UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





þ ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934


For
the fiscal year ended December 31, 2009








 ̈ 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
000-53619





———————


VERTEX
ENERGY, INC.


(Exact
name of registrant as specified in its charter)


———————





NEVADA
            94-3439569(State
      or other jurisdiction of
            (I.R.S.
      Employer Identification No.)incorporation
      or organization)1331
      GEMINI STREET, SUITE 250
              HOUSTON,
      TEXAS
            77058(Address
      of principal executive offices)
            (Zip
      Code)





Registrant's
telephone number, including area code: 866-660-8156





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




None.




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




Common Stock, $0.001 par
value




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  ̈ No  x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  x    No   ̈





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).   Yes   ̈    No   ̈





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





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





Large
      accelerated filer   ̈
              Accelerated
      filer    ̈Non-accelerated
      filer   ̈
              Smaller
      reporting company  x





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


Yes    ̈No   x





The
issuer's revenues for the most recent fiscal year ended December 31, 2009 were
$38,703,847.





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold as of the last business day of the registrant’s most recently
completed second fiscal quarter was approximately $1,253,779.





State the
number of shares of the issuer’s common stock outstanding, as of the latest
practicable date: 8,254,256 shares of common stock issued and outstanding as of
March 15, 2010.





DOCUMENTS
INCORPORATED BY REFERENCE




NONE.





FORM
10-K





FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009





TABLE OF
CONTENTS







Part
I




Item
      1. Business
            4Item
      1A. Risk Factors
            13Item
      2. Properties
            24Item
      3. Legal Proceedings
            25Item
      4. Submission of Matters to a Vote of Security Holders
            25





Part II




Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and
      Issuer Purchases of Equity Securities
            25Item
      6. Selected Financial Data
            30Item
      7. Management's Discussion and Analysis or Plan of
    Operation
            30Item
      8. Financial Statements and Supplementary Data
            F-1Item
      9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
            42Item
      9A. Controls and Procedures
            42Item
      9B. Other Information
            43





Part
III




Item
      10. Directors, Executive Officers and Corporate Governance
            44Item
      11. Executive Compensation
            51Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
            54Item
      13. Certain Relationships and Related Transactions
            56Item
      14. Principal Accountant Fees and Services
            59Part
      IVItem
      15. Exhibits, Financial Statement Schedules
            60












PART
I





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION




We
caution you that this report contains forward-looking statements regarding,
among other things, financial, business, and operational matters.




All
statements that are included in this Annual Report, other than statements of
historical fact, are forward-looking statements. Forward-looking statements
involve known and unknown risks, assumptions, uncertainties, and other factors.
Statements made in the future tense, and statements using words such as “may,” “can,” “could,” “should,” “predict,” “aim’” “potential,” “continue,” “opportunity,” “intend,” “goal,” “estimate,” “expect,” “expectations,” “project,” “projections,” “plans,” “anticipates,” “believe,” “think,” “confident” “scheduled” or similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are not a guarantee of performance and are subject to a number of
risks and uncertainties, many of which are difficult to predict and are beyond
our control. These risks and uncertainties could cause actual results to differ
materially from those expressed in or implied by the forward-looking statements,
and therefore should be carefully considered. We caution you not to place undo
reliance on the forward-looking statements, which speak only as of the date of
this report. We disclaim any obligation to update any of these forward-looking
statements as a result of new information, future events, or otherwise, except
as expressly required by law.




Please
see the “Glossary of
Selected Terms” incorporated by reference hereto as Exhibit 99.6, for a
list of abbreviations and definitions used throughout this report.








ITEM
1. Business





Corporate
History of the Registrant:





Vertex
Energy, Inc. (the “Company,” “we,” “us,” and “Vertex”) was formed
as a Nevada corporation on May 14, 2008.  Pursuant to an Amended and
Restated Agreement and Plan of Merger dated May 19, 2008, by and between Vertex
Holdings, L.P. (formerly Vertex Energy, L.P.), a Texas limited partnership
("Vertex LP"),
us, World Waste Technologies, Inc., a California corporation (“WWT” or “World Waste”), Vertex
Merger Sub, LLC, a California limited liability company and our wholly-owned
subsidiary ("Merger
Subsidiary"), and Benjamin P. Cowart, our Chief Executive Officer, as
agent for our shareholders (as amended from time to time, the “Merger Agreement”).
Effective on April 16, 2009, World Waste merged with and into Merger Subsidiary,
with Merger Subsidiary continuing as the surviving corporation and becoming our
wholly-owned subsidiary (the "Merger"). In
connection with the Merger, (i) each outstanding share of World Waste common
stock was cancelled and exchanged for 0.10 shares of our common stock; (ii) each
outstanding share of World Waste Series A preferred stock was cancelled and
exchanged for 0.4062 shares of our Series A preferred stock; and (iii) each
outstanding share of World Waste Series B preferred stock was cancelled and
exchanged for 11.651 shares of our Series A preferred stock.





Additionally,
as a result of the Merger, as the successor entity of World Waste, we assumed
World Waste’s filing obligations with the Securities and Exchange Commission and
our common stock began trading on the Over-The-Counter Bulletin Board under the
symbol “VTNR.OB” effective
May 4, 2009.  The previous trading symbol on the Over-The-Counter
Bulletin Board was “WDWT.OB”.  Finally,
as a result of the Merger, the common stock of World Waste was effectively
reversed one for ten (10) as a result of the exchange ratios set forth in the
Merger, and unless otherwise noted, the impact of such effective reverse stock
split, created by the exchange ratio set forth above, is retroactively reflected
throughout this report.





Description
of Business Activities:





We
provide a range of services designed to aggregate, process, and recycle
industrial and commercial waste streams. We currently provide these services in
13 states, with our primary focus in the Gulf Coast Region of the United
States.  Our primary focus is on the recycling of used motor oil and
other distressed hydrocarbon streams. This is accomplished (1) through our Black
Oil division, which aggregates used motor oil from third-party collectors and
manages the delivery of this feedstock to third-party re-refining facilities, as
well as fuel oil blenders, and burners of black oil, and (2) through our
Refining and Marketing division, which aggregates hydrocarbon streams from
collectors and generators and manages the delivery of the hydrocarbon products
to a third-party facility for further processing, and then manages the sale of
the end products. In addition, we are in the process of implementing a
proprietary licensed thermal chemical extraction process that, through an
operating and license agreement with a related party, will process used motor
oil and convert it to higher value products such as marine fuel cutterstock and
a feedstock component for major refineries.


-4-


Biomass
Renewable Energy




We are
continuing to work on joint development commercial projects which focus on the
separation of municipal solid waste into feedstocks for energy
production.  We are very selective in choosing opportunities that we
believe will result in some value for the shareholders of Vertex.  We
cannot assure that the ongoing venture will successfully bring any projects to a
point of financing or successful construction and operation.




Reliance
on Contracts and Relationships; Low Capital Intensive Business




We
currently have no significant capital assets and instead contract on a fee-paid
basis for the use of all assets we deem to be necessary to conduct our
operations, from either independent third-parties or related-parties, pursuant
to the Operating Agreement, described below, and other related party agreements
described in greater detail in our Report on Form 8-K/A, filed with the
Commission on June 26, 2009. These assets are made available to us at market
rates which are periodically reviewed by the Related Party Transaction Committee
of the Company’s Board of Directors. Our management has chosen to contract for
the use of assets rather than purchase or build and own them in order to provide
flexibility in the Company’s capital equipment requirements in the event there
is a need for more or less capacity due to rapid growth or contraction in the
future. We expect to continue to rely on contracts for access to assets going
forward, to avoid the initial capital expenditures that would be required to
build our own facilities.





We also have an agreement in place with
KMTEX, pursuant to which KMTEX has agreed to process feedstock of certain
petroleum distillates, which we provide to KMTEX, into more valuable feedstocks,
including pygas, gasoline blend stock and MDO/cutter stock, which agreement
expires on June 30, 2010, but is subject to a three year extension upon the
mutual agreement of both parties.  The agreement can be terminated
upon sixty days prior written notice by either party at any time.  In
connection with and pursuant to the agreement, we pay KMTEX certain monthly tank
rental fees, truck and rail car fees, and processing fees based on the weight of
the material processed by KMTEX, as well as certain disposal fees and other
fees.


-5-


The
following summarizes the third party contracts and relationships relating to the
Company:





Third
      PartyKMTEX
      Refining Facility
            
            Used
      Oil Supply ContractsServices
      Performed:
            
            Vertex
      gathers hydrocarbon streams in the form of petroleum distillates, transmix
      and other chemical products that have become off-specification during the
      transportation or refining process. These feedstock streams are purchased
      from pipeline operators, refineries, chemical processing facilities and
      third-party providers, processed on Vertex’s behalf by a third-party
      facility pursuant to a toll-based arrangement, and then resold by
      Vertex.
            
            Vertex
      purchases used oil (or “black oil”)
      from over 50 suppliers. These suppliers include small collectors who
      operate small fleets to collect used oil from garages and lube shops and
      larger collectors and aggregators who collect larger volumes and consider
      Vertex to be one of their potential off-take partners for a portion of
      their collected volumes. Much of this business is done at prices indexed
      to the spot market for No. 6 oil.Ownership:
            
            The
      refinery facility is owned by an independent third-party.
            
            Vertex
      Recovery is one of the suppliers of used oil to Vertex. Vertex Recovery is
      92.5% owned by Vertex LP, whose general partner is VTX, Inc. (“VTX”) (which is controlled by Benjamin
      Cowart, the Company’s Chief Executive Officer and Chairman). Approximately
      15% of Vertex’s   incoming oil has historically been
      supplied by Vertex Recovery, and the remaining 85% is gathered through
      various used oil supply contracts with third-party vendors and spot market
      purchases.







-6-




The
following summarizes the related-party contracts and relationships, as well as
the risks if such contracts or relationships are terminated:





Related
      PartyCrossRoad
              Carriers
              (“CRC”)
            
            Vertex
              Recovery
              And
              Subsidiaries
              (“VR”)
            
            Vertex
              Residual
              Management
              Group,
      LP
              (“VRM”)
            
            Cedar
      Marine
              Terminal
              (“CMT”)Services
      Performed:
            
            CRC
      is a transportation company engaged in the transporting of petroleum
      fuels, bio fuels and chemicals.
            
            VR
      is a generator solutions company for the proper recycling and management
      of petroleum products. VR receives petroleum products from various third
      parties and generally works as a broker for used petroleum products. VR is
      a “third party supplier” – a company
      that collects used petroleum products (“Feedstock”) from various generators and
      then resells such Feedstock. A “generator” is any person or entity whose
      activity or process produces used oil or whose activity first causes used
      oil to be subject to regulation (for example, an automotive service center
      that performs oil changes). Vertex is not currently a generator or a third
      party supplier, but is only a purchaser of Feedstock, through VR and/or
      through an alternative third party supplier.
            
            VRM
      is an environmental consulting services company. VRM provides
      environmental compliance, residual management and regulatory oversight
      services (including permitting) to Vertex.
            
            CMT
      is a marine terminal that is engaged in the storage and terminaling of
      petroleum fuels. CMT is contracted to store products for Vertex as well as
      for third parties.
              
              CMT
      is the operator of our “thermal/chemical
      extraction technology” – a process infrastructure located at the
      Cedar Marine Terminal, operated and managed by CMT, consisting of multiple
      tanks, associated piping and proprietary design and engineering for the
      thermal/chemical extraction of used motor
oil.







-7-




Ownership:
            
            95.1%
      owned by Vertex LP and affiliated with Benjamin P. Cowart, Vertex’s
      Chairman and Chief Executive Officer, who serves as the general partner of
      CRC through VTX, Inc., an entity owned by Mr. Cowart.
            
            92.5%
      owned by Vertex LP, whose general partner is VTX.
            
            69%
      owned by Vertex LP and controlled by Mr. Cowart through his ownership
      of VTX.
            
            99%
      owned by Vertex LP and controlled by Mr. Cowart through his ownership
      of VTXExisting
      Terms:
            
            CRC
      provides transport services for Vertex as well as for various third
      parties.
              
              Historically,
      approximately 25% of CRC’s revenue has been generated from Vertex LP, and
      an additional 10% from companies affiliated with Vertex LP. In addition,
      approximately 60% of the feedstock that comes into Vertex is transported
      by CRC, and 85-90% of Vertex’s trucking needs are fulfilled by
      CRC.
              
              In
      connection with the Merger, Vertex LP and Vertex entered into a Services
      Agreement pursuant to which CRC agreed to continue to perform services for
      Vertex at market rates.
            
            VR
      sells products to Vertex and/or acts as a broker in connection with sales.
      VR’s established business practice is for Vertex to have the first option
      to accept or not to accept any feedstock streams which VR becomes aware of
      at the current market price.
              
              No
      written agreements or understandings currently exist between VR and Vertex
      other than the Services Agreement, described
              below.
              
              Approximately
      25-35% of Vertex’s total feedstock comes from VR.
            
            VRM
      provides compliance services to Vertex pursuant to the terms of a Services
      Agreement, described below.
            
            Vertex
      has a lease agreement with the Terminal.
              
              CMT
      provides terminaling services to Vertex pursuant to a Services Agreement
      and Operating and Licensing Agreement.
              
              Pursuant
      to the Operating and Licensing Agreement (described greater detail below),
      Vertex has the right to license the thermal/chemical extraction technology
      from CMT at a price equal to the documented net development costs of such
      technology. CMT operates the actual thermal/chemical extraction technology
      and Vertex pays an operations fee to CMT. Although it is currently
      anticipated that Vertex LP and Vertex will be the only entities using the
      thermal/chemical extraction technology, because the license will be
      non-exclusive, CMT may license the technology to other parties and/or sell
      the technology outright. CMT currently provides terminaling services to
      Vertex’s competitors and may increase the volume of such services in the
      future.
              
              Additionally,
      Vertex shares in water treatment operations from CMT, which are supplied
      at cost plus 10%.




-8-


In the
event we are no longer able to contract with any of these related or third-party
entities for access to these assets and related services at fair-market prices,
or at all, then we would seek to contract with other parties to provide
refining, trucking, and terminaling assets or services as needed to operate and
grow our business. We cannot assure you that such assets and services could be
acquired on a timely basis, at fair-market prices, or at all. Given the relative
availability of refining, trucking, and terminaling infrastructure and services
in the Gulf Coast region of the United States, however, we believe we would be
able to replace our contracted assets and services with third-party providers,
if necessary. Nonetheless, based on an assessment of the market options readily
available, we believe that our current relationships and contracts with existing
third-parties and related parties are the most beneficial ones currently
available to us.




In the
future we may revisit our contract-based, capital-efficient asset strategy and
may determine if it is in our best interest to buy or build, own and maintain
the assets and infrastructure necessary to operate our current business or to
accommodate growth plans.




Operating
and Licensing Agreement





In
connection with the Merger and effective as of the effective date of the Merger,
Cedar Marine Terminals, L.P., a subsidiary of Vertex LP (“CMT”) and us entered
into an Operating and Licensing Agreement (the “Operating
Agreement”).  CMT is controlled by Vertex LP, an entity which
is majority owned and controlled by our Chief Executive Officer and Chairman,
Benjamin P. Cowart.  These related party transactions are discussed in
detail in the Form 8-K/A filed on June 26, 2009. Pursuant to the Operating
Agreement, CMT agreed to provide services to us in connection with the operation
of the Terminal run by CMT, and the operations of and use of certain proprietary
technology relating to the re-refining of certain oil feedstock referred to as
our “thermal chemical
extraction process” (“TCEP”), in connection
with a Terminaling Agreement by and between CMT and Vertex
LP.  Additionally, we have the right to use the first 33,000 monthly
barrels of the capacity of the thermal chemical extraction
processpursuant to the terms of the Operating Agreement, with CMT being
provided the right to use the next 20,000 barrels of capacity and any additional
capacity allocated pro rata (based on the percentages above), subject to
separate mutually agreeable allocations.





The
Operating Agreement has a term expiring on February 28, 2017, and can be
terminated earlier based on provisions in the Operating Agreement.





In
consideration for the services to be rendered pursuant to the Operating
Agreement, we agreed to pay CMT its actual costs and expenses associated with
providing such services, plus 10%, subject to a maximum price per gallon of
$0.40, subject to CMT meeting certain minimum volume requirements as provided in
the agreement. The maximum price to be paid per gallon is subject to change
based on the mutual agreement of both parties and during the third quarter we
agreed to pay CMT its actual costs and expenses (which have exceeded $0.40 per
gallon) associated with providing such services, plus 10%, not withstanding the
maximum price per gallon.  This decision was made in light of
unanticipated per gallon costs greater than $0.40 per gallon incurred during the
start-up phase of the plant.  As of the date of this filing we are
continuing to operate under this structure.





Pursuant
to the Operating Agreement, we also have the right to a non-revocable,
non-transferable, royalty-free, perpetual (except as provided in the agreement)
license to use the technology associated with the operations of the thermal chemical extraction
process(the “License” which we
have fully paid for in the amount of $1,731,889), in any market in the world
(except at CMT’s Baytown facility where it is non-exclusive).





Feedstock
Agreements:





Vertex’s
current operations are undertaken pursuant to two feedstock sale agreements and
four feedstock purchase agreements.  One of the feedstock sale
agreements was entered into in March 2009, for an initial term of 18 months,
terminable by the buyer after the expiration of six months, subject to the terms
of the agreement.  The agreement is also terminable by either party
with thirty days notice of a material breach that is not cured.  The
sale agreement requires that we provide between 8,000 and 22,000 barrels per
calendar month of used oil product (“Recovery Oil”) during
the term of the agreement; provides that the buyer shall have the right of first
refusal to purchase additional Recovery Oil from us, which is procured within
300 miles of their current location; and provides that the buyer pay us a price
per barrel equal to our direct costs, plus certain commissions based on the
quality and quantity of the Recovery Oil we supply.


-9-


The
second feedstock sale agreement requires us to provide between 800 and 2,500
barrels of Cutterstock per day to a separate buyer pursuant to a 24 month
contract entered into in April 2009, and provides that the buyer pay us a price
per gallon based on a premium to the market price of certain average weekly oil
prices listed on the “Platts Oilgram Price
Report”.





Vertex is
also a party to three feedstock purchase agreements with separate third parties,
pursuant to which such third parties have agreed to supply us with
feedstock.  The first supply agreement, for the purchase of Pygas, is
in effect until February 28, 2010, and continues thereafter in six month
increments unless terminated 30 days prior to the renewal date by either party,
and provides for us to purchase all Pygas which the seller produces in the
normal course of business.  The second agreement entered into in
September 2009, provides for us to purchase at least 567,000 gallons of
feedstock per month for a period of 18 months beginning on October 1, 2009 and
ending on March 31, 2011. The third agreement entered into in September 2009,
provides for us to purchase up to 350,000 gallons of feedstock per month for the
period from September 2009 to August 31, 2010. The purchase price per gallon for
each agreement is based on a discount to the market price of certain average
weekly oil prices listed on the “Platts Oilgram Price
Report”.





On or around February 5, 2010, Vertex
entered into an agreement with a third party to supply the third party with
recovery oil feedstock (used oil).  We have not yet begun supplying
feedstock under the agreement, which calls for commencement of deliveries on or
before May 1, 2010. Pursuant to the terms of the agreement, we have agreed to
supply up to 12,000 barrels of feedstock per month to the third party in
consideration for payment to be made to the Company. We anticipate supplying
feedstock pursuant to the terms of the agreement.  There are no
penalties associated with these agreements.





Market





Vertex
competes primarily in the used motor oil collection market, as well as in the
markets for the refining and trading of petrochemical products. The used motor
oil collection market is highly fragmented with more than an estimated 700 used
oil collectors nationwide. Based on a U.S. Department of Energy study dated
July 2006, the estimated volume of used motor oil recycled each year is
945 million gallons, of which it is estimated that 83% is burned and 17% is
re-refined. Vertex believes that there is a significant opportunity to increase
the percentage of used motor oil that is re-refined rather than burned.
Vertex collected approximately 29 million gallons of used motor oil in
2007, which accounted for approximately 3% of the entire recycled volume and
approximately 18% of the estimated 160 million gallons that are re-refined.
This used motor oil is collected from garages, vehicle dealerships, quick lube
change installations, and other commercial and industrial businesses. Market
participants include used motor oil collectors, transporters/brokers,
processors, re-refiners and used motor oil burners. Collected used motor oil is
often recycled and subsequently burned by various users such as asphalt
companies, paper mills and industrial facilities as an alternative to their base
load natural gas or other liquefied fuels, to offset operational costs. The
market size of the refining business in the Gulf Coast Region of the US
(Vertex’s primary market) is estimated at 2.0 million barrels per
year.




