name “Maverick Engineering” and that SNP has suffered damages as a result of two
engineering firms having the same name.  We do not believe that any of
SNP’s claims have merit and we intend to vigorously defend ourselves against
these claims.





Maverick Engineering, Inc.
v. CITGO Refining & Chemicals Company, L.P.





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.





Lisa Meier v. Platinum
Energy Resources, Inc.





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.




Item 1A.
  Risk
Factors.




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





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




None.




Item 3.   Defaults Upon Senior
Securities.





None.


29





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




None.




Item 5.   Other
Information.




None.




Item 6.   Exhibits.




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




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


30





SIGNATURES




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




PLATINUM
      ENERGY RESOURCES, INC.Date:
      July 29, 2010
              By:
              /s/ Al RahmaniAl
      Rahmani
                Chief
      Executive Officer


31