Competitive
Business Conditions




The
industrial waste and brokerage of petroleum products industries are highly
competitive. There are numerous small to mid-size firms that are engaged in the
collection, transportation, treatment and brokerage of virgin and used petroleum
products. Competitors include, but are not limited to: Safety-Kleen, Rio Energy,
Inc., and FCC Environmental (formerly Siemens Hydrocarbon Recovery Services).
These competitors actively seek to purchase feedstock from local, regional and
industrial collectors, refineries, pipelines and other sources. Competition for
these feedstocks may result in increasing prices to obtain used motor oil and
transmix feedstocks critical to the success of Vertex’s business model. In order
to remain competitive, Vertex must control costs and maintain strong
relationships with its feedstock suppliers. Vertex’s network of approximately 50
feedstock suppliers minimizes the reliance on any single supplier. A portion of
the sales of the aggregated used motor oil product are based on supply contracts
which include a range of prices which change based on feedstock quality
specifications and volumes. This pricing structure helps to insulate Vertex from
inventory risk by ensuring a spread between costs to acquire used motor oil
feedstock and the revenues received for delivery of the feedstock. Vertex
believes that price and service are the main competitive factors in the used
motor oil collection industry. Vertex believes that its ability to accept large
volumes of oil year round gives it an advantage over many of its competitors.
Vertex also believes that its storage capacity and ability to process the
streams of products that it receives and its ability to transport the end
product through barge, rail and truck gives it an advantage over many of its
competitors in the refining industry.


-10-


Although
Mr. Cowart and other key employees of Vertex are prohibited from competing
with Vertex while they are employed with Vertex and for six months thereafter,
none of such individuals will be prohibited from competing with Vertex after
such six month period ends. Additionally, none of Mr. Cowart’s affiliated
companies, including Vertex LP, are prohibited from competing with
Vertex.  Accordingly, any of these individuals or entities could be in
a position to use industry experience gained while working with Vertex to
compete with Vertex. Such competition could increase Vertex’s costs to obtain
feedstocks, and increase its costs for contracting use of operating assets and
services such as third party refining capacity, trucking services or terminal
access. Furthermore, such competition could distract or confuse customers,
reduce the value of Vertex’s intellectual property and trade secrets, or result
in a reduction in the prices Vertex is able to obtain for its finished products.
Any of the foregoing could reduce Vertex’s future revenues, earnings or growth
prospects.




Suppliers/Customers




Vertex
conducts business with approximately 50 feedstock suppliers from various
business segments, including motor oil change service stations, automotive
repair shops, manufacturing facilities, petroleum refineries and petrochemical
manufacturing operations, as well as brokers. The Black Oil division
historically aggregated, transported, and sold these feedstocks to one primary
customer, Omega Refining, LLC (“Omega”), which
represented a significant portion of Vertex’s revenues.  As a result
of the termination of this agreement with Omega in fiscal year 2009, our results
of operations were affected.  The Company has established arrangements
with other customers of its products such as blenders and burners of Black Oil,
as described above.




With
respect to its Refining and Marketing division, Vertex does not rely solely on
its contracts, but also on a strong spot market to support the sale of its end
products, which are commodities. Vertex has and expects to continue to maintain
positive working relationships with its customers.




Seasonality




The
industrial hydrocarbon recovery business is seasonal to the extent that it is
dependent on streams from seasonal industries. For example, asphalt plants burn
recycled waste oil in their process, placing pricing and supply availability
constraints on the industry during the good weather construction and road
building seasons. In Vertex’s current markets, road paving typically occurs from
late spring to early fall. Therefore, it is somewhat easier to procure certain
waste streams during winter months when competition for used motor oil feedstock
has historically not been as strong.




Regulatory
Environment




Vertex
operates in a highly regulated and competitive environment that is subject to
change, particularly in the area of environmental compliance. Its operations are
regulated by federal, state, county and, in some jurisdictions, city
regulations. Vertex’s compliance challenges arise from various legislative and
regulatory bodies influenced by political, environmental, health and safety
concerns.




For
example, changes in federal regulations relating to the use of methyl tertiary
butyl ether and new sulfur limits for product shipped on domestic pipelines
resulted in tightened specifications of gasoline blendstock that Vertex was
refining, causing a corresponding decrease in revenue and gross margin growth
during 2006, as compared to prior years. This change in regulation, as well as
other emission-related regulations, had a material impact on the entire
petroleum industry, and Vertex adapted and managed its operations to finding
materials better suited to comply with these regulations.




Vertex
must also obtain and maintain a range of federal, state and local permits for
its various logistical needs as well as its planned industrial
processes.


-11-


Inflation
and Commodity Price Risk




To date,
Vertex’s business has not been significantly affected by inflation. Vertex
purchases petroleum and distressed hydrocarbon products for consolidation and
delivery, as well as for its own refining operations. By virtue of constant
changes in the market value of petroleum products, Vertex is exposed to
fluctuations in both revenues and expenses. Vertex does not currently engage in
an active hedging program, as the inventory/finished product turnover occurs
within approximately four to six weeks, thereby limiting the timeline of
potential exposure. The purchase of Vertex’s used motor oil feedstock tends to
track with natural gas pricing due to the market’s typical practice of
substituting used motor oil and natural gas as a fuel source for various
industrial processes. On the other hand, the prices of the products that may in
the future be generated through the re-refining processes that Vertex hopes to
develop are expected to track with market pricing for marine diesel and
vacuum-gas oil. The recent rise in oil prices has increased the spread between
the price of used motor oil, feedstock and re-refining
end-products.




Vertex
Strategy




Our goal
is to continue to grow our business of recycling used motor oil and other
distressed hydrocarbon streams. Strategies to achieve this goal include (1)
working to grow revenues in core businesses, (2) seeking to increase margins
through developing additional processing capabilities, including but not limited
to the thermal chemical extraction process at additional locations other than
Baytown, Texas, (3) increasing market share through greenfield development or
through acquisitions, and (4) continued pursuit of alternative energy project
development opportunities, some of which were originally sourced by World
Waste.





·
            Our
      primary focus is to continue to supply used motor oil and other
      hydrocarbons to existing customers and to cultivate additional feedstock
      supply volume by expanding relationships with existing suppliers and
      developing new supplier relationships. We will seek to maintain good
      relations with existing suppliers, customers and vendors and the high
      levels of customer service necessary to maintain these businesses. We plan
      to seek to develop relationships with several other re-refining facilities
      to serve as such facilities’ primary and exclusive feedstock
      provider.





·
            We
      intend to improve margins by applying new technologies, including but not
      limited to the re-refining of certain oil feedstock through the “thermal chemical
      extraction process” to existing and new feedstock streams. The
      first application of this technology at CMT’s Baytown, Texas facility came
      on-line during the third quarter of 2009 and we have continued to enhance
      the facility and process.  We also plan to build additional
      facilities for various processes to implement proprietary company-owned,
      leased, or potentially acquired technologies to upgrade feedstock
      materials to create marine cutterstock, vacuum gas oil and other
      value-added energy products.  By moving from our historical role
      as a value-added logistics provider, to operating as an actual re-refiner
      ourselves, we plan to improve margins through the upgrading of used motor
      oil and transmix inventories into higher value end products, funding
      permitting, of which there can be no
assurance.





·
            We
      plan to seek to grow market share by consolidating feedstock supply
      through partnering with or acquiring collection and aggregation assets.
      For example, we may seek to use a combination of stock and cash to acquire
      or enter into joint ventures with various local used motor oil collectors
      and aggregators, technology providers, real estate partners and others.
      Such acquisitions and/or ventures, if successful, could add to revenues
      and provide better control over the quality and quantity of feedstock
      available for resale and/or upgrading as well as providing additional
      locations for the implementation of our thermal chemical extraction
      technology.  This may include the greenfield development of
      collection assets, terminals, re-refining facilities and equipment and
      opportunistic mergers and
acquisitions.





·
            We
      will continue to evaluate and potentially pursue various alternative
      energy project development opportunities.  These opportunities
      may be a continuation of the projects sourced originally by World Waste
      and/or may include new projects initiated by
us.


-12-


Employees




Vertex
has 12 full-time employees and 2 independent contractors.  We believe
that our relations with our employees are good.




Patents,
Trademarks, and Licenses




Pursuant
to the Operating Agreement, Vertex has the right to a non-revocable,
non-transferable, royalty-free, perpetual (except as provided in the agreement)
license to use the technology associated with the operations of TCEP in any
market in the world (the “License”).





In
addition, we have developed a website and have registered www.vertexenergy.com
as our domain name.





ITEM
1A. Risk Factors





Benjamin
P. Cowart, our Chief Executive Officer and Chairman, controls
Vertex.




Benjamin
P. Cowart, Vertex’s Chairman and Chief Executive Officer, beneficially owns a
total of approximately 36% of the total outstanding shares of the Company’s
capital stock, and holds the right to vote an additional 22% of the Company’s
capital stock pursuant to voting agreements entered into with various
shareholders of Vertex, which voting agreements provide him the right to elect
four (4) of Vertex’s five (5) directors (with the fifth director being appointed
by the shareholders of Vertex’s Series A Preferred Stock). The voting agreements
remain in effect until April 16, 2012.  As such, subject to the resale
terms and conditions of the voting agreements and the Lock-up Agreements
(described below) which certain of Vertex’s shareholders signed, until April 12,
2012, Mr. Cowart will have the right, to appoint four (4) of Vertex’s five
(5) directors, and therefore to exercise significant control over the Company,
including making decisions with respect to issuing additional shares, entering
into mergers, asset sales, and other fundamental transactions, and amending the
terms of Vertex’s articles of incorporation.




Vertex
owes a significant amount of money on behalf of Vertex LP in connection with
certain transactions affected pursuant to and in connection with the
Merger.




Pursuant
to an Operating Agreement (described above) entered into between Vertex and
Cedar Marine Terminals, L.P., a wholly-owned subsidiary of Vertex LP (“CMT”), in connection
with the Merger, Vertex has the right to a non-revocable, non-transferable,
royalty-free, perpetual (except as provided in the agreement) license to use the
technology associated with certain proprietary technology relating to the
re-refining of certain oil feedstock referred to as our “Thermal/chemical extraction
technology” in any market in the world (the “License”), provided
that Vertex pays CMT the documented net development costs of the
Thermal/chemical extraction technology, estimated to be $1.4 million (the “R&D Costs”),
which have been paid in full to date.   Additionally, pursuant to the
Asset Transfer Agreement (described above) and the terms of the Merger, Vertex
was required to assume up to $1.6 million of indebtedness from Vertex LP, of
which $0.9 million has been paid to date.  As such, Vertex is
following a payment schedule agreed to by the Related Party Transaction
Committee along with Vertex, LP which leaves approximately $0.7 million
remaining, which we plan to pay in full by May 2010.





Moving
forward, Vertex may need to raise additional funding to pay the expenses
described above, and as such may need to seek additional debt or equity
financing. If debt financing is available and obtained, our interest expense may
increase and we may be subject to the risk of default, depending on the terms of
such financing. If equity financing is available and obtained it may result in
our shareholders experiencing significant dilution. If such financing is
unavailable, we may be forced to curtail our operations, which may cause the
value of our securities to decline in value and/or become
worthless.





An
event of default by Vertex LP, and a foreclosure of Vertex LP’s and CMT’s assets
by Regions Bank, would materially adversely effect the Company’s operations and
the value of its securities.





Vertex
LP, which is majority-owned and controlled by the Company’s Chief Executive
Officer and Director, Benjamin P. Cowart, is a party to certain loan agreements,
security agreements and related agreements with Regions Bank (“Regions”).  In
August 2009, Vertex LP (and certain other entities controlled by and/or
associated with Vertex LP, including but not limited to CMT) received notice
from Regions that Regions believed it was in default of certain borrowing
criteria set forth in the loan agreement between Vertex LP and Regions, and that
Vertex LP had until October 1, 2009 at the latest, to remedy such alleged
defaults.  Although Vertex LP is taking actions to remedy the
defaults, they have not been remedied to date; however, Regions subsequently
agreed to provide Vertex LP a 6 month extension of the due date of the loans
made by Regions, and as a result, Vertex LP has until May 28, 2010, to repay
amounts owed under the loan agreements, and similarly, Vertex LP believes that
it has additional time to come to an understanding with Regions regarding its
defaults.  In the event that Vertex LP is unable to remedy its alleged
defaults with Regions prior to May 28, 2010, Regions may declare the entire
outstanding amount of the loan agreement in default and/or take action to
enforce its security interests over substantially all of Vertex LP’s and CMT’s
assets, including but not limited to the lease agreement pursuant to which CMT
leases the land at the Terminal, and the assets and operations relating to the
Company’s licensed thermal chemical extraction
process. As a result, if Regions were to call Vertex LP’s debts in
default and foreclose on Vertex LP’s assets, it may delay and/or prevent the
Company from operating its thermal chemical extraction
process (or potentially effect the license to use the technology), using
the Terminal for its operations, and/or using any of the other services provided
to the Company by Vertex LP’s affiliated companies.  Therefore, if
Regions were to declare Vertex LP in default of its loan agreements, it could
result in the value of the Company’s securities becoming devalued and/or
worthless and potentially force the Company to curtail or abandon its business
plan or operations.


-13-


Vertex
has no significant long-term assets and needs to rely on its contracts and
relationships with Vertex LP and its affiliates and certain third parties, which
could affect Vertex’s ability to operate its business.




Vertex
does not currently have any long-term assets, but instead its business is
comprised of the rights to various contracts and arrangements. As such, moving
forward, Vertex will need to rely on its relationships and agreements with
Vertex LP and its affiliates, including with the following:




·
            CrossRoad
      Carriers, for the transportation of Vertex’s feedstock of refined and
      re-refined petroleum products;





·
            Cedar
      Marine Terminal LP, which will sublease terminal space to Vertex, and from
      which Vertex may purchase certain re-refining assets;
  and





·
            Vertex
      Residual Management Group LP, which will perform environmental compliance
      and regulatory oversight for
Vertex.




Although
Vertex has a right of first refusal to purchase the entities (including the
assets of such entities), there can be no assurance that Vertex will exercise
such right.





In the
event that any of the above-described relationships are terminated, Vertex may
be forced to spend significant resources to identify and secure alternative
sources to provide these services. There can be no assurance that Vertex will be
able to locate such alternative sources on terms acceptable to it, or at all. As
a result, Vertex may be unable to continue its operations in its current form,
may be required to expend significant resources identifying alternative sources
of services, and/or may be forced to expend significant resources to purchase
and/or manufacture long-term assets, the construction of which assets may take a
significant amount of time and capital to complete.




Holders of shares
of common stock will not have the right to vote for
directors.




Due to
Mr. Cowart’s beneficial ownership of 36% of Vertex’s common stock and voting
agreements which are in place, which allow him to vote an additional 22% of
Vertex’s common stock for 4 of the 5 Directors of Vertex, at least one of whom
must be “independent” as
defined by the New York Stock Exchange, Mr. Cowart will have the right to
appoint 4 of our 5 Directors until April 16, 2012. The holders of Vertex’s
Series A preferred stock are entitled to elect the remaining Vertex
director. Accordingly, so long as the voting agreements remain in effect and the
shares of Vertex Series A Preferred Stock remain outstanding, the minority
holders of shares of Vertex’s common stock will not have the right to vote for
the election of directors.




Benjamin
P. Cowart, Vertex’s Chief Executive Officer and Chairman of the Board, owns and
is involved in other businesses that have relationships and agreements with
Vertex, including, but not limited to Vertex LP. These relationships may cause
conflicts of interest with Vertex.




Benjamin
P. Cowart, Vertex’s Chief Executive Officer and Chairman of the Board, also
serves as the General Partner of and controls several other entities, including,
but not limited to Vertex LP, through VTX, Inc. (collectively, the “Vertex Entities”),
that have entered into transactions with, supplied feedstock for, and performed
various business services for Vertex. These transactions and relationships
include the following:


-14-


·      Cross
Road Carriers transports some of Vertex’s feedstock and refined and re-refined
petroleum products;





·      Vertex
subleases terminal space from CMT and may purchase certain re-refining assets,
and perform certain other services for, Cedar Marine Terminal pursuant to other
agreements described herein;





·      Vertex
Residual Management Group LP performs environmental compliance and regulatory
oversight for Vertex; and





·      Vertex
Recovery collects used oil feedstock and sells it to Vertex.





Vertex
has (1) a right of first refusal to match any third-party offer to purchase any
of the Vertex LP Entities on the terms and conditions set forth in such offer;
and (2) the option, exercisable in Vertex’s sole discretion any time after the
18-month anniversary of the closing of the merger and so long as Mr. Cowart
is employed by Vertex, to purchase all or any part of the outstanding stock of
any of the Vertex LP Entities owned by Vertex LP or VTX, Inc., at a price based
on an independent third-party valuation and appraisal of the fair market value
of such Vertex LP Entity (the “Right of First
Refusal”). Pursuant to the merger agreement, Vertex was required to form
a committee of its board of directors (the “Related Party Transaction
Committee”)  including at least two “independent
directors” (defined as any individuals who do not beneficially own more
than 5% of the outstanding voting shares of Vertex, are not employed by, or
officers of, Vertex or any entity related to Mr. Cowart, are not directors
or managers of any such company, are not family members of Mr. Cowart, and
would qualify as “Independent
Directors” as defined in the rules and regulations of the New York Stock
Exchange). The Related Party Transaction Committee is charged with the review
and pre-approval of any and all related party transactions, including between
Vertex and Vertex LP, Mr. Cowart, or any other company or individual which
may be affiliated with Mr. Cowart.




Notwithstanding
the Right of First Refusal and the Related Party Transaction Committee,
perceived or actual conflicts of interest may exist between Mr. Cowart and
Vertex in connection with the Vertex Entities and/or any other entity which
Mr. Cowart may be affiliated and/or control in the future. Furthermore, if
any disagreement were to occur between Mr. Cowart and/or any Vertex Entity,
Vertex may be forced to find alternative suppliers and contractors to supply the
services or products then supplied by any of the Vertex Entities, which new
arrangements may not be on as favorable terms to Vertex and/or Mr. Cowart
may be forced to make a decision between remaining in control of any of the
Vertex Entities and/or Vertex.  Such perceived or actual conflicts of
interest may cause potential investors to not be willing to invest in Vertex,
which could make it harder for Vertex to raise funds through the sale of debt
and/or equity securities and/or cause Vertex’s securities to be devalued. As a
result of these perceived and/or actual conflicts of interest, the value of
Vertex’s securities may decrease in value and/or be valued less than similarly
situated publicly-traded companies without such potential conflicts of
interest.




Vertex
has established preferred stock which can be designated by the Vertex Board of
Directors without shareholder approval and has established Series A
preferred stock and Series B preferred stock, which gives the holders a
liquidation preference and the ability to convert such shares into Vertex’s
common stock.




Vertex
has 50,000,000 shares of preferred stock authorized which includes
5 million shares of designated Series A preferred stock of which
approximately 4.7 million shares are issued and outstanding and 2,000,000
designated shares of Series B preferred stock, of which 100,000 shares are
outstanding as of the date of this report.  The Vertex Series A
preferred stock has a liquidation preference of $1.49 per share. As a result, if
Vertex were to dissolve, liquidate or sell its assets, the holders of Vertex’s
Series A preferred stock would have the right to receive up to the first
approximately $7.0 million in proceeds from any such transaction.
Additionally, the Series B preferred stock has a liquidation preference which is
junior to the Series A preferred stock, senior securities and other security
holders (other than the common stock shareholders) equal to the face value of
such Series B preferred stock, $1.00 per share.  Consequently, holders
of Vertex common stock may receive less consideration or no consideration in
connection with such a transaction. Furthermore, the conversion of Series A
preferred stock into common stock and/or conversion of Series B preferred stock
into common stock may cause substantial dilution to Vertex’s common
shareholders. Additionally, because Vertex’s board of directors is entitled to
designate the powers and preferences of the preferred stock without a vote of
its shareholders, Vertex’s shareholders will have no control over what
designations and preferences Vertex’s future preferred stock, if any, will
have.


-15-


Vertex’s
shareholders may have difficulty selling their shares because such shares will
likely be deemed “penny
stock.”




Since the
shares of Vertex’s common stock are not be listed on a national securities
exchange, if the trading price of such shares is below $5.00 per share, trading
in such shares will be subject to the requirements of certain rules promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock (generally, any equity security not
listed on a national securities exchange that has a market price of less than
$5.00 per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
defined as an investor with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 individually or $300,000 together with a spouse). For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser’s written
consent to the transaction prior to the sale. The broker-dealer also must
disclose the commissions payable to the broker-dealer, current bid and offer
quotations for the penny stock and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market. Such information must be provided to the
customer orally or in writing before or with the written confirmation of trade
sent to the customer. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-dealers from
effecting transactions in Vertex’s common stock, which could severely limit the
market liquidity of such shares of common stock and the ability of such holders
to sell their shares.




The
market price of Vertex’s common stock may be adversely affected by market
volatility.




The
market price of Vertex’s common stock is likely to be volatile and could
fluctuate widely in response to many factors, including:




·
            actual
      or anticipated variations in Vertex’s operating
  results;





·
            developments
      with respect to patents or proprietary
rights;





·
            announcements
      of technological innovations by Vertex or its
  competitors;





·
            announcements
      of new products or new contracts by Vertex or its
    competitors;





·
            changes
      in financial estimates by securities analysts and whether Vertex’s
      earnings meet or exceed such
estimates;





·
            conditions
      and trends in the industries in which Vertex
  operates;





·
            changing
      environmental standards;





·
            new
      accounting standards;





·
            general
      economic, political and market conditions and other factors;
      and





·
            the
      occurrence of any of the other risks described in this
    report.





-16-




RISKS
RELATING TO VERTEX’S BUSINESS




Vertex’s
contracts may not be renewed and its existing relationships may not continue,
which could be exacerbated by the fact that a limited number of Vertex’s
customers represented a significant portion of Vertex’s sales.




Vertex’s
contracts and relationships in the black oil business include feedstock
purchasing agreements with local waste oil collectors, an off-take arrangement
with one re-refinery, along with a few key relationships in the bunkering,
blending and No. 6 oil industry.  Because Vertex’s operations are
extremely dependent on the black oil key bunkering, blending and No. 6 oil
relationships as well as its third-party refining contracts, if we were to lose
relationships there would be a material adverse effect on Vertex’s operations
and results of operations. Additionally, if Vertex were to lose any of its
current local waste oil collectors, Vertex could be required to spend additional
resources locating and providing incentives for other waste oil collectors,
which could cause Vertex’s expenses to increase and/or cause it to curtail or
abandon its business plans.




This is
exacerbated by the fact that five large companies with various independent
divisions represented 26%, 17%, 14%, 14% and 13% of the Company’s gross sales
and four of these companies represented 6%, 32%, 17% and 21% of outstanding
trade receivables for the year ended December 31, 2009.  As a result,
if the Company were to lose any of its largest revenue producing relationships,
the Company may be forced to expend additional resources attempting to secure
replacement relationships, which may not be on as favorable terms as its current
relationships, if such relationships can be secured at all.





A
significant portion of our historical revenues are a result of our agreement
with KMTEX, which can be terminated by either party with sixty days prior
notice.





We have
an agreement in place with KMTEX, pursuant to which KMTEX has agreed to process
feedstock of certain petroleum distillates, which we provide to KMTEX into more
valuable feedstocks, including pygas, gasoline blend stock and MDO/cutter stock,
which agreement expires on June 30, 2010, but is subject to a three year
extension upon the mutual agreement of both parties.  The agreement
can be terminated upon sixty days prior written notice by either party at any
time.  If KMTEX were to terminate and/or not agree to renew our
agreement with it, we would be forced to spend resources attempting to locate
another party which we could supply our feedstock which could take substantial
time, if such alternative party is even available. If we are able to find
another contracting party, the terms of the understanding or agreement with such
contracting party may be on terms less favorable to us and/or may force us to
transport our feedstock a greater distance.  As a result of the above,
if we were to lose our agreement with KMTEX our expenses may increase, our
results of operations may decrease and/or it may cause us to curtail or abandon
our business plans, all of which would likely cause the value of our securities
to decrease in value.





Vertex
operates in competitive markets, and there can be no certainty that Vertex will
maintain its current customers or attract new customers or that its operating
margins will not be impacted by competition.




The
industries in which Vertex operates are highly competitive. Vertex competes with
numerous local and regional companies of varying sizes and financial resources
in its refining and feedstock consolidation operations, and expects to compete
with larger oil companies, with significantly greater resources than Vertex, in
its planned oil re-refining operations. Vertex expects competition to intensify
in the future. Furthermore, numerous well-established companies are focusing
significant resources on providing refining and re-refining services that will
compete with Vertex’s services. We cannot assure you that Vertex will be able to
effectively compete with these other companies or that competitive pressures,
including possible downward pressure on the prices Vertex charges for its
products and services, will not arise. In the event that Vertex cannot
effectively compete on a continuing basis, or competitive pressures arise, such
inability to compete or competitive pressures could have a material adverse
effect on Vertex’s business, results of operations and financial
condition.


-17-


Disruptions
in the supply of feedstock could have an adverse effect on Vertex’s
business.




Vertex
depends on the continuing availability of raw materials, including feedstock, to
remain in production.  A serious disruption in supply of feedstock, or
significant increases in the prices of feedstock, could significantly reduce the
availability of raw materials at Vertex’s plant.  Additionally,
increases in production costs could have a material adverse effect on its
business, results of operations and financial condition.




For
example, Vertex has previously experienced difficulty in obtaining feedstock
from its suppliers who, because of the sharp downturn in the price of oil (used
and otherwise) have seen their margins decrease substantially, which in some
cases has made it uneconomical for such suppliers to purchase feedstock from
their suppliers and/or sell to Vertex at the rates set forth in their contracts.
Any similar decline in the price of oil and/or the economy in general could
create a decrease in the supply of feedstock, prevent Vertex from maintaining
its required levels of output and/or force Vertex to seek out additional
suppliers of feedstock, who may charge more than its current suppliers, and
therefore adversely affect its results of operations.




Vertex
is subject to numerous environmental and other laws and regulations and, to the
extent Vertex is found to be in violation of any such laws and regulations,
Vertex’s business could be materially and adversely affected.




Vertex is
subject to extensive federal, state, provincial and local laws and regulations
relating to the protection of the environment which, among other
things:





·
            regulate
      the collection, transportation, handling, processing and disposal of
      hazardous and non-hazardous wastes;





·
            impose
      liability on persons involved in generating, handling, processing,
      transporting or disposing hazardous
materials;





·
            impose
      joint and several liability for remediation and clean-up of environmental
      contamination; and





·
            require
      financial assurance that funds will be available for the closure and
      post-closure care of sites where hazardous wastes are stored, processed or
      disposed.





The
breadth and complexity of all of these laws and regulations affecting Vertex
make consistent compliance extremely difficult and often result in increased
operating and compliance costs, including requiring the implementation of new
programs to promote compliance. Even with these programs, Vertex and other
companies in the industry are routinely faced with legal and administrative
proceedings which can result in civil and criminal penalties, interruption of
business operations, fines or other sanctions and require expenditures. Under
current law, Vertex may be held liable for damage caused by conditions that
existed before it acquired its assets and/or before it took control of its
leased properties or if it arranges for the transportation, disposal or
treatment of hazardous substances that cause environmental contamination. In the
future, Vertex may be subject to monetary fines, civil or criminal penalties,
remediation, clean-up or stop orders, injunctions, orders to cease or suspend
certain practices or denial of permits required to operate its facilities and
conduct its operations. The outcome of any proceeding and associated costs and
expenses could have a material adverse impact on Vertex’s operations and
financial condition.


-18-


Environmental
laws and regulations are subject to change and may become increasingly stringent
or relaxed. Interpretation or enforcement of existing laws and regulations, or
the adoption of new laws and regulations, may require Vertex to modify or
curtail its operations or replace or upgrade its facilities or equipment at
substantial costs which it may not be able to pass on to its customers. On the
other hand, if new laws and regulations are less stringent, then Vertex’s
customers or competitors may be able to compete with Vertex more effectively,
without reliance on its services, which could decrease the need for its services
and/or increase competition which could adversely affect its revenues and
profitability, if any.




Vertex is
required to obtain and maintain permits, licenses and approvals to conduct its
operations in compliance with such laws and regulations. If Vertex is unable to
maintain its currently held permits, licenses and approvals, it may not be able
to continue certain of its operations. If it is unable to obtain any additional
permits, licenses and approvals which may be required as Vertex expands its
operations, it may be forced to curtail or abandon its current and/or future
planned business operations.




Vertex could be subject to
involuntary shutdowns or be required to pay significant monetary damages or
remediation costs if it is found to be a responsible party for the improper
handling or the release of hazardous substances.




As a
company engaged in the sale, handling, transportation, storage, recycling and
disposal of materials that are or may be classified as hazardous by federal,
state, provincial or other regulatory agencies, Vertex faces risks of liability
for environmental contamination. The federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or “CERCLA” or Superfund,
and similar state laws impose strict liability for clean-up costs on current or
former owners and operators of facilities that release hazardous substances into
the environment, as well as on the businesses that generate those substances or
transport them. As a potentially responsible party, or “PRP,” Vertex may be
liable under CERCLA for substantial investigation and cleanup costs even if it
operates its business properly and complies with applicable federal and state
laws and regulations. Liability under CERCLA may be joint and several, which
means that if it were found to be a business with responsibility for a
particular CERCLA site, Vertex could be required to pay the entire cost of the
investigation and cleanup, even though it was not the party responsible for the
release of the hazardous substance and even though other companies might also be
liable. Even if Vertex is able to identify who the other responsible parties
might be, it may not be able to compel them to contribute to the remediation
costs, or they might be insolvent or unable to contribute due to lack of
financial resources.




Vertex’s
facilities and the facilities of its clients and third-party contractors may
have generated, used, handled and/or disposed of hazardous substances and other
regulated wastes. Environmental liabilities could exist, including cleanup
obligations at these facilities or at off-site locations, which could result in
future expenditures that cannot be currently quantified and which could
materially reduce Vertex’s profits. In addition, new services or products
offered by Vertex could expose it to further environmental liabilities for which
it has no historical experience and cannot estimate its potential exposure to
liabilities.




Vertex
is dependent on third parties for the disposal of its waste
streams.




Vertex
does not own any waste disposal sites. As a result, it is dependent on third
parties for the disposal of waste streams. To date, disposal vendors have met
their requirements, but we cannot assure you that they will continue to do so.
If for some reason Vertex’s current disposal vendors cannot perform up to
standards, Vertex may be required to replace them. Although Vertex believes
there are a number of potential replacement disposal vendors that could provide
such services, it may incur additional costs and delays in identifying and
qualifying such replacements. In addition, any mishandling of its waste streams
by disposal vendors could expose Vertex to liability. Any failure by disposal
vendors to properly collect, transport, handle or dispose of Vertex’s waste
streams could expose it to liability, damage its reputation and generally have a
material adverse effect on its business, financial condition or results of
operations.




Worsening
economic conditions and trends and downturns in the business cycles of the
industries Vertex serves and which provide services to Vertex would impact its
business and operating results.




A
significant portion of Vertex’s customer base is comprised of companies in the
chemical manufacturing and hydrocarbon recovery industries. The overall levels
of demand for its products, refining operations, and future planned re-refined
oil products, are driven by fluctuations in levels of end-user demand, which
depend in large part on general macroeconomic conditions in the U.S., as well as
regional economic conditions. For example, many of Vertex’s principal consumers
are themselves heavily dependent on general economic conditions, including the
price of fuel and energy, availability of affordable credit and capital,
employment levels, interest rates, consumer confidence and housing demand. These
cyclical shifts in Vertex’s customers’ businesses may result in fluctuations in
demand, volumes, pricing and operating margins for its services and
products.




In
addition to its customers, the suppliers of Vertex’s feedstock may also be
affected by downturns in the economy and adverse changes in the price of
feedstock. For example, Vertex has recently experienced difficulty obtaining
feedstock from its suppliers who, because of the sharp downturn in the price of
oil (used and otherwise) have seen their margins decrease substantially, which
in some cases have made it uneconomical for such suppliers to purchase feedstock
from their suppliers and/or sell to Vertex at the rates set forth in their
contracts. Any similar decline in the price of oil and/or the economy in general
could create a decrease in the supply of feedstock, prevent Vertex from
maintaining its required levels of output and/or force Vertex to seek additional
suppliers of feedstock, who may charge more than its current suppliers, and
therefore adversely affect its results of operations.


-19-


Vertex’s
operating margins and profitability may be negatively impacted by changes in
fuel and energy costs.




Vertex
transports its refined oil, and plans in the future to transport re-refined oil,
with trucks and by rail. As a result, increases in shipping and transportation
costs caused by increases in oil, gasoline and diesel prices have a significant
impact on its operating expenses. The price and supply of oil and gas is
unpredictable and fluctuates based on events beyond Vertex’s control, including
geopolitical developments, supply and demand for oil and natural gas, actions by
OPEC and other oil and gas producers, war and unrest in oil producing countries,
regional production patterns and environmental concerns. A significant increase
in transportation or fuel costs could lower Vertex’s operating margins and
negatively impact its profitability.




Additionally,
the price at which Vertex sells its refined oil and its re-refined oil is
affected by changes in certain oil indexes. If the relevant oil index rises,
Vertex anticipates being able to increase the prices for its refined and
re-refined oil. If the relevant oil index declines, Vertex anticipates having to
reduce prices for its refined and re-refined oil. However, the cost to collect
used oil and refinery feedstock, including the amounts that must be paid to
obtain used oil and feedstock, generally also increases or decreases when the
relevant index increases or decreases. Even though the prices that can be
charged for Vertex’s refined (and in the future, re-refined) products and the
costs to collect, refine, and re-refine the feedstock generally increase and
decrease together, Vertex cannot assure you that when the costs to collect,
refine and re-refine used oil and petrochemical products increase, Vertex will
be able to increase the prices it charges for its refined and re-refined
products to cover such increased costs, or that the costs to collect, refine and
re-refine used oil and petrochemical products will decline when the prices
Vertex can charge for its products declines. If the prices Vertex charges for
its finished products and the costs to collect, refine and re-refine products do
not move together or in similar magnitudes, Vertex’s profitability may be
materially and negatively impacted.




Expansion
of Vertex’s business may result in unanticipated adverse
consequences.




In the
future, Vertex may seek to grow its business by investing in new or existing
facilities or technologies, making acquisitions or entering into partnerships
and joint ventures. Acquisitions, partnerships, joint ventures or investments
may require significant managerial attention, which may divert management from
its other activities and may impair the operation of Vertex’s existing
businesses. Any future acquisitions of businesses or facilities could entail a
number of additional risks, including:




·
            the
      failure to successfully integrate the acquired businesses or facilities or
      new technology into Vertex’s
operations;




·
            the
      inability to maintain key pre-acquisition business
      relationships;




·
            loss
      of key personnel of the acquired business or
  facility;




·
            exposure
      to unanticipated liabilities; and




·
            the
      failure to realize efficiencies, synergies and cost
    savings.




As a
result of these and other factors, including the general economic risk
associated with the industries in which it operates, Vertex may not be able to
realize the expected benefits from any future acquisitions, partnerships, joint
ventures or other investments.


-20-


Vertex
depends heavily on the services of its Chief Executive Officer and Chairman,
Benjamin P. Cowart.




Vertex’s
success depends heavily upon the personal efforts and abilities of Benjamin P.
Cowart, its Chief Executive Officer and Chairman, who is employed by Vertex
under a five-year employment contract. Vertex does not currently have any “key man” life
insurance policy in place for Mr. Cowart. Mr. Cowart has numerous
business relationships with entities separate from Vertex  which could
take a significant portion of his time and/or could cause conflicts of interest
with Vertex’s operations. The loss of Mr. Cowart or other key employees
could have a material adverse effect on Vertex’s business, results of operations
or financial condition. In addition, the absence of Mr. Cowart may force
Vertex to seek a replacement who may have less experience or who may not
understand Vertex’s business as well, or Vertex may not be able to find a
suitable replacement.




Unanticipated
problems or delays in building Vertex’s facilities to the proper specifications
may harm its business and viability.




Vertex’s
future growth will depend on its ability to timely and economically complete and
operate its planned re-refining facility and operate its existing refining
operations. If Vertex’s operations are disrupted or its economic integrity is
threatened for unexpected reasons, its business may experience a substantial
setback. Moreover, the occurrence of significant unforeseen conditions or events
in connection with the construction of Vertex’s planned facility may require it
to reexamine its business model. Any change to Vertex’s business model or
management’s evaluation of the viability of its planned services may adversely
affect its business. Construction costs for Vertex’s facility may also increase
to a level that would make a new facility too expensive to complete or
unprofitable to operate. Contractors, engineering firms, construction firms and
equipment suppliers also receive requests and orders from other companies and,
therefore, Vertex may not be able to secure their services or products on a
timely basis or on acceptable financial terms. Vertex may suffer significant
delays or cost overruns as a result of a variety of factors, such as increases
in the prices of raw materials, shortages of workers or materials,
transportation constraints, adverse weather, equipment failures, fires, damage
to or destruction of property and equipment, environmental damage, unforeseen
difficulties or labor issues, any of which could prevent Vertex from commencing
operations as expected at its planned re-refining facility.




Strategic
relationships on which Vertex relies are subject to change.




Vertex’s
ability to identify and enter into commercial arrangements with feedstock
suppliers and refined and re-refined oil clients depends on developing and
maintaining close working relationships with industry participants. Vertex’s
success in this area also depends on its ability to select and evaluate suitable
projects as well as to consummate transactions in a highly competitive
environment. These factors are subject to change and may impair Vertex’s ability
to grow.




Disruptions
to infrastructure could materially and adversely affect Vertex’s
business.




Vertex’s
business depends on the continuing availability of railroad, port, storage and
distribution infrastructure. Any disruptions in this infrastructure network,
whether caused by labor difficulties, earthquakes, storms, other natural
disasters, human error or malfeasance or other reasons, could have a material
adverse effect on Vertex’s business. Vertex relies on third parties to maintain
the rail lines from their plants to the national rail network, and any failure
by these third parties to maintain the lines could impede the delivery of
products, impose additional costs and could have a material adverse effect on
Vertex’s business, results of operations and financial condition. For example,
recent damage to the Cedar Marine Terminal as a result of Hurricane Ike (which
caused the terminal to temporarily be out of operation), resulted in increased
costs associated with the shipping of feedstock through third party contractors,
thereby raising the overall cost of the feedstock and lowering Vertex’s margins.
Additional hurricanes or natural disasters in the future could cause similar
damage to Vertex’s infrastructure, prevent Vertex from generating revenues while
such infrastructure is undergoing repair (if repairable) and/or cause Vertex’s
margins and therefore its results of operations to be adversely
affected.


-21-


Vertex’s
commercial success will depend in part on its ability to obtain and maintain
protection of its intellectual property.




Vertex’s
success will depend in part on its ability to maintain or obtain and enforce any
future patent rights and/or other intellectual property protection for its
technologies and to preserve its trade secrets, and to operate without
infringing upon the proprietary rights of third parties. Vertex has not obtained
patents (although patent applications for the Company’s licensed Thermo-Chemical
Extraction Process are pending, which patent pending is owned by Vertex LP
and/or its affiliates)  in the United States or internationally for
its technology to date. We cannot assure you that if Vertex files patent
applications for its technologies, such patents will be granted or that the
scope of any claims granted in any patent will provide Vertex with proprietary
protection or a competitive advantage. We cannot assure you that if granted,
such patents will be valid or will afford Vertex with protection against
competitors with similar technology. The failure to obtain or maintain patent or
other intellectual property protection on the technologies underlying Vertex’s
technologies may have a material adverse effect on its competitive position and
business prospects. It is also possible that Vertex’s technologies may infringe
on patents or other intellectual property rights owned by others. Vertex may
have to alter its products or processes, pay licensing fees, defend an
infringement action or challenge the validity of the patents in court, or cease
activities altogether because of patent rights of third parties, thereby causing
additional unexpected costs and delays to it. We cannot assure you that a
license will be available to Vertex, if at all, upon terms and conditions
acceptable to it or that it will prevail in any intellectual property
litigation. Intellectual property litigation is costly and time consuming, and
we cannot assure you that Vertex will have sufficient resources to pursue such
litigation. If Vertex does not obtain a license under such intellectual property
rights, is found liable for infringement or is not able to have such patents
declared invalid, Vertex may be liable for significant money damages and may
encounter significant delays in bringing products to market.




Competition
may impair Vertex’s success.




New
technologies may be developed by others that could compete with Vertex’s
refining and re-refining technologies. In addition, Vertex faces competition
from other producers of oil substitutes and related products. Such competition
is expected to be intense and could significantly drive down the price for
Vertex’s products. Competition will likely increase as prices of energy in the
commodities market, including refined and re-refined oil, rise. Additionally,
new companies are constantly entering the market, thus increasing the
competition even further. These companies may have greater success in the
recruitment and retention of qualified employees, as well as in conducting their
own refining and re-refining operations, and may have greater access to
feedstock, market presence, economies of scale, financial resources and
engineering, technical and marketing capabilities, which may give them a
competitive advantage. In addition, actual or potential competitors may be
strengthened through the acquisition of additional assets and interests. If
Vertex is unable to compete effectively or adequately respond to competitive
pressures, this may materially adversely affect its results of operation and
financial condition and could also have a negative impact on its ability to
obtain additional capital from investors.




Potential
competition from Vertex’s existing employees and affiliated entities could
negatively impact Vertex’s profitability.




Although
Mr. Cowart and other employees of Vertex are prohibited from competing with
Vertex while they are employed with Vertex and for six months thereafter, none
of such individuals will be prohibited from competing with Vertex after such six
month period ends. Additionally, none of Mr. Cowart’s affiliated companies,
including Vertex LP, are prohibited from competing with Vertex Accordingly, any
of these individuals or entities could be in a position to use industry
experience gained while working with Vertex to compete with Vertex Such
competition could increase Vertex’s costs to obtain feedstock, and increase its
costs for contracting use of operating assets and services such as third party
refining capacity, trucking services or terminal access. Furthermore, such
competition could distract or confuse customers, reduce the value of Vertex’s
intellectual property and trade secrets, or result in a reduction in the prices
Vertex is able to obtain for its finished products. Any of the foregoing could
reduce Vertex’s future revenues, earnings or growth prospects.




Competition
due to advances in renewable fuels may lessen the demand for Vertex’s products
and negatively impact its profitability.




Alternatives
to petroleum-based products and production methods are continually under
development. For example, a number of automotive, industrial and power
generation manufacturers are developing alternative clean power systems using
fuel cells or clean-burning gaseous fuels that may address increasing worldwide
energy costs, the long-term availability of petroleum reserves and environmental
concerns, which if successful could lower the demand for Vertex’s services. If
these non-petroleum based products and oil alternatives continue to expand and
gain broad acceptance such that the overall demand for Vertex’s products is
reduced, it may not be able to compete effectively in the
marketplace.


-22-


Vertex
will rely on new technology to conduct its business, including the Thermal
Chemical Extraction Process, and its technology could become ineffective or
obsolete.




Vertex
will be required to continually enhance and update its technology to maintain
its efficiency and to avoid obsolescence. Additionally, Vertex initially plans
to rely on the License from CMT in connection with the Thermal/chemical extraction
technology (the “Process”).  The
Process is currently commercially unproven and may never work in a profitable
manner, if at all.  Currently the Process is not producing at expected
levels and not producing the quality of product we had originally planned to
produce.  As a result, the total revenues generated by the process
have been below our previous estimates.  The Process may be unable to
produce the level or quality of product we originally hoped and as a result, our
results of operations may be adversely affected and the value of our securities
may decline in value.




Additionally,
the costs moving forward of enhancing and updating our technology may be
substantial and may be higher than the costs that we anticipated for technology
maintenance and development. If Vertex is unable to maintain the efficiency of
its technology, its ability to manage its business and to compete may be
impaired. Even if Vertex is able to maintain technical effectiveness, its
technology may not be the most efficient means of reaching its objectives, in
which case it may incur higher operating costs than it would if its technology
was more effective. The impact of technical shortcomings, including but not
limited to the failure of the Process, could have a material adverse effect on
Vertex’s prospects, business, financial condition, and results of
operations.




Vertex’s
business is subject to local, legal, political, and economic factors which are
beyond its control.




Vertex
believes that the current political environment for construction of its planned
re-refining facility is sufficiently supportive to enable it to plan and
implement its operations. However, there are risks that conditions will change
in an adverse manner. These risks include, but are not limited to, environmental
issues, land use, air emissions, water use, zoning, workplace safety,
restrictions imposed on the re-refining industry such as restrictions on
production, substantial changes in product quality standards, restrictions on
feedstock supply, price controls and export controls. Any changes in financial
incentives, investment regulations, policies or a shift in political attitudes
are beyond the control of Vertex and may adversely affect its business and
future financial results.




Environmental
risks and regulations may adversely affect Vertex’s business.




All
phases of designing, constructing and operating Vertex’s refining and planned
re-refining plant present environmental risks and hazards. Vertex is subject to
environmental regulation implemented or imposed by a variety of federal, state
and municipal laws and regulations as well as international conventions. Among
other things, environmental legislation provides for restrictions and
prohibitions on spills and discharges, as well as emissions of various
substances produced in association with Vertex’s operations. Legislation also
requires that facility sites be operated, maintained, abandoned and reclaimed in
such a way that would satisfy applicable regulatory authorities. Compliance with
such legislation can require significant expenditures and a breach could result
in the imposition of fines and penalties, some of which could be material.
Environmental legislation is evolving in a manner Vertex expects may result in
stricter standards and enforcement, larger fines and liability, as well as
potentially increased capital expenditures and operating costs. The presence or
discharge of pollutants in or into the air, soil or water may give rise to
liabilities to governments and third parties and may require Vertex to incur
costs to remedy such presence or discharge. If Vertex is unable to remediate
such conditions economically or obtain reimbursement or indemnification from
third parties, its financial condition and results of operations could be
adversely affected. Vertex cannot assure you that the application of
environmental laws to its business will not cause it to limit its production, to
significantly increase the costs of its operations and activities, to reduce the
market for its products or to otherwise adversely affect its financial
condition, results of operations or prospects.


-23-


Penalties
Vertex may incur could impair its business.




Failure
to comply with government regulations could subject Vertex to civil and criminal
penalties and may negatively affect the value of its assets or its ability to
conduct its business. Vertex may also be required to take corrective actions,
including, but not limited to, installing additional equipment, which could
require it to make substantial capital expenditures. Vertex could also be
required to indemnify its employees in connection with any expenses or
liabilities that they may incur individually in connection with regulatory
action against Vertex. These could result in a material adverse effect on
Vertex’s prospects, business, financial condition and its results of
operations.




If
Vertex cannot maintain adequate insurance coverage, it will be unable to
continue certain operations.




Vertex’s
business exposes it to various risks, including claims for causing damage to
property and injuries to persons that may involve allegations of negligence or
professional errors or omissions in the performance of its services. Such claims
could be substantial. Vertex believes that its insurance coverage is presently
adequate and similar to, or greater than, the coverage maintained by other
similarly situated companies in the industry. If Vertex is unable to obtain
adequate or required insurance coverage in the future, or if such insurance is
not available at affordable rates, Vertex could be in violation of its permit
conditions and other requirements of the environmental laws, rules and
regulations under which it operates. Such violations could render Vertex unable
to continue certain of its operations. These events could result in an inability
to operate certain assets and significantly impair its financial
condition.




Increases
in energy costs will affect Vertex’s operating results and financial
condition.




Vertex’s
production costs will be dependent on the costs of the energy sources used to
run its facilities and to procure feedstock. These costs are subject to
fluctuations and variations, and Vertex may not be able to predict or control
these costs. If these costs exceed Vertex’s expectations, this may adversely
affect its results of operations.




Vertex’s
insurance policies do not cover all losses, costs or liabilities that it may
experience.




Vertex
maintains insurance coverage, but these policies do not cover all of its
potential losses, costs or liabilities. Vertex could suffer losses for
uninsurable or uninsured risks, or in amounts in excess of its existing
insurance coverage, which would significantly affect its financial performance.
Vertex’s insurance policies also have deductibles and self-retention limits that
could expose it to significant financial expense. Vertex’s ability to obtain and
maintain adequate insurance may be affected by conditions in the insurance
market over which it has no control. The occurrence of an event that is not
fully covered by insurance could have a material adverse effect on Vertex’s
business, financial condition and results of operations. In addition, Vertex’s
business requires that it maintain various types of insurance. If such insurance
is not available or not available on economically acceptable terms, Vertex’s
business would be materially and adversely affected.




If
Vertex is unable to maintain a line of credit, it could have an adverse effect
on Vertex’s business.




Our Line of Credit with Regions bank
comes due on May 25, 2010 (as described in greater detail
below).  Vertex relies heavily on the availability and utilization of
this line of credit for its operations and for the purchase of
inventory.  If Vertex is unable to renew or replace this facility it
may be forced to curtail or abandon its current and/or future planned business
operations.




ITEM
1B. Unresolved Staff Comments





Not
applicable.





ITEM
2. Properties




Vertex
sub-leases office space from Vertex LP at its current principal executive office
located at 1331 Gemini St., Houston, Texas 77058. The office rent is
approximately $6,629 per month for 3,250 square feet, and the facility lease
expires in June 2012. Additionally, Vertex leases approximately 30,000 barrels
in storage capacity for its Black Oil division at Cedar Marine Terminal, Texas.
The monthly lease expense is $22,500 and the lease expires in March
2011.


-24-





ITEM
3. Legal Proceedings





From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.





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





No matter
was submitted to a vote of Vertex’s security holders during the quarter ended
December 31, 2009.




PART
II





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





Our
common stock has been traded on the OTC Bulletin Board over-the-counter market
since May 4, 2009, under the symbol "VTNR.OB". Our common
stock was traded on the OTC Bulletin Board over-the-counter market from
August 24, 2004 until May 4, 2009 under the symbol "WDWT.OB” and prior to
August 24, 2004 under the symbol “VPTI.OB”.




The
following table sets forth, for the periods indicated, the high and low sales
prices for our common stock on the OTC Bulletin Board, for the quarters
presented. Prices represent inter-dealer quotations without adjustments for
markups, markdowns, and commissions, and may not represent actual
transactions.  Additionally, as a result of the Merger, the common
stock of World Waste was effectively reversed one for ten (10) as a result of
the exchange ratios set forth in the Merger, and the table below retroactively
reflects the impact of such effective reverse stock split.




QUARTER
      ENDING
            
            HIGH
            
            
            LOWFISCAL
      2009December
      31, 2009
            
            $
            2.10
            
            
            $
            0.37September
      30, 2009
            
            $
            2.25
            
            
            $
            0.31June
      30, 2009
            
            $
            1.25
            
            
            $
            0.15March
      31, 2009
            
            $
            0.18
            
            
            $
            0.02FISCAL
      2008December
      31, 2008
            
            $
            0.11
            
            
            $
            0.01September
      30, 2008
            
            $
            0.24
            
            
            $
            0.10June
      30, 2008
            
            $
            0.30
            
            
            $
            0.14March
      31, 2008
            
            $
            0.34
            
            
            $
            0.14





HOLDERS





As of
March 1, 2010, there were approximately 730 holders of record of our common
stock, not including holders who hold their shares in street
name.   As of March 1, 2010, there were 4,755,666 shares of our
Series A Preferred Stock issued and outstanding and held by approximately 207
holders and 100,000 shares of our Series B Preferred Stock issued and
outstanding held by one holder.


-25-


DIVIDENDS





We have
not paid any dividends on our common stock to date and do not anticipate that we
will be paying dividends in the foreseeable future. Any payment of cash
dividends on our common stock in the future will be dependent upon the amount of
funds legally available, our earnings, if any, our financial condition, our
anticipated capital requirements and other factors that our Board of Directors
may think are relevant. However, we currently intend for the foreseeable future
to follow a policy of retaining all of our earnings, if any, to finance the
development and expansion of our business and, therefore, do not expect to pay
any dividends on our common stock in the foreseeable future. Additionally, the
terms of our preferred stock impose restrictions on our ability to pay
dividends.





Description
of Capital Stock





Common
Stock




The total
number of authorized shares of Vertex common stock is 750,000,000 shares, $0.001
par value per share.




Each
share of Vertex common stock is entitled to equal dividends and distributions
per share with respect to the common stock when, as and if declared by Vertex’s
board of directors. No holder of any shares of Vertex common stock has a
preemptive right to subscribe for any Vertex security, nor are any shares of
Vertex common stock subject to redemption or convertible into other securities.
Upon liquidation, dissolution or winding-up of Vertex, and after payment of
creditors and preferred shareholders of Vertex, if any, the assets of Vertex
will be divided pro rata on a share-for-share basis among the holders of Vertex
common stock. Each share of Vertex common stock is entitled to one vote, except
with respect to the election of directors. Shares of Vertex common stock do not
possess any rights in respect of cumulative voting.




Preferred
Stock




The total
number of “blank
check” authorized shares of Vertex preferred stock is 50,000,000 shares,
$0.001 par value per share. The total number of authorized shares of Vertex’s
Series A Convertible Preferred Stock (“Vertex Series A
Preferred”) is 5,000,000 and the total number of authorized shares of
Vertex’s Series B Convertible Preferred Stock is 2,000,000 (“Vertex Series B
Preferred”).




Vertex
Series A Preferred




Holders
of outstanding shares of Vertex Series A Preferred are entitled to receive
dividends, when, as, and if declared by Vertex’s board of directors. No
dividends or similar distributions may be made on shares of capital stock or
securities junior to the Vertex Series A Preferred until dividends in the
same amount per share on the Vertex Series A preferred have been declared
and paid. In connection with a liquidation, winding-up, dissolution or sale of
Vertex, each share of Vertex Series A Preferred is entitled to receive
$1.49 prior to similar liquidation payments due on shares of Vertex common stock
or any other class of securities junior to the Vertex Series A Preferred.
Shares of Vertex Series A Preferred are not entitled to participate with
the holders of Vertex common stock with respect to the distribution of any
remaining assets of Vertex.




Each
share of Vertex Series A Preferred is entitled to that number of votes
equal to the number of whole shares of Vertex common stock into which it is
convertible. Generally, holders of Vertex common stock and Vertex Series A
Preferred vote together as a single class.




Shares of
Vertex Series A Preferred automatically convert into shares of Vertex
common stock on the earliest to occur of the following:




·
            The
      affirmative vote or written consent of the holders of a majority of the
      then-outstanding shares of Vertex Series A
  Preferred;





·
            If
      the closing market price of Vertex common stock averages at least $15.00
      per share over a period of 20 consecutive trading days and the daily
      trading volume averages at least 7,500 shares over such
      period;


-26-


·
            If
      Vertex  consummates an underwritten public offering of its
      securities at a price per share not less than $10.00 and for a total gross
      offering amount of at least $10 million;
or





·
            If
      a sale of Vertex occurs resulting in proceeds to the holders of Vertex
      Series A Preferred of a per share amount of at least
      $10.00.




·
            Holders
      of Vertex Series A Preferred may not voluntarily convert their shares
      into Vertex common stock for at least one year following the issuance of
      the Vertex Series A Preferred. Thereafter, holders may convert their
      shares of Vertex Series A Preferred subject to the following
      conditions:




·
            At
      any time following the one-year anniversary of the issuance of Vertex
      Series A Preferred, holders may convert only up to that number of
      shares such that, upon conversion, the aggregate beneficial ownership of
      Vertex common stock of any such holder does not exceed 4.99% of Vertex’s
      common stock then outstanding; and





·
            Prior
      to the three-year anniversary of the issuance of Vertex Series A
      Preferred, no holder may, in any given three-month period, convert more
      than that number of shares of Vertex Series A Preferred that equals
      5% of the total number of shares of Vertex Series A Preferred then
      beneficially owned by such holder.





Each
share of Vertex Series A Preferred converts into one share of Vertex common
stock, subject to adjustment.




Special
Voting Rights




The
holder of each share of Vertex Series A Preferred is entitled to that
number of votes equal to the number of whole shares of Vertex common stock into
which such holder’s shares are convertible. In general, holders of Vertex common
stock and Vertex Series A Preferred vote together as a single class.
However, so long as at least 50% of the shares of the Vertex Series A
Preferred originally issued in the merger remain outstanding, holders of Vertex
Series A Preferred are entitled to elect one member of Vertex’s five-person
board of directors. Any director elected by holders of shares of Vertex
Series A Preferred may be removed during such director’s term of office,
either with or without cause, only by the affirmative vote of at least 66-2/3%
of the then outstanding shares of Vertex Series A Preferred.




Vertex
Series B Preferred Stock




On
January 13, 2010, the Company’s Board of Directors approved the filing of a
Certificate of Designation of the Company’s Series B Convertible Preferred Stock
(the “Vertex Series B
Preferred Stock”), which was filed with the Secretary of State of Nevada
on or around January 14, 2010 (the “Designation”).  The
Designation provides for 2,000,000 shares of Vertex Series B Preferred Stock
which have the following rights, preferences and limitations (which rights,
preferences and limitations are qualified in all respects by the terms and
conditions of the actual Designation as filed with the Secretary of State of
Nevada):





·
            The
      Vertex Series B Preferred Stock accrues a dividend of 12% per annum,
      payable quarterly in arrears (beginning on the first full quarter after
      the issuance date of such Vertex Series B Preferred Stock), based on a
      face value of $1.00 per share;·
            The
      Vertex Series B Preferred Stock includes a liquidation preference which is
      junior to the Company’s previously outstanding shares of preferred stock,
      senior securities and other security holders as provided in further detail
      in the Designation;·
            The
      Vertex Series B Preferred Stock is convertible into shares of the
      Company’s common stock on a one for one basis at a conversion price of
      $1.00 per share, provided that the Vertex Series B Preferred Stock
      automatically converts into shares of the Company’s common stock on a one
      for one basis if the Company’s common stock trades above $2.00 per share
      for a period of 10 consecutive trading days;·
            The
      Vertex Series B Preferred Stock has no voting rights (other than on
      matters concerning the Vertex Series B Preferred Stock as further
      described in the Designation); and·
            The
      Company is obligated to redeem any unconverted shares of Vertex Series B
      Preferred Stock in cash at $1.00 per share on the third anniversary date
      of the original issuance date of each share of Vertex Series B Preferred
      Stock.


-27-


Lock-Up
Agreements




The
Vertex shares issued to certain insiders, founders and early owners of World
Waste are subject to a contractual lock-up voluntarily entered into by such
holders in connection with the Merger (the “Lock-up
Agreements”).  The Lock-up Agreements provide that until three
years following the effective date of the Merger (the “Lock-Up Period”),
such shareholders cannot sell, assign, pledge or otherwise transfer any shares
of Vertex common stock such holders beneficially own, without Vertex’s prior
written consent.  Notwithstanding the foregoing, the Lock-up
Agreements provide that the holders may transfer (i) all or any portion of the
shares subject to the Lock-up Agreements commencing on the date that the closing
price of Vertex’s common stock has averaged at least $15.00 per share over a
period of 20 consecutive trading days and the daily trading volume over the same
20-day period has averaged at least 7,500 shares; (ii) all or any portion of the
shares as a bona fide gift or gifts, provided that the donee or donees thereof
agree to be bound by the restrictions set forth in the Lock-up Agreement, (iii)
all or any portion of the shares to any trust for the direct or indirect benefit
of the holder or the immediate family of the holder, provided that the trustee
of the trust agrees to be bound by the restrictions set forth in the Lock-up
Agreement, and provided further that any such transfer shall not involve a
disposition for value, and (iv) in any given three-month period commencing on
the one-year anniversary of the effective date of the Merger, up to that number
of shares equal to 5% of the total number of shares then beneficially owned by
such holder.




Options
and Warrants




Vertex
assumed warrants to purchase approximately 94,084 shares of its common stock,
each at a nominal exercise price and warrants to purchase an aggregate of
542,916 shares of common stock with exercise prices ranging from between $10.00
and $27.50 per share and options to purchase 659,300 shares of common stock
with exercise prices ranging from between $1.55 to $37.00 per share in
connection with the Merger.  Vertex also granted warrants to purchase
an aggregate of 774,478 shares of Vertex’s common stock to the partners of
Vertex LP, which warrants had various exercise prices ranging from $1.55 to
$37.00 per share, and had various expiration dates from between April 28, 2010
and February 26, 2018, and which warrants represented 40% of the total
outstanding warrants and options of World Waste (not taking into account the
warrants with a nominal exercise price, as described above) on the effective
date of the Merger.





Vertex
has also granted an aggregate of 1,681,500 options (of which 50,000 have expired
unexercised) with exercise prices between $0.45 and $1.20 per share, all of
which are held by Vertex’s employees, directors, and consultants and an
aggregate of 30,000 options which are held by consultants of the
Company.




Finally,
Vertex granted warrants to purchase 100,000 shares of Vertex’s common stock at
an exercise price of $2.00 per share, to a purchaser of the Company’s Units (as
described below) in February 2010.





EQUITY
COMPENSATION PLAN INFORMATION





Effective
May 16, 2008, the Company’s Board of Directors approved the Company’s 2008 Stock
Incentive Plan, which was subsequently approved by the majority shareholders of
the Company on December 3, 2008, which allows the Board of Directors to grant up
to an aggregate of 600,000 qualified and non-qualified stock options, restricted
stock and performance based awards of securities to the Company’s officers,
Directors and consultants to help attract and retain qualified Company personnel
(the “2008
Plan”).


-28-


Effective
July 15, 2009, the Company’s Board of Directors approved the Company’s 2009
Stock Incentive Plan, which is subject to shareholder approval within twelve
(12) months of the adoption date of the plan, and allows the Board of Directors
to grant up to an aggregate of 1,575,000 qualified and non-qualified stock
options, restricted stock and performance based awards of securities to the
Company’s officers, Directors and consultants to help attract and retain
qualified Company personnel (the “2009 Plan” and
collectively with the 2008 Plan, the “Plans”).





The
following table provides information as of December 31, 2009 regarding the Plans
(including individual compensation arrangements) under which equity securities
are authorized for issuance:





Plan
      Category
            
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            Number
      of securities available for future issuance under equity compensation
      plans (excluding those in first column)Equity
      compensation plans approved by the security holders
            
            645,200
            
            $21.70
            
            143,500Equity
      compensation plans not approved by the security holders
            
            1,675,600
            
            $11.89
            
            370,000Total
            
            2,320,800
            
            
            
            513,500





Recent Sales of Unregistered
Securities





In
October 2009, we entered into a consulting services agreement for investor
relations services.  The twelve month agreement will expire on
September 24, 2010.  Pursuant to the agreement, we agreed to grant the
consultant stock options to purchase 25,000 shares of the Company’s common stock
at an exercise price of $1.10 per share, which options vest at the rate of 6,250
options on each of the four following vesting dates, December 24, 2009, March
24, 2010, June 24, 2010 and September 24, 2010.  The options will
expire on September 24, 2019 pursuant to their terms.





In
December 2009, we entered into a consulting and advisory services agreement for
investor and shareholder communications.  The twelve month agreement
will expire on December 8, 2010.  Pursuant to the agreement, we agreed
to compensate the consultant $6,000 per month and grant stock options to
purchase 5,000 shares of the Company’s common stock at an exercise price of
$0.95 per share.  The options will vest on a 4 year schedule beginning
in December 2009, with 1,667 options vesting on December 9, 2010, and the
remaining options vesting at the rate of 1/24 of such options per month
beginning on January 9, 2011, and continuing for the following 24
months.


-29-


We claim an exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, for the
above grants, since the grants did not involve a public offering, the recipients
took the securities for investment and not resale and we took appropriate
measures to restrict transfer.





In
January 2010, the Company began a private placement offering to accredited
investors only of up to 2,000,000 units (the “Offering”), each
consisting of (a) one share of Series B Preferred Stock; and (b) one three year
warrant to purchase one share of common stock of the Company at an exercise
price of $2.00 per share (each a “Unit”).  We
also agreed to grant investors in the offering piggy-back registration rights in
connection with the shares of common stock issuable in connection with the
conversion of the Series B Preferred Stock and the shares of common stock
underlying the exercise of the warrants sold in the Offering.





In
February 2010, the Company sold 100,000 Units to one investor and raised
$100,000 in connection with the Offering.   The Company claims an
exemption from registration provided by Rule 506 of the Securities Act of 1933,
as amended, as the subscriber was an accredited investor and made certain
representations and warranties to the Company in the Subscription Agreement
evidencing the purchase.





Item
6. Selected Financial Data





Not
applicable.





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





RESULTS
OF OPERATIONS





Description of Material
Financial Line Items:





Revenues





We
generate revenues from two existing operating divisions as follows:





BLACK OIL
- Revenues for our Black Oil division are comprised primarily of feedstock sales
(used motor oil) which are purchased from a network of local and regional
suppliers.  Volumes are consolidated for efficient delivery and then
sold to third-party re-refiners and fuel oil blenders for the export
market.





REFINING
AND MARKETING - The Refining and Marketing division generates revenues relating
to the sales of finished products.  The Refining and Marketing
division gathers hydrocarbon streams in the form of petroleum distillates,
transmix and other chemical products that have become off-specification during
the transportation or refining process. These feedstock streams are purchased
from pipeline
operators, refineries, chemical processing facilities and third-party providers,
and then processed at a third-party facility under our direction. The end
products are typically three distillate petroleum streams (gasoline blendstock,
fuel oil cutterstock and marine cutterstock), which are sold to major oil
companies or to large petroleum trading and blending companies. The end products
are delivered by barge and truck to customers.  In addition the
Refining and Marketing division gathers hydrocarbon streams in the form of
recovered black oil which is then re-refined through our thermal chemical
extraction process.  The finished product is then sold by barge as
marine fuel cutterstock and a feedstock component for major
refineries.





Our
revenues are affected by changes in various commodity prices including crude
oil, natural gas and 6-oil.





Cost
of Revenues





BLACK OIL
- Cost of revenues for our Black Oil division are comprised primarily of
feedstock purchases from a network of providers. Other cost of revenues include
transportation costs incurred by third parties, purchasing and receiving costs,
analytical assessments, brokerage fees and commissions, surveying and storage
costs.


-30-


REFINING
AND MARKETING - The Refining and Marketing division incurs cost of revenues
relating to the purchase of feedstock, purchasing and receiving costs, and
inspection and processing of the feedstock into gasoline blendstock and marine
cutterstock by a third party. Cost of revenues also includes brokers fees,
inspection and transportation costs.




Our cost
of revenues are affected by changes in various commodity indices, including
crude oil, natural gas and #6 oil.  For example, if the price for
crude oil increases, the cost of solvent additives used in the production of
blended oil products, and fuel cost for transportation cost from third party
providers will generally increase. Similarly, if the price of crude oil falls,
these costs may also decline.




General and Administrative
Expenses




Our
general and administrative expenses consist primarily of salaries and other
employee-related benefits for executive, administrative, legal, financial and
information technology personnel, as well as outsourced and professional
services, rent, utilities, and related expenses at our headquarters, as well as
certain taxes.




After
deducting nonrecurring costs in connection with the Merger, we expect that we
will incur higher general and administrative expenses, primarily related to our
public-company reporting status.  These expenses are expected to
include additional accounting and finance expenses, audit fees, legal fees and
corporate governance expenses, exchange listing fees, transfer agent and
stockholder-related fees, and increased premiums for director and officer
liability insurance coverage. We anticipate that we will incur additional
expenses in the range of approximately $800,000 to $1,200,000 annually above our
normal historical general and administrative expenses as a result of our public
company status.




Merger
Related Expenses




In
connection with the merger with World Waste we incurred additional nonrecurring
general and administrative expenses.  These expenses include legal,
audit, stock compensation, and additional start-up compliance expenses that are
nonrecurring and are a result of the merger.




RESULTS
OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 COMPARED TO THE FISCAL
YEAR ENDED DECEMBER 31, 2008




Set forth
below are our results of operations for the year ended December 31, 2009, as
compared to the same period in 2008; in the comparative tables below, increases
in revenue/income or decreases in expense (favorable variances) are shown
without parentheses while decreases in revenue/income or increases in expense
(unfavorable variances) are shown with parentheses in the “$ Change” and “% Change”
columns.




Twelve
      Months Ended
              December
      31,2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeRevenues
            
            $
            38,703,847
            
            
            $
            65,213,294
            
            
            $
            (26,509,447
            )
            
            
            (41
            )%Cost
      of Revenues
            
            
            35,974,295
            
            
            
            63,333,141
            
            
            
            27,358,846
            
            
            
            43
            %Gross
      Profit
            
            
            2,729,552
            
            
            
            1,880,153
            
            
            
            849,399
            
            
            
            45
            %Selling,
      general and administrative expenses(exclusive of merger related
      expenses)
            
            
            3,089,539
            
            
            
            2,248,443
            
            
            
            (841,096
            )
            
            
            (37
            )%Merger
      related expenses
            
            
            249,397
            
            
            
            -
            
            
            
            (249,397
            )Total
      selling, general and administrative expenses
            
            
            3,338,936
            
            
            
            2,248,443
            
            
            
            (1,090,493
            )
            
            
            (48
            )%Income
      (loss) from operations
            
            
            (609,384
            )
            
            
            (368,290
            )
            
            
            (241,094
            )
            
            
            (65
            )%Net
      income
            
            $
            (609,384
            )
            
            $
            (368,290
            )
            
            $
            (241,094
            )
            
            
            (65
            )%


-31-


Each of
our segments’ gross profit during these periods was as follows:




Twelve
      Months Ended
              December
      31,Black
      Oil Segment
            
            2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeTotal
      revenue
            
            $
            22,197,711
            
            
            $
            45,149,632
            
            
            $
            (22,951,921
            )
            
            
            (51
            )%Total
      cost of revenue
            
            
            20,338,112
            
            
            
            43,275,370
            
            
            
            22,937,258
            
            
            
            53
            %Gross
      profit
            
            $
            1,859,599
            
            
            $
            1,874,262
            
            
            $
            (14,663
            )
            
            
            (2
            )%Refining
      and Marketing SegmentTotal
      revenue
            
            $
            16,506,136
            
            
            $
            20,063,662
            
            
            $
            (3,557,526
            )
            
            
            (18
            )%Total
      cost of revenue
            
            
            15,636,183
            
            
            
            20,057,771
            
            
            
            4,421,588
            
            
            
            22
            %Gross
      profit
            
            $
            869,953
            
            
            $
            5,891
            
            
            $
            864,062
            
            
            
            14,667
            %




Our
revenues and cost of revenues are significantly impacted by fluctuations in
commodity prices; decreases in commodity prices typically result in decreases in
revenue and cost of revenues.  Our gross profit is to a large extent a
function of the market discount we are able to obtain in purchasing feedstock,
as well as how efficiently management conducts operations.




Total
revenues decreased 41% for the year ended December 31, 2009, compared to the
year ended December 31, 2008, due to decreases in commodity
pricing.  The average posting (U.S. Gulfcoast Residual Fuel No. 6 3%)
for 2009 decreased $16.59 per barrel from a 2008 average of $72.35 per barrel to
$55.76 per barrel during the 2009 period.  On average, prices we
received for our products decreased 41% for the year ended December 31, 2009,
compared to the year ended December 31, 2008, resulting in a $27 million
decrease in revenue.




Volume
for our Black Oil division decreased ten percent during 2009, compared to 2008,
respectively.  Our volumes were impacted somewhat due to the loss of
the Omega Refining, LLC (“Omega”) contract,
however such losses were offset by volumes delivered to other third party
re-refiners along with newly formed relationships in the #6 oil blending
market.  We have continued to supply feedstock to Omega on a
spot-basis.




Although
volume decreased during 2009, compared to 2008, our per barrel margin increased
approximately 28% for 2009, compared to 2008.




Our
Refining and Marketing division experienced an increase in production of 10% for
its marine cutterstock product for the year ended December 31, 2009, compared to
the same period in 2008, and commodity price decreases of approximately 41% over
the same period.  The average posting (U.S. Gulfcoast No. 2
Waterborne) during 2009 decreased $46.30 per barrel from $114.18 per barrel for
2008 to $67.87 per barrel for 2009.


-32-


Our Pygas
production increased 66% for the year ended December 31, 2009, compared to the
same period in 2008; however, commodity prices decreased approximately 35% for
our finished product for 2009, compared to the same period in 2008.




Our
gasoline blendstock volumes increased ten percent for the year ended December
31, 2009 as compared to the same period in 2008.




The
overall decrease in revenues associated with our Refining and Marketing division
was mainly due to decreases in market prices.




Prevailing
prices of certain commodity products significantly impacted our revenues and
cash flows during 2009, as noted above the revenue variances from fiscal 2008 to
2009 were largely due to the changes in commodity pricing between the two
periods as detailed below.




The
following table sets forth the high and low spot prices during 2008 for our key
benchmarks.




Benchmark
            High
            Date
            Low
            DateU.S.
      Gulfcoast No. 2 Waterborne (dollars per gallon)
            $  4.06
            July
      3
            $
      1.16
            December
      24U.S.
      Gulfcoast Unleaded 87 Waterborne (dollars per gallon)
            $
      4.75
            September
      11
            $
      .78
            December
      24U.S.
      Gulfcoast Residual Fuel No. 6  3% (dollars per
      barrel)
            $115.35
            July
      14
            $
      24.65
            December
      24NYMEX
      Crude oil (dollars per barrel)
            $
      145.29
            July
      3
            $
      33.87
            December
      24Reported
      in Platt’s US Marketscan (Gulf Coast)




The
following table sets forth the high and low spot prices during 2009 for our key
benchmarks.




Benchmark
            High
            Date
            Low
            DateU.S.
      Gulfcoast No. 2 Waterborne (dollars per gallon)
            $  2.07
            December
      29
            $
      1.05
            March
      11U.S.
      Gulfcoast Unleaded 87 Waterborne (dollars per gallon)
            $
      2.05
            June
      16
            $
      1.05
            January
      7U.S.
      Gulfcoast Residual Fuel No. 6  3% (dollars per
      barrel)
            $75.55
            November
      4
            $
      37.50
            January
      2NYMEX
      Crude oil (dollars per barrel)
            $
      81.19
            October
      22
            $
      33.98
            February
      12Reported
      in Platt’s US Marketscan (Gulf Coast)





We have
seen steady increases in each of the benchmark commodities through December
2009; however such values are significantly lower than the highs of
2008.  We expect to see continued volatility until the global economy,
and more specifically the U.S. economy, stabilizes.  Declining
commodity pricing, typically results in a corresponding decrease in our
revenues, gross profits, and net income.  As such, we have adjusted
the way we price some of our products and the overall results of operations for
the year ended 2009 was consistent with our projections and we believe this will
help to mitigate some of our volatility experienced in prior
periods.


-33-


Our
margins are a function of the difference between what we are able to pay for raw
materials and the market prices for the range of products
produced.  The various petroleum products produced are typically a
function of Crude Oil indices and are quoted on multiple exchanges such as the
New York Mercantile Exchange (“NYMEX”).  These
prices are determined by a global market and can be influenced by many factors,
including but not limited to supply/demand, weather, politics, and
global/regional inventory levels.  As such, we cannot provide any
assurances regarding results of operations for any future periods, as numerous
factors outside of our control affect the prices paid for raw materials and the
prices (for the most part keyed to the NYMEX) that can be charged for such
products.  Additionally, for the near term, results of operations will
be subject to further uncertainty, as the global markets and exchanges,
including the NYMEX, have recently experienced extreme volatility due to a
tightening of the credit markets and an overall malaise in the financial
investment market in general.




Gross
profit increased 45% from $1,880,153 for the twelve months ended 2008 to
$2,729,552 for the twelve months ended 2009, primarily due to increased volumes,
an inventory write down of $852,678 in 2008, more stabilized commodity pricing,
and adjustments in our contracts which further reduce our market
exposure.




Selling,
general, and administrative expenses increased 37% or $841,096 for the twelve
months ended 2009 to $3,089,539 compared to $2,248,443 for the same period in
2008.  This increase is primarily due to added expenditures incurred
in connection with the regulatory compliance of being a publicly-traded company,
some of which included legal expenses of approximately $75,000 specifically
related to SEC filings, administrative and transitional costs.




We had a
net loss of $609,384 for the twelve months ended December 31, 2009, compared to
a net loss of $368,290 for the twelve months ended December 31, 2008, an
increase in net loss of $241,094 or 65% from the prior year’s
period.  The increase in net loss was largely due to a 37% increase in
selling, general, and administrative expenses, offset by the 45% increase in
gross profit for the year ended December 31, 2009, compared to the year ended
December 31, 2008.




Liquidity
and Capital Resources




The
success of our current business operations is not dependent on extensive capital
expenditures, but rather on relationships with feedstock suppliers and
end-product customers, and on efficient management of overhead
costs.  Through these relationships, we are able to achieve volume
discounts in the procurement of our feedstock, thereby increasing the margins of
our segments’ operations.  The resulting operating cash flow is
crucial to the viability and growth of our existing business lines.




We had
total assets of $7,547,987 as of December 31, 2009, which consisted of total
current assets of $5,796,983 consisting of cash and cash equivalents of
$514,136, accounts receivable, net of $2,188,423, inventory of $2,978,883,
prepaid expenses of $115,541, and long term assets consisting of fixed assets of
$75,807, and a licensing agreement in the amount of $1,675,197, which represents
the value of the Company’s licensing agreement for the use of the thermal
chemical extraction technology.  As of December 31, 2009, an
additional $275,197 of development investments were made to the thermal/chemical
process technology and added to the original $1.4 million
license.   The Company has fully paid CMT for the license for the
thermal/chemical process as of the date of this filing.




We had
total liabilities, representing solely current liabilities, of $6,422,144 as of
December 31, 2009, which included accounts payable of $5,052,558, accounts
payable – related parties of $527,731, and amounts due to related party of
$841,855.


-34-


We had
negative working capital of $625,161 as of December 31, 2009. Excluding current
assets and current liabilities to related parties our working capital was
$744,425 as of December 31, 2009.




The
continuing turmoil in financial markets has resulted in a decreased willingness
on the part of lenders to enter into new agreements or extend loans.  The
banks and other businesses with which we transact our business have also been
affected by market developments and conditions, which could affect their ability
to enter into transactions with us and further impact the way we conduct
business.




Our
future operating cash flows will vary based on a number of factors, many of
which are beyond our control, including commodity prices, the cost of recovered
oil, and the ability to turn our inventory.  Other factors that have
affected and are expected to continue to affect earnings and cash flow are
transportation, processing, and storage costs.  Over the long term, our
operating cash flows will also be impacted by our ability to effectively manage
our administrative and operating costs.




In June
2009, we secured a line of credit of up to $3.5 million (which shall in no event
be more than 80% of certain accounts held by us and 50% of the total amount of
our inventory, as otherwise described in the Regions Agreement), in connection
with our entry into a Letter Loan Agreement (the “Regions Agreement”)
and a Revolving Line of Credit (the “Line of Credit”) with
Regions Bank (“Regions”) which is
expected to be used for feedstock purchases and general corporate
purposes.  The Line of Credit bears interest at the LIBOR rate plus 4%
per annum, subject to a minimum of 5% per annum, adjusted monthly, and which is
due on May 25, 2010.  The Regions Agreement also provided for a $1.6
million loan, which we have not borrowed against to date (the “Letter Loan”) and a
$500,000 equipment guidance line, which we have not utilized to
date.  The Letter Loan would be due on May 25, 2010, and accrue
interest at the rate of the greater of 5% or the LIBOR rate plus 1.5% per annum,
adjusted monthly.  The Line of Credit (and the Letter Loan and
equipment guidance line, should we choose to draw on such loans) are secured by
a Security Agreement, which gives Regions a security interest in substantially
all of our assets.  The Line of Credit also provided that we would pay
Regions an aggregate of $17,500 in borrowing fees, and would pay Regions a fee
equal to the unused amount of the Line of Credit multiplied by 0.35%, accruing
daily and payable at the end of each calendar quarter.  The Line of
Credit also requires that we meet and comply with certain liabilities to assets
ratios and lending ratios described in greater detail in the Line of Credit, as
well as certain other affirmative and negative covenants, the breach of which
trigger a default of the Line of Credit.




As of
December 31, 2009, there was no balance due on the Line of Credit, of which
there was $3,159,065 available (based on the criteria described above); however,
as of December 31, 2009 we were out of compliance with certain covenants, as
required by the Letter Agreement.  This was due in part to the
additional expenditures and investments made in the thermal chemical extraction
process resulting in us having non-conforming ratios with Regions
bank.  We believe that as we continue to sell our finished product
from the thermal chemical extraction process we will be taking steps during the
first quarter of 2010 to comply with these ratios.  Regions has not
provided us any notice of a default under the Letter Agreement; however we will
be seeking a formal waiver from Regions of the covenant described above after
the filing of this report, which we can provide no assurances will be
granted.




Our
development stage re-refining business will require significant capital to
design and construct additional facilities other than the existing facility in
Baytown, Texas owned by CMT.  Vertex LP currently has one such
facility under development in Baytown, Texas, which we have the right to use
pursuant to an Operating Agreement with CMT described above. We currently
estimate that the cost to construct a new, fully functional full-scale
commercial process at another location would be approximately $2.5 to $5.0
million, based on throughput capacity.  The facility infrastructure
would be an additional capitalized expenditure to these proposed process costs
and would depend on the location and site specifics of the
facility.




We
believe that cash from ongoing operations and our working capital facility will
be sufficient to satisfy our existing cash requirements.   In
order to implement our growth strategy, and pay our outstanding debts (as
described above) we may need to secure additional financing in the
future.


-35-


As part
of our ongoing efforts to maintain a capital structure that is closely aligned
with the cash-generating potential of our business and future growth, which is
subject to cyclical changes in commodity prices, we will be exploring additional
sources of external liquidity.  The receptiveness of the capital
markets to an offering of debt or equities cannot be assured and may be
negatively impacted by, among other things, debt maturities, current market
conditions, and potential stockholder dilution. The sale of additional
securities, if undertaken by the Company and if accomplished, may result in
dilution to our shareholders. We cannot assure you, however, that future
financing will be available in amounts or on terms acceptable to us, or at
all.




There is currently only a limited
market for our common stock, and as such, we anticipate that such market will be
illiquid, sporadic and subject to wide fluctuations in response to several
factors moving forward, including, but not limited to:





(1)
            actual
      or anticipated variations in our results of operations;(2)
            our
      ability or inability to generate new
    revenues; and(3)
            the
      number of shares in our public
float.





Furthermore,
because our common stock is traded on the Over-The-Counter Bulletin Board, our
stock price may be impacted by factors that are unrelated or disproportionate to
our operating performance. These market fluctuations, as well as general
economic, political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of our
common stock. Additionally, at present, we have a limited number of shares in
our public float, and as a result, there could be extreme fluctuations in the
price of our common stock.  The total number of shares of common stock
outstanding as of the date of this report was 8,254,256 shares, and
approximately 6,600,000 of these shares are subject to Lock-up
Agreements.  The Lock-up Agreements provide that until three years
following the effective date of the Merger (the “Lock-Up Period”),
shareholders subject to the Lock-Up Agreements cannot sell, assign, pledge or
otherwise transfer any shares of common stock such holders beneficially own,
without the Company's prior written consent.  Notwithstanding the
foregoing, the Lock-up Agreements provide that the holders may transfer (i) all
or any portion of the shares subject to the Lock-up Agreements commencing on the
date that the closing price of our common stock has averaged at least $15.00 per
share over a period of 20 consecutive trading days and the daily trading volume
over the same 20-day period has averaged at least 7,500 shares; (ii) all or any
portion of the shares as a bona fide gift or gifts, provided that the donee or
donees thereof agree to be bound by the restrictions set forth in the Lock-up
Agreement, (iii) all or any portion of the shares to any trust for the direct or
indirect benefit of the holder or the immediate family of the holder, provided
that the trustee of the trust agrees to be bound by the restrictions set forth
in the Lock-up Agreement, and provided further that any such transfer shall not
involve a disposition for value, and (iv) in any given three-month period
commencing on the one-year anniversary of the effective date of the Merger, up
to that number of shares equal to 5% of the total number of shares then
beneficially owned by such holder.





As such,
and after taking into account shares of our common stock held by affiliates of
the Company, we currently have approximately 1,400,000 shares of
common stock that are currently tradeable in our public float, which
are not subject to  the Lock-Up Agreements.  Further,
due to the limited volume of our shares which trade and our limited public
float, we believe that our stock prices (bid, ask and closing prices) are
entirely arbitrary, are not related to the actual value of the Company, and may
not reflect the actual value of our common stock (and may reflect a lower
value). Shareholders and potential investors in our common stock should exercise
caution before making an investment in the Company, and should not rely on the
publicly quoted or traded stock prices in determining our common stock value,
but should instead determine the value of our common stock based on the
information contained in the Company's public reports, industry information, and
those business valuation methods commonly used to value private
companies.





We may
seek the listing of our common stock on NASDAQ, NYSE, or AMEX or another
national securities exchange in the future.  We believe that the
listing of our securities on a national exchange will facilitate the Company’s
access to capital, from which certain acquisitions and capital investments might
be financed.  However, we can provide no assurances that we will be
able to meet the initial listing standards of any stock exchange in the future,
or that we will be able to maintain a listing of our common stock on any stock
exchange in the future, assuming we are initially approved for quotation on an
exchange of which there can be no assurance.  Until meeting the
listing requirements of a national securities exchange, we expect that our
common stock will continue to be eligible to trade on the OTC Bulletin Board,
another over-the-counter quotation system, or on the "pink sheets," where
our stockholders may find it more difficult to dispose of shares or obtain
accurate quotations as to the market value of our common stock.


-36-


Cash
flows for the fiscal year ended December 31, 2009 compared to the same period
ended December 31, 2008:




Twelve
      Months Ended
              December
      31,2009
            
            
            2008Beginning
      cash and cash equivalents
            
            $
            17,616
            
            
            $
            52,650Net
      cash provided by (used in):Operating
      activities
            
            
            713,681
            
            
            
            920,237Investing
      activities
            
            
            (1,816,003
            )
            
            
            (11,022
            )Financing
      activities
            
            
            1,598,842
            
            
            
            (944,249
            )Net
      increase in cash and cash equivalents
            
            
            496,520
            
            
            
            (35,034
            )Ending
      cash and cash equivalents
            
            $
            514,136
            
            
            $
            17,616




Operating
activities provided cash of $713,681 for the twelve months ended December 31,
2009 as compared to being provided $920,237 of cash during the corresponding
period in 2008.  The primary reason for this decrease is related to
our operating loss of $609,384, our $1,954,704 decrease in accounts receivable,
$2,397,911 decrease in inventory and $668,942 decrease in accounts
payable-related parties, offset by $5,713,388 of increase in accounts
payable.  Additionally, non-cash net income related to stock
compensation provided $324,589 of liquidity.




Investing
activities used cash of $1,816,003 for the twelve months ended December 31, 2009
as compared to having only used $11,022 during the corresponding period in
2008.  Investing activities in 2009 are comprised primarily of
$1,731,889 in cash payments related to the license of the thermal chemical
extraction process and $84,114 for the purchase of fixed assets.




Financing
activities provided $1,598,842 during the twelve months ended December 31, 2009
resulting primarily from the net effect of transactions related to our
recapitalization of $2,408,114, which was offset by cash payments per the merger
agreement in the amount of $758,145 against a note paid to an entity controlled
by Vertex LP, an entity which is majority-owned and controlled by our Chief
Executive Officer and Chairman, Benjamin P. Cowart.




Recent
Events




In January and March of 2010, we paid
an additional $200,000 to Vertex LP in connection with the $1.6 million of debt
which the Company agreed to assume from Vertex LP and/or replace in connection
with the Merger, of which $441,855 remained to be assumed/replaced following the
payment.




On January 13, 2010, the Board Of
Directors approved the filing of a Certificate of Designation of the Company’s
Series B Convertible Preferred Stock (the “Series B Preferred
Stock”), which was filed with the Secretary of State of Nevada on January
14, 2010. The designation provides for 2,000,000 shares of Series B Preferred
Stock at $0.001 par value per share.  The Series B Preferred Stock
accrues a dividend of 12% per annum, payable quarterly in arrears (beginning on
the first full quarter after the issuance date of such Preferred Stock), based
on a face value of $1.00 per share. The Series B Preferred Stock includes a
liquidation preference which is junior to the Company’s previously outstanding
shares of preferred stock, senior securities and other security holders as
provided in further detail in the designation. The Series B Preferred Stock is
convertible into shares of the Company’s common stock on a one for one basis at
a conversion price of $1.00 per share, provided that the Series B Preferred
Stock automatically converts into shares of the Company’s common stock on a one
for one basis if the Company’s common stock trades above $2.00 per share for a
period of 10 consecutive trade days.  The Series B Preferred Stock has
no voting rights (other than on matters concerning the Series B Preferred Stock
described in the designation) and the Company is obligated to redeem any
unconverted shares of Series B Preferred Stock in cash at $1.00 per share on the
third anniversary date of the original issuance date of each share of Preferred
Stock.


-37-


In January 2010, the Company began a
private placement offering to accredited investors only of up to 2,000,000 units
(the “Offering”), each
consisting of (a) one share of Series B Preferred Stock; and (b) one three year
warrant to purchase one share of common stock of the Company at an exercise
price of $2.00 per share (each a “Unit”).  We
also agreed to grant investors in the offering piggy-back registration rights in
connection with the shares of common stock issuable in connection with the
conversion of the Series B Preferred Stock and the shares of common stock
issuable in connection with the exercise of the warrants sold in the
Offering.





In
February 2010, the Company sold 100,000 Units to one investor and raised
$100,000 in connection with the Offering.





Net
Operating Losses





We intend
to take advantage of any potential tax benefits related to net operating losses
(“NOLs”)
acquired as part of the World Waste merger.  As a result of the merger
we acquired approximately $42 million of net operating losses that may be used
to offset taxable income generated by the Company in future
periods.




It is
possible that the Company may be unable to use these NOLs in their
entirety.  The extent to which the Company will be able to utilize
these carry-forwards in future periods is subject to limitations based on a
number of factors, including the number of shares issued within a three-year
look-back period, whether the merger is deemed to be a change in control,
whether there is deemed to be a continuity of World Waste’s historical business,
and the extent of the Company’s subsequent income. The Company has not yet
determined the extent, if any, to which it may be able to utilize these
carry-forwards. The history of these NOLs and the related tax laws are complex
and the Company is researching the facts and circumstances as to whether the
Company will ultimately be able to utilize the benefit from these
NOLs.




Critical
Accounting Policies and Use of Estimates




Our
financial statements are prepared in accordance with GAAP. The preparation of
these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses.
Management regularly evaluates its estimates and judgments, including those
related to revenue recognition, goodwill, intangible assets, long-lived assets
valuation, and legal matters. Actual results may differ from these estimates.
(See Note 2 to the Vertex Energy, Inc. financial statements.)




Revenue
Recognition.  Revenue for each of the Company’s divisions is recognized when persuasive
evidence of an arrangement exists, goods are delivered, sales price is
determinable, and collection is reasonably assured.


-38-


Legal
Matters.  Accruals are established for legal matters when, in
our opinion, it is probable that a liability exists and the liability can be
reasonably estimated. Actual expenses incurred in future periods can differ
materially from accruals established.




Stock
Based Compensation




The
Company accounts for share-based expense and activity in accordance with FASB
ASC Topic 718, which establishes accounting for equity instruments exchanged for
services. Under this provision share-based compensation costs are measured at
the grant date, based on the calculated fair value of the award, and are
recognized as an expense over the employee’s requisite service period, generally
the vesting period of the equity grant.




Share-based
payments to non-employees are measured at the grant date, based on the
calculated fair value of the award, and are recognized as an expense over the
service period, generally the vesting period of the equity grant. The Company
estimates the fair value of stock options using the Black-Scholes valuation
model. Key input assumptions used to estimate the fair value of stock options
include the exercise price of the award, expected option term, expected
volatility of the stock over the option’s expected term, risk-free interest rate
over the option’s expected term, and the expected annual dividend yield. The
Company believes that the valuation technique and approach utilized to develop
the underlying assumptions are appropriate in calculating the fair values of the
stock options granted.





Basic
and Diluted Loss per Share




Basic and
diluted loss per share has been calculated based on the weighted average number
of shares of common stock outstanding during the period.




Income
Taxes




The
Company accounts for income taxes in accordance with the FASB ASC Topic
740.  The Company records a valuation allowance against net deferred
tax assets if, based upon the available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.  The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income and when temporary differences become
deductible.  The Company considers, among other available information,
uncertainties surrounding the recoverability of deferred tax assets, scheduled
reversals of deferred tax liabilities, projected future taxable income, and
other matters in making this assessment.




Recently
Issued Accounting Pronouncements




Effective
September 15, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 105-10, “Generally Accepted
Accounting Principles.”  ASC 105-10 establishes the FASB
Accounting Standards Codification (“Codification”) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP for SEC registrants.  All guidance contained
in the Codification carries an equal level of authority.  The
Codification supersedes all existing non-SEC accounting and reporting
standards.  The FASB will now issue new standards in the form of
Accounting Standard Updates (“ASUs”).  The
FASB will not consider ASUs as authoritative in their own right.  ASUs
will serve only to update the conclusions on the changes in the
Codification.  References made to FASB guidance have been updated for
the Codification throughout this document.





Effective
June 30, 2009, we adopted guidance issued by the FASB and included in ASC
855-10, “Subsequent
Events,” which establishes general standards of accounting for and
disclosures of events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued.  It
requires the disclosure of the date through which an entity has evaluated
subsequent events.





Effective
April 1, 2009, we adopted guidance issued by the FASB that requires disclosure
about the fair value of financial instruments for interim financial statements
of publicly traded companies, which is included in the Codification in ASC
825-10-65, “Financial
Instruments.”  The adoption of ASC 825-10-65 did not have an
impact on our consolidated results of operations or financial
condition.


-39-


Effective
January 1, 2008, we adopted ASC 820-10, “Fair Value Measurements and
Disclosures,” with respect to recurring financial assets and
liabilities.  We adopted ASC 820-10 on January 1, 2009, as it relates
to nonrecurring fair value measurement requirements for nonfinancial assets and
liabilities.  ASC 820-10 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements.  Our adoption of
the standard had no impact on our consolidated financial results.





Market
Risk





Our
revenues and cost of revenues are affected by fluctuations in the value of
energy related products.  We attempt to mitigate much of the risk
associated with the volatility of relevant commodity prices by using our
knowledge of the market to obtain feedstock at attractive costs, by efficiently
managing the logistics associated with our products, by turning our inventory
over quickly, and by selling our products into markets where we believe we can
achieve the greatest value.  We believe that the current downward trend in
natural gas prices coupled with increasing crude oil prices provides an
attractive margin opportunity for our proposed thermal chemical extraction
process.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk





Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item as it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).

















-40-


Item 8.
Financial Statements and Supplementary Data


VERTEX
ENERGY, INC.
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 
 DECEMBER
31, 2009
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 -41-
 VERTEX
ENERGY, INC.
 
 CONTENTS
  PageConsolidated  Financial
      StatementsReport
      of Independent Registered Public Accounting Firm
              
              F-2Consolidated  Balance
      Sheets
              
              F-3Consolidated  Statements
      of  Operations
              
              F-4Consolidated
      Statement of  Stockholders’ Equity
              
              F-5Consolidated  Statements
      of Cash Flows
              
              F-6Notes
      to Consolidated Financial Statements
              
              F-7
 
 
 
 
 
 
 
 
 F-1
 Report of Independent
Registered Public Accounting Firm
 
 To the
Board of Directors
 Vertex
Energy, Inc.
 Houston,
TX
 
 
 We have
audited the accompanying consolidated balance sheets of Vertex Energy, Inc. (the
“Company”) as of December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders’ equity and cash flows for each of the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Vertex Energy, Inc. as of
December 31, 2009 and 2008, and the results of its operations and its cash flows
for each of the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 
 LBB &
Associates Ltd., LLP
 
 Houston,
Texas
 March 26,
2010
 F-2
  VERTEX
      ENERGY, INC.CONSOLIDATED
      BALANCE SHEETSDECEMBER
      31, 2009 AND 20082009
              
              
              2008ASSETSCurrent
      assetsCash
      and cash equivalents
              
              $
              514,136
              
              
              $
              17,616Accounts
      receivable, net
              
              
              2,188,423
              
              
              
              817,232Accounts
      receivable – related parties
              
              
              -
              
              
              
              1,817,228Due
      from partnership
              
              
              -
              
              
              
              405,219Inventory
              
              
              2,978,883
              
              
              
              1,232,904Prepaid
      expenses
              
              
              115,541
              
              
              
              270,522Total
      current assets
              
              
              5,796,983
              
              
              
              4,560,721Noncurrent
      assetsLicensing
      agreement, net
              
              
              1,675,197
              
              
              
              -Fixed
      assets, net
              
              
              75,807
              
              
              
              11,022Total
      noncurrent assets
              
              
              1,751,004
              
              
              
              11,022TOTAL
      ASSETS
              
              $
              7,547,987
              
              
              $
              4,571,743LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              5,052,558
              
              
              $
              1,836,340Accounts
      payable-related party
              
              
              527,731
              
              
              
              2,676,650Due to
      related party
              
              
              841,855
              
              
              
              -Total
      current liabilities
              
              
              6,422,144
              
              
              
              4,512,990Total
      liabilities
              
              
              6,422,144
              
              
              
              4,512,990Commitments
      and contingenciesSTOCKHOLDERS’
      EQUITYPreferred
      stock, $0.001 par value per share:50,000,000
      shares authorizedSeries
      A Convertible Preferred stock, $0.001 par value,
                5,000,000
      authorized and 4,755,666 and 0 issued and
                outstanding
      at December 31, 2009 and
                2008
      respectively
              
              
              4,756
              
              
              
              -Common
      stock, $0.001 par value per share;750,000,000
      shares authorized; 8,254,256 and 5,502,000
                issued
      and outstanding at December 31, 2009 and
                2008,
      respectively
              
              
              8,254
              
              
              
              5,502Additional
      paid-in capital
              
              
              2,090,507
              
              
              
              421,541Accumulated
      deficit
              
              
              (977,674
              )
              
              
              (368,290
              )Total
      stockholders’ equity
              
              
              1,125,843
              
              
              
              58,753TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              7,547,987
              
              
              $
              4,571,743
 See
accompanying notes to the consolidated financial statements
 F-3
 VERTEX
      ENERGY, INC.CONSOLIDATED
      STATEMENTS OF OPERATIONSDECEMBER
      31, 2009 AND 20082009
              
              
              2008Revenues
              
              $
              38,555,976
              
              
              $
              62,170,275Revenues-related
      parties
              
              
              147,871
              
              
              
              3,043,01938,703,847
              
              
              
              65,213,294Cost
      of revenues
              
              
              35,974,295
              
              
              
              63,333,141Gross
      profit
              
              
              2,729,552
              
              
              
              1,880,153Selling,
      general and administrative expenses
              
              
              3,089,539
              
              
              
              2,248,443Merger
      related expenses
              
              
              249,397
              
              
              
              -Total
      selling, general and administrative expenses
              
              
              3,338,936
              
              
              
              2,248,443Loss
      from operations
              
              
              (609,384
              )
              
              
              (368,290
              )Net
      loss
              
              $
              (609,384
              )
              
              $
              (368,290
              )Earnings per
      common shareBasic
              
              $
              (0.08
              )
              
              $
              (0.07
              )Diluted
              
              $
              (0.08
              )
              
              $
              (0.07
              )Shares
      used in computing earnings per shareBasic
              
              
              7,453,958
              
              
              
              5,502,000Diluted
              
              
              7,453,958
              
              
              
              5,502,000
 See
accompanying notes to the consolidated financial statements
 F-4
 
 Vertex
      Energy, Inc.Statements
      of Stockholders' EquityFor
      the Years Ending December 31, 2009 and 2008TotalCommon
      Stock
                
                Preferred
      Stock
                
                Common
      Stock
                
                Preferred
      Stock
                
                Paid-in
      Capital
                
                Retained
                
                Stockholders'Shares
                
                Shares
                
                $.001
      Par
                
                $.001
      Par
                
                in
      Excess of Par
                
                Earnings
                
                EquityBalance
      at December 31, 2007
                
                
                5,502,000
                
                
                -
                
                $
                5,502
                
                
                -
                
                $
                1,274,612
                
                
                -
                
                $
                1,280,114Issuance
      of stock options
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                91,178
                
                
                -
                
                
                91,178Distributions
      to Partners
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (944,249
                )
                
                -
                
                
                (944,249
                )Net
      loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (368,290
                )
                
                (368,290
                )Balance
      on December 31, 2008
                
                
                5,502,000
                
                
                -
                
                
                5,502
                
                
                -
                
                
                421,541
                
                
                (368,290
                )
                
                58,753Distributions
      to Partners
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (51,391
                )
                
                -
                
                
                (51,391
                )Issuance
      of stock options and warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                324,589
                
                
                -
                
                
                324,589Recapitalization
      due to merger
                
                
                2,749,616
                
                
                4,755,666
                
                
                2,750
                
                
                4,756
                
                
                1,395,506
                
                
                -
                
                
                1,403,012Exercise
      of warrants for cash
                
                
                2,640
                
                
                -
                
                
                2
                
                
                -
                
                
                262
                
                
                -
                
                
                264Net
      loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (609,384
                )
                
                (609,384
                )Balance
      on December 31, 2009
                
                
                8,254,256
                
                
                4,755,666
                
                $
                8,254
                
                $
                4,756
                
                $
                2,090,507
                
                $
                (977,674
                )
                $
                1,125,843
 See
accompanying notes to the consolidated financial statements
 F-5
 VERTEX
      ENERGY, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWYEARS
      ENDED DECEMBER 31, 2009 AND 20082009
              
              
              2008Cash
      flows operating activitiesNet
      loss
              
              $
              (609,384
              )
              
              $
              (368,290
              )Adjustments
      to reconcile net loss to cashused
      by operating activitiesStock
      based compensation expense
              
              
              324,589
              
              
              
              91,178Depreciation
      and amortization
              
              
              65,572
              
              
              
              -Inventory
      impairment
              
              
              -
              
              
              
              852,678Changes
      in assets and liabilitiesAccounts
      receivable
              
              
              (1,954,704
              )
              
              
              824,034Accounts
      receivable- related parties
              
              
              21,232
              
              
              
              (1,048,235
              )Due
      from partnership
              
              
              265,219
              
              
              
              (405,219
              )Inventory
              
              
              (2,397,911
              )
              
              
              95,794Prepaid
      expenses
              
              
              (45,378
              )
              
              
              375,256Accounts
      payable
              
              
              5,713,388
              
              
              
              (1,083,707
              )Accounts
      payable – related parties
              
              
              (668,942
              )
              
              
              1,586,748Net
      cash provided by operating activities
              
              
              713,681
              
              
              
              920,237Cash
      flows from investing activitiesPayments
      for licensing agreement
              
              
              (1,731,889
              )
              
              
              -Purchase
      of fixed assets
              
              
              (84,114
              )
              
              
              (11,022
              )Net
      cash used by investing activities
              
              
              (1,816,003
              )
              
              
              (11,022
              )Cash
      flows from financing activitiesProceeds
      from exercise of common stock warrants
              
              
              264
              
              
              
              -Distributions
      to limited partners prior to merger
              
              
              (51,391
              )
              
              
              (944,249
              )Proceeds
      from recapitalization
              
              
              2,408,114
              
              
              
              -Payments
      on due to related party balance
              
              
              (758,145
              )
              
              
              -Net
      cash provided (used) by financing activities
              
              
              1,598,842
              
              
              
              (944,249
              )Net
      increase in cash and cash equivalents
              
              
              496,520
              
              
              
              (35,034
              )Cash
      and cash equivalents at beginning of the period
              
              
              17,616
              
              
              
              52,650Cash
      and cash equivalents at end of period
              
              $
              514,136
              
              
              $
              17,616SUPPLEMENTAL
      INFORMATIONCash
      paid for interest during the period
              
              $
              89,682
              
              
              $
              -Cash
      paid for income taxes during the period
              
              $
              -
              
              
              $
              - NON-CASH
      TRANSACTIONSAssumption
      of liability from related party
                    
                    $
                    1,600,000
                    
                    
                    $
                    -in
      connection with recapitalizationCapital
      contributions by related party
                    
                    $
                    594,898
                    
                    
                    $
                    -in
      connection with recapitalization
 NON-CASH
      TRANSACTIONSAssumption
      of liability from related party
                  
                  $
                  1,600,000
                  
                  
                  $
                  -in
      connection with recapitalizationCapital
      contributions by related party
                  
                  $
                  594,898
                  
                  
                  $
                  -in
      connection with recapitalization
 See
accompanying notes to the consolidated financial statements
 F-6
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
1.  BASIS OF PRESENTATION AND NATURE OF OPERATIONS
 
 Vertex
Energy, Inc. (“Vertex Energy” or the “Company”), provides a range of services
designed to aggregate, process and recycle industrial and commercial waste
systems.  Vertex Energy, Inc. currently provides these services in 13
states, with its primary focus in the Gulf Coast region.
 
 As
described in more detail in Note 12 “Merger Agreement,” in May 2008, Vertex
Holdings, L.P., Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P.
Cowart, and individual (collectively “the Partnership”) entered into an
agreement and plan of merger with World Waste Technologies, Inc. (“World
Waste”).  Pursuant to this agreement, the Partnership agreed to
transfer (the “Transfer”) a specifically defined portion of its operations
(referred to as the “Vertex Nevada Business”) to the Company.
 
 The
Company has evaluated subsequent events for recognition or disclosure through
the date these financial statements were issued.
 
 COMPANY
OPERATIONS
 
 Vertex
Energy, Inc.’s operations are primarily focused on recycle/reuse options for
petroleum products, crudes, used lubricants and distillate petroleum
products.  This focus includes the aggregation, processing and
refining of these used petroleum materials into viable commodity
products.  Vertex Energy, Inc.’s two principal divisions are comprised
of Black Oil and Refining and Marketing.
 
 Black
Oil
 
 Through
its Black Oil division, which has been operational since 2001, Vertex Energy
recycles used motor oil by purchasing it from a network of local and regional
collectors with which Vertex Energy has existing relationships, consolidating it
for efficient delivery, and selling it to third-party
re-refiners.  The re-refiners then upgrade and sell the product for
their own accounts.  In addition, the Company has established
arrangements with other customers of its products such as blenders and burners
of black oil.
 
 Refining
and Marketing
 
 Through
its Refining and Marketing division, which has been operational since 2004,
Vertex Energy recycles hydrocarbon streams by (1) purchasing and aggregating
these streams from collectors and generators, (2) managing the delivery of these
streams to a third-party facility for processing into end-products and (3)
managing the sale of the end-products.  Vertex Energy gathers
hydrocarbon streams in the form of petroleum distillates, transmix and other
chemical products that have become off-specification during the transportation
or refining process.  These feedstock streams are purchased from
pipeline operators, refineries, chemical processing facilities and third-party
providers, processed on Vertex Energy’s behalf by a third-party facility, and
then resold by Vertex Energy.  The end products are typically three
distillate petroleum streams (gasoline blendstock, fuel oil cutterstock and
marine diesel oil), which are sold to major oil companies or to large petroleum
trading and blending companies.
  Managements’
consideration of going concern
 
 There are
several indicators that may cause the Company to face liquidity difficulties.
These indicators include (i) losses for the 2008 and 2009 fiscal years, (ii)
negative working capital at December 31, 2009, and (iii) default by the Company,
based on non-compliance with certain
financialcovenants,
with regard to its $3,500,000bank line of credit as of December 31, 2009, and subsequent thereto.
Furthermore, the Company has drawn $1,100,000 on the line of credit subsequent
to December 31, 2009, repayment of which could technically be demanded by the
lender at any time.
 
 Accordingly,
Company management has identified the following as factors which mitigate the
negative indicators noted above:
  ·
                The
      Company has seasoned senior management, and has a track record of
      profitable operations prior to the last two years, and forecasts improved
      operations and positive cash flows from operations for 2010.
 ·
                Management
      specifically attributes the performance of the last two years to one time
      occurrences, including (i) an unprecedented near collapse of the American
      financial markets in the last half of 2008, (ii) a category 5 hurricane in
      the Houston area, also in 2008, resulting in a slow down in the Company’s
      operations, and (iii) the significant and temporary increase in legal,
      accounting, and administrative costs during 2008 and 2009 associated with
      the Company’s merger process.
 ·
                Also
      during 2008 and 2009, management has devoted considerable resources in the
      development, through its affiliate Cedar
      Marine Terminals, LPof an improved, internal, re-refining
      process which will result in less dependence on outside providers of this
      re-refining process, and greater profitability. Management does not
      anticipate incurring significant licensing or development costs at the
      current facility.
 
 Based on
the above, management has concluded that sufficient factors exist which
mitigates the indicators of the Company’s liquidity difficulties.
 
 NOTE
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles
of consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries.  All intercompany accounts and transactions
have been eliminated in consolidation.
 
 Cash
and cash equivalents
 
 For
purposes of the statement of cash flows, the Company considers all short-term
investments purchased with original maturities of three months or less at the
date of purchase to be cash equivalents.
 F-7
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
  Accounts
receivable
 
 Accounts
receivable represents amounts due from customers.  Accounts receivable
are recorded at invoiced amounts, net of reserves and allowances, and do not
bear interest.  The Company uses its best estimate to determine the
required allowance for doubtful accounts based on a variety of factors,
including the length of time receivables are past due, economic trends and
conditions affecting its customer base, significant one-time events and
historical write-off experience.  Specific provisions are recorded for
individual receivables when we become aware of a customer’s inability to meet
its financial obligations.  The Company reviews the adequacy of its
reserves and allowances quarterly.
 
 Receivable
balances greater than 30 days past due are individually reviewed for
collectability and if deemed uncollectible, are charged off against the
allowance accounts after all means of collection have been exhausted and the
potential for recovery is considered remote.  The Company does not
have any significant off balance sheet credit exposure related to its
customers.  The allowance was $0 at December 31, 2009 and
2008.
 
 Inventory
 
 Inventories
of products consist of feedstocks and refined petroleum products and are
reported at the lower of cost or market.  The Company recorded
inventory impairments of $0 and $852,678 during the years ended December 2009
and 2008 and included the amounts in cost of revenues.
 
 Fixed
Assets
 
 Fixed
assets are stated at historical costs. Depreciation of fixed assets placed in
operations is provided using the straight-line method over the estimated useful
lives of the assets.  The policy of the Company is to charge amounts
for maintenance and repairs to expenses, and to capitalize expenditures for
major replacements and betterments.
 
 Revenue
recognition
 
 Revenue
for each of the Company’s divisions is recognized when persuasive evidence of an
arrangement exists, goods are delivered, sales price is determinable, and
collection is reasonably assured.
 
 Leases
 
 The
Company recognizes lease expense on a straight-line basis over the minimum lease
terms which expire at various dates through 2012.  These leases are
for office and storage tank facilities and are classified as operating
leases.  For leases that contain predetermined, fixed escalations of
the minimum rentals, the Company recognizes the rent expense on a straight-line
basis and records the difference between the rent expense and the rental amount
payable in liabilities.
 
 Leasehold
improvements made at the inception of the lease are amortized over the shorter
of the asset life or the initial lease term as described
above.  Leasehold improvements made during the lease term are also
amortized over the shorter of the asset life or the remaining lease
term.
 
 Fair
value of financial instruments
 
 Under the
Financial Accounting Standards Board Accounting Standards Codification (“FASB
ASC”), we are permitted to elect to measure financial instruments and certain
other items at fair value, with the change in fair value recorded in
earnings.  We elected not to measure any eligible items using the fair
value option.  Consistent with the Fair Value Measurement Topic of the
FASB ASC, we implemented guidelines relating to the disclosure of our
methodology for periodic measurement of our assets and liabilities recorded at
fair market value.
 F-8
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 Fair
value is defined as 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.  A three-tier fair value hierarchy prioritizes
the inputs used in measuring fair value.  The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements).  These tiers
include:
 
 ·
              Level
      1, defined as observable inputs such as quoted prices for identical
      instruments in active markets;
 ·
              Level
      2, defined as inputs other than quoted prices in active markets that are
      either directly or indirectly observable such as quoted prices for similar
      instruments in active markets or quoted prices for identical or similar
      instruments in markets that are not active;
and
 ·
              Level
      3, defined as unobservable inputs in which little or no market data
      exists, therefore requiring an entity to develop its own assumptions, such
      as valuations derived from valuation techniques in which one more
      significant inputs or significant value drivers are
      unobservable.
 
 Our Level
1 assets primarily include our cash and cash equivalents, accounts receivable,
accounts payable and due to related party amounts due to the immediate or
short-term maturities of these financial instruments.  Valuations are
obtained from readily available pricing sources for market transactions
involving identical assets or liabilities.
 
 Use
of estimates
 
 These
consolidated financial statements were prepared in accordance with account
principals generally accepted in the United States.  Certain amounts
included in or affecting the financial statements and related disclosures must
be estimated by management, requiring certain assumptions with respect to values
or conditions which cannot be known with certainty at the time the financial
statements are prepared.  These estimates and assumptions affect the
amounts reported for assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements.  Any
effects on the business, financial position or results of operations from
revisions to these estimates are recorded in the period in which the facts that
give rise to the revision become known.
 
 Impairment
of long-lived assets
 
 The
Company evaluates the carrying value and recoverability of its long-lived assets
when circumstances warrant such evaluation by applying the provisions of the
FASB ASC regarding long-lived assets. It requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable through the
estimated undiscounted cash flows expected to result from the use and eventual
disposition of the assets.  Whenever any such impairment exists, an
impairment loss will be recognized for the amount by which the carrying value
exceeds the fair value.
 
 Income
Taxes
 
 The
Company accounts for income taxes in accordance with the FASB ASC Topic 740. The
Company records a valuation allowance against net deferred tax assets if, based
upon the available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income and when
temporary differences become deductible. The Company considers, among other
available information, uncertainties surrounding the recoverability of deferred
tax assets, scheduled reversals of deferred tax liabilities, projected future
taxable income, and other matters in making this assessment.
 
 As part
of the process of preparing its consolidated financial statements, the Company
is required to estimate its income taxes in each of the jurisdictions in which
it operates.  This process requires the Company to estimate its actual
current tax liability and to assess temporary differences resulting from
differing book versus tax treatment of items, such as deferred revenue,
compensation and benefits expense and depreciation.  These temporary
differences result in deferred tax assets and liabilities, which are included
within the Company’s consolidated statements of financial
condition.  Significant management judgment is required in determining
the Company’s provision for income taxes, its deferred tax assets and
liabilities and any valuation allowance recorded against its net deferred tax
assets.  In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will be realized and, when necessary, valuation
allowances are established.  The ultimate realization of the deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences become deductible.  Management
considers the level of historical taxable income, scheduled reversals of
deferred taxes, projected future taxable income and tax planning strategies that
can be implemented by the Company in making this assessment.  If
actual results differ from these estimates or the Company adjusts these
estimates in future periods, the Company may need to adjust its valuation
allowance, which could materially impact the Company’s consolidated financial
position and results of operations.
 F-9
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 Tax
contingencies can involve complex issues and may require an extended period of
time to resolve.  Changes in the level of annual pre-tax income can
affect the Company’s overall effective tax rate.  Significant
management judgment is required in determining the Company’s provision for
income taxes, its deferred tax assets and liabilities and any valuation
allowance recorded against its net deferred tax assets.  Furthermore,
the Company’s interpretation of complex tax laws may impact its recognition and
measurement of current and deferred income taxes.
 
 Stock
based compensation
 
 The
Company accounts for share-based expense and activity in accordance with FASB
ASC Topic 718, which establishes accounting for equity instruments exchanged for
services. Under this provision, share-based compensation costs are measured at
the grant date, based on the calculated fair value of the award, and are
recognized as an expense over both the employee and non-employee’s requisite
service period, generally the vesting period of the equity grant.
 
 The
Company estimates the fair value of stock options using the Black-Scholes
valuation model. Key input assumptions used to estimate the fair value of stock
options include the exercise price of the award, expected option term, expected
volatility of the stock over the option’s expected term, risk-free interest rate
over the option’s expected term, and the expected annual dividend yield. The
Company believes that the valuation technique and approach utilized to develop
the underlying assumptions are appropriate in calculating the fair values of the
stock options granted.
 
 Earnings
per share
 
 The
Company has adopted FASB ASC Topic 260, which provides for the calculation of
basic and diluted earnings per share.  Basic and diluted loss per
share has been calculated based on the weighted average number of shares of
common stock outstanding during the period.
 
 Recently
issued accounting pronouncements
 
 Effective
September 15, 2009, we adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10, “Generally Accepted Accounting
Principles.”  ASC 105-10 establishes the FASB Accounting Standards
Codification (“Codification”) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP for SEC
registrants.  All guidance contained in the Codification carries an
equal level of authority.  The Codification supersedes all existing
non-SEC accounting and reporting standards.  The FASB will now issue
new standards in the form of Accounting Standard Updates
(“ASUs”).  The FASB will not consider ASUs as authoritative in their
own right.  ASUs will serve only to update the conclusions on the
changes in the Codification.  References made to FASB guidance have
been updated for the Codification throughout this document.
 
 Effective
June 30, 2009, we adopted guidance issued by the FASB and included in ASC
855-10, “Subsequent Events,” which establishes general standards of accounting
for and disclosures of events that occur after the balance sheet date but before
the financial statements are issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events.
 
 Effective
April 1, 2009, we adopted guidance issued by the FASB that requires disclosure
about the fair value of financial instruments for interim financial statements
of publicly traded companies, which is included in ASC 825-10-65, “Financial
Instruments.”  The adoption of ASC 825-10-65 did not have an impact on
our consolidated results of operations or financial condition.
 F-10
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 Effective
January 1, 2008, we adopted ASC 820-10, “Fair Value Measurements and
Disclosures,” with respect to recurring financial assets and
liabilities.  We adopted ASC 820-10 on January 1, 2009, as it relates
to nonrecurring fair value measurement requirements for nonfinancial assets and
liabilities.  ASC 820-10 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements.  Our adoption of
the standard had no impact on our consolidated financial results, as we did
elect to measure assets and liabilities at fair value.
 
 In June
2009, the FASB issued ASC Topic 810-10-15, “Consolidation-Variable Interest
Entities,” or Topic 810-10-15.  Topic 810-10-15 improves financial
reporting by enterprises involved with variable interest entities and provides
more relevant and reliable information to users of financial
statements.  Topic 810-10-15 is effective as of the beginning of the
first annual reporting period that begins after November 15, 2009 and for
interim periods within that first annual reporting period.  We do not
believe the future implementation of Topic 810-10-15 will have a material impact
on our consolidated financial statements.
 
 NOTE
3.  RELATED PARTIES
 
 The
Company has numerous transactions with Vertex Holdings, L.P., formerly Vertex
Energy, L.P. (also defined herein as the “Partnership”), including the lease of
the Partnership’s storage facility, subletting of office space, transportation
of feedstock to re-refiners and the Company’s storage facility, and delivery
from the Company’s re-refinery to end customers. The pricing under these
contracts are with certain wholly-owed subsidiaries of the Partnership and are
priced at market, and are reviewed periodically from time to time by the Related
Party Transaction committee.  The Related Party Transaction committee
includes at least two independent directors and will review and pre-approve any
and all related party transactions.
 
 The
financial statements included revenues from related parties of $147,871 and
$3,043,019 and inventory purchases from related parties of $3,838,624 and
$11,585,420 for the year ended December 31, 2009 and 2008,
respectively.  As of December 31, 2009, the Company owes $1,369,586 to
related parties. This includes $841,855 due to Vertex Holdings, L.P., and
$527,731 of accounts payable most of which is due to Cedar Marine Terminal
(“CMT”). Vertex Holdings, L.P. and CMT are majority owned and controlled by our
Chief Executive Officer and Chairman Benjamin P. Cowart
 
 NOTE
4.  CONCENTRATIONS, SIGNIFICANT CUSTOMERS AND COMMITMENTS
 
 The
Company has concentrated credit risk for cash by maintaining deposits in one
bank.  These balances are insured by the Federal Deposit Insurance
Corporation up to $250,000.  From time to time during the years ended
December 31, 2009 and 2008, the Company’s cash balances exceeded the federally
insured limits.
 
 Financial
instruments that potentially subject the Company to credit risk consist
primarily of trade receivables.  Five large companies with various
independent divisions represented 26%, 17%, 14%, 14% and 13% of the Company’s
gross sales and four of these companies represented 6%, 32%, 17% and 21% of
outstanding trade receivables for the year ended December 31,
2009.  Three large publicly-held companies with various independent
divisions represented 40%, 16% and 13% of the Company’s gross sales and 92%, 1%
and 1% of outstanding trade receivables for the year ended December 31,
2008.
 
 The
Company’s revenue, profitability and future rate of growth are substantially
dependent on prevailing prices for petroleum-based
products.  Historically, the energy markets have been very volatile,
and there can be no assurance that these prices will not be subject to wide
fluctuations in the future.  A substantial or extended decline in such
prices could have a material adverse effect on the Company’s financial position,
results of operations, cash flows, and access to capital and on the quantities
of petroleum-based product that the Company can economically
produce.
 
 The
Company has several purchase agreements with suppliers that require purchases of
minimum quantities of the Company’s products.  The agreements
generally have a one year term, after which they become month-to-month
agreements.  There are no penalties associated with these
agreements.  Minimum purchases under these contracts are approximately
$13,872,319 for the twelve months ending December 31, 2010.
 F-11
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 The
Company has several debt facilities available for use, of which there were no
amounts outstanding as of December 31, 2009 or December 31, 2008.  See
note 5 for further details.
 
 The
Company purchases goods from three companies that represented 18%, 12% and 10%
of total purchases in 2009.  The entity that was 10% of the total is a
related party.
 
 NOTE
5. NOTES PAYABLE
 
 In
connection with the Merger discussed in Note 12, the Company assumed up to $1.6
million of Vertex LP’s indebtedness. As of December 31, 2009, the balance on the
note was $841,855. The note bears interest of 6.25% and payments are made when
sufficient cash flows are available.
 
 In June
2009, the Company secured a revolving line of credit of up to $3.5 million with
Regions Bank (“Regions”), which is expected to be used for feedstock purchases
and general corporate purposes.  The line of credit bears interest at
LIBOR plus 4% per annum, subject to a minimum of 5% per annum, adjusted monthly,
and which is due on May 25, 2010.  The balance on the line of credit
was $0 at December 31, 2009.
 As of
December 31, 2009 the Company was out of compliance with certain covenants, as
required by the Letter Agreement.  Regions has not provided us any
notice of a default under the Letter Agreement; however, we will be seeking a
formal waiver from Regions of the covenant described above after the filing of
this report, which we can provide no assurances will be granted.
 
 The
financing arrangement discussed above is secured by all of the assets of the
Company.  Management of Vertex Energy believes that with the financing
arrangements, in addition to projected earnings, it will have sufficient
liquidity to fund the Company’s operations for the foreseeable future, although
it may seek additional financing to fund acquisitions or other developments in
the future.
 
 NOTE
6. INCOME TAXES
 
 The
Company has not recorded a current or deferred income tax provision (benefit)
for the years ended December 31, 2009  due to the net loss incurred
during the period.
 
 No
provision for United States income taxes was required for the year ended
December 31, 2008 since the Partners reported their proportionate share of
taxable income or loss on their respective tax returns.  Such income
or losses are proportionately allocated based on their respective ownership
interests. Income taxes would have resulted in a tax benefit of approximately
$125,219 for the year ended December 31, 2008 if not passed through to the
partners assuming a 34% effective rate and the separate return
method.
 
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
  The
effective tax rate for the Company is reconcilable to statutory tax rates as
follows:
  December
      31, 2009
              
              December
      31, 2008U.S.
      Federal statutory tax rate
              
              34%
              
              
              n/aU.S.
      valuation difference
              
              (34%
              )
              
              n/aEffective
      U.S. tax rate
              
              -
              
              
              n/a
  F-12
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 Income tax expense (benefit)
attributable to income from continuing operations differed from the amounts
computed by applying the U.S. Federal income tax of 34% to pretax income from
continuing operations as a result of the following:
  December
      31, 2009
              December
      31, 2008Computed
      expected tax benefit
              
              -
              
              n/aIncrease
      in valuation allowance
              
              -
              
              n/aIncome
      tax expense
              
              -
              
              n/a
  The
cumulative tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2009 and 2008, are presented below:
  December
      31, 2009
              
              December
      31, 2008Deferred
      tax assets:Net
      operating loss carryforwards
              
              (14,546,809
              )
              
              n/aLess
      valuation allowance
              
              14,546,809
              
              
              n/aNet
      deferred tax assets
              
              -
              
              
              n/a
  The
Company has determined that a valuation allowance of $14,546,809 at December 31,
2009 is necessary to reduce the deferred tax assets to the amount that will more
than likely not be realized.
 
 At
December 31, 2009, the Company had federal net operating loss carry-forwards
("NOLs") of approximately $42 million acquired as part of the merger between
World Waste Technologies, Inc. ("World Waste") and the Company's wholly-owned
subsidiary Vertex Merger Sub, LLC, as described in greater detail below in Note
12 merger. It is possible that the Company may be unable to use these NOLs in
their entirety.  At December 31, 2009, the total amount of net
operating loss carry-forwards is approximately $42.7 million.
 
 The
history of these NOLs and the related tax laws are complex and the Company is
researching the facts and circumstances as to whether the Company will
ultimately be able to utilize the benefit from these NOLs. The extent to which
the Company will be able to utilize these carry-forwards in future periods is
subject to limitations based on a number of factors, including the number of
shares issued within a three-year look-back period, whether the merger is deemed
to be a change in control, whether there is deemed to be a continuity of World
Waste's historical business, and the extent of the Company's subsequent income.
The Company has not yet determined the extent, if any, to which it may be able
to utilize these carry-forwards.
 
 NOTE
7. STOCK BASED COMPENSATION
 
 The stock
based compensation cost that has been charged against income by the Company was
$324,589 and $91,178 for the year ended December 31, 2009 and 2008,
respectively. Because the Company is in a net loss position, no income tax
benefit has been recognized in the income statement for share-based compensation
arrangements. No share-based compensation cost had been capitalized as part of
inventory or fixed assets.
 
 The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
table below. Expected volatilities are based on management’s estimates given
that the Company’s stock is not widely traded. The Company uses historical data
to estimate option exercise and employee terminations within the valuation
model. The expected term of options granted  are based on the
remaining contractual lives of the related grants. The risk-free rate for
periods within the contractual life of the option is based on the Federal
Reserve’s risk-free interest rate based on zero-coupon government issues at the
time of the grant.
 F-13
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 The
Company believes that such awards better align the interests of its employees
with those of its shareholders. Option awards are generally granted with an
exercise price equal to the market price of the Company's stock at the date of
grant; those option awards generally vest based on four years of continuous
service and have 10-year contractual terms. Certain option awards provide for
accelerated vesting if there is a change in control (as defined in the
Plan).
 
 As of
December 31, 2009, the Company had two share-based compensation
plans.  The Company's 2008 Incentive Stock Option Plan (the “2008
Plan”), which is shareholder-approved, provides for the issuance by the Company
of a total of up to 600,000 shares of common stock and options to acquire common
stock to the Company's employees, directors and consultants. At December 31,
2009, there were 456,500 options outstanding under the Plan.  The
exercise price of these 456,500 options is $1.20 per share.  The fair
value of these options was $264,970, and the Company recognized $92,286 of
expense in 2009.
 
 Effective
July 15, 2009, the Company’s Board of Directors approved the Company’s 2009
Stock Incentive Plan and the grant of an aggregate of 815,000 stock options to
certain employees, Directors and officers of the Company.  The
Company’s 2009 Stock Incentive Plan (the “2009 Plan” and together with the 2008
Plan, the “Plans”), is subject to shareholder approval within twelve (12) months
of the adoption date of the 2009 Plan, and allows the Board of Directors to
grant up to an aggregate of 1,575,000 qualified and non-qualified stock options,
restricted stock and performance based awards of securities to the Company’s
officers, Directors and consultants to help attract and retain qualified Company
personnel.  The exercise price of the 815,000 options is $0.45 per
share and their fair value on the issuance date was $293,400.  The
Company expensed $34,313 related to these options during the year ended December
31, 2009.  At December 31, 2009, there were 775,000 options
outstanding under the 2009 Plan.
 
 In April
2009, the Company granted a total of 400,000 qualified and non-qualified stock
options in connection with employment agreements entered into with its then
newly appointed Chief Operating Officer, Matthew Lieb and its then newly
appointed Executive Vice President of Business Development, John
Pimentel. A total of 125,000 non-qualified stock options (100,000 to Mr.
Pimentel and 25,000 to Mr. Lieb vested immediately and are exercisable for three
years after termination of their employment.  The 275,000 qualified
options (100,000 to Mr. Pimentel and 75,000 to Mr. Lieb) vest in equal portions
quarterly over 4 years and are exercisable for 10 years or 90 days after the
termination of employment.  These options were all granted at a strike
price of $0.55 per share. The fair value of these options at issuance was
$111,013 and the Company expensed $77,189 in 2009.
 
 Mr.
Pimentel’s employment and his employment agreement were terminated by the
Company effective June 22, 2009, however, Mr. Pimentel continues to serve on the
Board of Directors of the Company.  In connection with the termination of
Mr. Pimentel’s employment, 100,000 of Mr. Pimentel’s options vested immediately
to Mr. Pimentel and are exercisable for three years following his termination as
an employee. Additionally, the Board subsequently revised the treatment of a
total of 100,000 of the remaining options from qualified to non-qualified
options, which options continue to vest pursuant to the terms of such options,
based on Mr. Pimentel’s service on the Board of Directors.
 
 The
following table summarizes the assumptions used in assessing the above described
options valuations:
 
 YEAR ENDED
                
                YEAR
      ENDEDDECEMBER
      31, 2009
                
                DECEMBER
      31, 2008Expected
      volatility
                
                
                50-75%
                
                
                35%Expected
      dividends
                
                
                0%
                
                
                0%Expected
      term (in years)
                
                
                10
                
                
                10Risk-free
      rate
                
                
                1.71-3.5%
                
                
                2.1%-3.28%
 
 F-14
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 During
the second quarter of 2009, in connection with the consummation of the Company’s
merger with World Waste , the Company converted all options and warrants that
were previously outstanding (all of which immediately vested as a result of the
change of control) in World Waste into options and warrants to purchase shares
of common stock of the Company.  There were 1,296,300 options and
warrants outstanding during the year ending December 31, 2009.  Of
these instruments, 157,500 and 94,084 are set at strike prices per share of
$1.55 and $0.10 respectively.  The remaining 1,044,716 instruments are
set at an average strike price of $19.78 per share and are significantly out of
the money at December 31, 2009. The Company recognized $92,418 of expense in
2009 related to the fair value of these instruments.
 
 Also,
during the second quarter of 2009, as a result of the share exchange and related
ownership percentages of the merged company, approximately 774,478 options and
warrants to purchase the Company’s common stock were issued to partners of
Vertex Holdings L.P.  (formerly Vertex Energy, L.P., “Vertex LP” which
entity  is majority- owned and controlled by our Chief Executive
Officer and Chairman Benjamin P. Cowart) with exercise prices and expiration
dates matching those of the World Waste options and warrants
exchanged.  A total of 96,667 of these instruments are set at a strike
price of $1.55 per share.  The remaining 677,812 instruments are set
at an average strike price of $21.68 per share and are significantly out of the
money at December 31, 2009.  The Company recognized expense of $23,751
related to the fair value of these instruments.
 
 On
October 21, 2009, we agreed to hire a third party to perform public relations
and fund raising related consulting services.  The agreement will
expire on September 24, 2010.  In return for the services we agree to
compensate the third party with 25,000 stock options at a strike price of $1.10
per share.  The options will expire on September 24,
2019.  The fair value of these was $17,512 and $4,380 of expense was
recognized in 2009.
 
 On
December 9, 2009, we hired an additional third party to perform public relations
and  fund raising related consulting services.  This
agreement will expire on December 8, 2010.  In addition to monthly
payments we agreed to issue 5,000 stock options at a strike price of $0.95 per
share.  These options will expire on December 9, 2019. The fair value
of these options was $3,025 and $252 of expense was recognized in
2009.
 
 NOTE
8. EARNINGS (LOSS) PER SHARE
 
 Basic
earnings per share includes no dilution and is computed by dividing income
(loss)  available to common shareholders by the weighted average
number of common shares outstanding for the periods presented. The calculation
of basic earnings per share for the year ended December 31, 2009 includes the
weighted average of common shares outstanding.  Diluted earnings per
share reflect the potential dilution of securities that could share in the
earnings of an entity, such as convertible preferred stock, stock options,
warrants or convertible securities.  The calculation of diluted
earnings per share for the year ended December 31, 2009 does not
include 2,734,167 options; 998,111 warrants and 4,755,666 preferred stock
shares due to their anti-dilutive effect.
 
 As of the
year ended December 31, 2008 common stock equivalents of 456,500 consisting
of employee stock options were excluded in the calculation of diluted earnings
per share due to their anti-dilutive effect.
 
 NOTE
9. COMMON STOCK
 
 The total
number of authorized shares of the Company’s common stock is 750,000,000 shares,
$0.001 par value per share.
 
 As a
result of the Merger, as discussed in Note 12, the total number of shares of
common stock outstanding immediately following the Merger, once issued, was
8,251,616 shares.  During the year ending December 31, 2009, an
additional 2,640 shares were issued for cash. As of December 31 2009 there were
8,254,256 shares of common stock issued and outstanding.
 F-15
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 Each
share of the Company’s common stock is entitled to equal dividends and
distributions per share with respect to the common stock when, as and if
declared by the Company’s board of directors. No holder of any shares of the
Company’s common stock has a preemptive right to subscribe for any the Company’s
security, nor are any shares of the Company’s common stock subject to redemption
or convertible into other securities. Upon liquidation, dissolution or
winding-up of the Company and after payment of creditors and preferred
shareholders of the Company, if any, the assets of the Company will be divided
pro rata on a share-for-share basis among the holders of the Company’s common
stock. Each share of the Company’s common stock is entitled to one vote, except
with respect to the election of one (1) of the Company's directors by the
Company's Series A Preferred Stock (described below under Note 10) holder.
Shares of the Company’s common stock do not possess any cumulative voting
rights.
 
 NOTE
10.  PREFERRED STOCK
 
 The total
number of authorized shares of the Company’s preferred stock is 50,000,000
shares, $0.001 par value per share. The total number of designated shares of the
Company’s Series A Preferred Stock is 5,000,000.
 
 As a
result of the Merger, as discussed in Note 12, the total number of shares of
Series A Preferred Stock outstanding immediately following the Merger, once
issued, was 4,755,666. At December 31 2009 there were 4,755,666 preferred stock
shares issued and outstanding.
 
 Holders
of outstanding shares of the Company’s Series A Convertible Preferred are
entitled to receive dividends, when, as, and if declared by the Company’s board
of directors. No dividends or similar distributions may be made on shares of
capital stock or securities junior to the Company’s Series A Preferred
until dividends in the same amount per share on the Company’s Series A
preferred have been declared and paid. In connection with a liquidation,
winding-up, dissolution or sale of the Company, each share of the Company’s
Series A Preferred is entitled to receive $1.49 prior to similar
liquidation payments due on shares of the Company’s common stock or any other
class of securities junior to the Company’s Series A Preferred Stock.
Shares of the Company’s Series A Preferred Stock are not entitled to
participate with the holders of the Company’s common stock with respect to the
distribution of any remaining assets of the Company.
 
 NOTE
11.  LICENSING AGREEMENT
 
 The
Company operates under an operating and licensing agreement with a related party
that is majority owned and controlled by our Chief Executive Officer and
Chairman Benjamin P. Cowart that provides for an irrevocable, non-transferable,
royalty-free, perpetual right to use a certain thermal/chemical extraction
technology (TCEP”) to re-refine certain used oil feedstock and associated
operations of this technology on a global basis.  This includes the
right to utilize the technology in any future production facilities built by the
Company.  If the related entity is unable to continue operations, the
Company would not have a source of its TCEP products to sell to customers, which
could negatively impact sales. The Company must approve any research and
development costs that are performed by the related party and this may affect
the related party’s ability to maintain technological feasibility of the
technology which could impact the value of the license.
 
 The
initial valuation of the license was based upon the cost to acquire the use of
the thermal/chemical extraction technology and its processes.  It will
be assessed over time for changes in the valuation.  The Company is
amortizing the value of the license agreement over a fifteen year
period.  Amortization expense was $56,692 and $0
for the years ending December 31, 2009 and 2008 respectively.  The
Company evaluated the carrying value of the license and determined that no
impairment exists; therefore, no impairment loss was recognized at December 31,
2009. The related party recently received notice from a lender that the lender
believed it to be in default of certain borrowing criteria.  Although
the related party is taking action to remedy this default, it has not been
remedied to date.  If the default is not cured, it could materially
impact the Company’s ability to utilize this licensing
agreement.
 F-16
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
12.  MERGER AGREEMENT
 
 As
previously disclosed in the Form 8-K/A filed on June 26, 2009, the World Waste
stockholders adopted a merger agreement by and among World Waste Technologies,
Inc. (“World Waste”), Vertex Holdings  L.P. (the “Partnership”),
Vertex Energy, Vertex Merger Sub, LLC (the “Merger Sub”), a California limited
liability company and wholly-owned subsidiary of Vertex Energy, and Benjamin P.
Cowart, as agent for the stockholders of Vertex Energy (the “Merger”). The
Merger closed on April 16, 2009.
 In
connection with the merger agreement, Vertex Energy assumed the Partnership’s
operations in connection with the fulfillment of a certain relationship with a
major customer and assumed the operations of the property of the Partnership
following the merger. Accordingly, the intellectual property, customer lists,
certain personnel, and the going concern of the business involved with the
merger were transferred to Vertex Energy. However, no physical assets of the
Partnership were transferred to Vertex Energy. The assets remaining with the
Partnership were treated as a distribution to the partners.
 
 The
Merger was accounted for as a reverse acquisition of World Waste pursuant to
which the Company is considered to be the accounting acquirer. In the merger,
the shareholders of World Waste exchanged 100% of their shares for approximately
58% of the total capital stock of the Company. Vertex Energy is the
continuing entity for financial reporting purposes. After the closing of the
merger and as a result of the share exchange, Vertex Energy accounted for the
reverse merger as a recapitalization of World Waste.
 
 As a
result of the Merger, the counterparties to the Merger transaction became the
holders of approximately 42% of Vertex Energy’s outstanding voting
securities.  Benjamin P. Cowart, who owns 39% of Vertex Energy’s
outstanding shares, entered into voting agreements with other shareholders
whereby he controlled approximately 58% of the Vertex Energy voting common stock
as to the vote of four of Vertex Energy’s five Directors for three
years.
 
 The
following is a reconciliation of the cash received from the merger to the
recapitalization of Vertex Energy, Inc. in the statement of stockholder’s
equity:
 
 Total
      proceeds
                
                $
                5,638,791Amount
      paid to Vertex LP
                
                
                (3,400,000
                )Other
      proceeds
                
                
                169,323Cash
      to Vertex Energy, Inc.
                
                
                2,408,114Assets
      and liabilities retained by Vertex LP:Accounts
      receivable
                
                
                (583,513
                )Accounts
      receivable-related party
                
                
                (1,795,996
                )Due
      from partnership
                
                
                (140,000
                )Inventory
                
                
                (651,933
                )Prepaid
                
                
                (200,359
                )PP&E
                
                
                (10,449
                )Accounts
      payable
                
                
                2,497,171Accounts
      payable-related party
                
                
                1,479,977Contribution
      to capital by Vertex, LP (due to liabilities exceeding
      assets)
                
                
                594,898Assumption
      of Vertex LP liabilities by Vertex Energy, Inc.
                
                
                (1,600,000
                )Total
      recapitalization of  Vertex Energy, Inc.
                
                $
                1,403,012
 F-17
 VERTEX
ENERGY, INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
13.  SEGMENT REPORTING
 
 The
Company’s reportable segments include the Black Oil and Refining & Marketing
divisions.  Segment information for the years ended December 31, 2009
and 2008, is as follows.
 
 YEAR
      ENDED DECEMBER 31, 2009Refining
      &Black
      Oil
              
              
              Marketing
              
              
              TotalRevenues
              
              $
              22,197,711
              
              
              $
              16,506,136
              
              
              $
              38,703,847Cost
      of revenues
              
              
              20,338,112
              
              
              
              15,636,183
              
              
              
              35,974,295Gross
      profit
              
              
              1,859,599
              
              
              
              869,953
              
              
              
              2,729,552Selling,
      general and administrative expenses
              
              
              1,815,993
              
              
              
              1,522,943
              
              
              
              3,338,936Net
      income (loss)
              
              $
              43,606
              
              
              $
              (652,990
              )
              
              $
              (609,384
              )Total
      Assets
              
              $
              4,936,343
              
              
              $
              2,611,644
              
              
              $
              7,547,987YEAR
      ENDED DECEMBER 31, 2008Refining
      &Black
      Oil
              
              
              Marketing
              
              
              TotalRevenues
              
              $
              45,149,632
              
              
              $
              20,063,662
              
              
              $
              65,213,294Cost
      of revenues
              
              
              43,275,370
              
              
              
              20,057,771
              
              
              
              63,333,141Gross
      profit
              
              
              1,874,262
              
              
              
              5,891
              
              
              
              1,880,153Selling,
      general and administrative expenses
              
              
              1,530,074
              
              
              
              718,369
              
              
              
              2,248,443Net
      income
              
              $
              344,188
              
              
              $
              (712,478
              )
              
              $
              (368,290
              )Total
      Assets
              
              $
              2,683,420
              
              
              $
              1,888,323
              
              
              $
              4,571,743
 
 NOTE
14. SUBSEQUENT EVENTS
 
 As of
March 26, 2010, $1,100,000 was outstanding under the Line of Credit, of which
there was $3,386,961 available, leaving an available balance of
$2,286,961.  As of March 26, 2010 the Company was out of compliance
with certain covenants, as required by the Letter Agreement.  This was
due in part to the additional expenditures and investments made in the
thermal/chemical extraction process resulting in the Company having
non-conforming ratios with the bank.  Management believes that as the
Company continues to sell finished product from the thermal/chemical extraction
process it will be taking steps during the first quarter of 2010 to comply with
these ratios.  The bank has not provided the Company with notice of
default under the Letter Agreement,  however, the Company will seek a
formal waiver of the covenant described above, of which no assurance can be
provided that the waiver will be granted.
 
 In
January and March 2010, we paid $200,000 each month to Vertex LP in connection
with the $1.6 million of debt which the Company agreed to assume from Vertex LP
and/or replace in connection with the Merger, of which $441,855 remained to be
assumed/replaced following the payments.
 
 On
January 13, 2010, the board of directors approved the filing of a Certificate of
Designation of the Company’s Series B Convertible Preferred Stock (the
“Preferred Stock”), which was filed with the Secretary of State of Nevada on
January 14, 2010.  The offering consists of (a) one share of the
Company’s Series B Convertible Preferred Stock and (b) one three year warrant to
purchase one share of the common stock of the Company.  The
designation provides for 2,000,000 shares at $.001 par value.
 The  Preferred
Stock accrues a dividend of 12% per annum, payable quarterly in arrears
(beginning on the first full quarter after the issuance date of such Preferred
Stock), based on a face value of $1.00 per share. The Preferred Stock includes a
liquidation preference which is junior to the Company’s previously outstanding
shares of preferred stock, senior securities and other security holders as
provided in further detail in the designation. The Preferred Stock is
convertible into shares of the Company’s common stock on a one for one basis at
a conversion price of $1.00 per share, provided that the Preferred Stock
automatically converts into shares of the Company’s common stock on a one for
one basis if the Company’s common stock trades above $2.00 per share for a
period of 10 consecutive trade days.  The Preferred Stock has no
voting rights (other than on matters concerning the Preferred Stock described in
the designation) and the Company is obligated to redeem any unconverted shares
of Preferred Stock in cash at $1.00 per share on the third anniversary date of
the original issuance date of each share of Preferred Stock. As of March 26,
2010 there were 100,000 shares of
 Series B
Convertible Preferred Stock issued and outstanding, for which we received
$100,000 of cash.
 
 Each
warrant provides the holder the right to purchase one share of the Company’s
common stock at an exercise price of $2.00 per share.  The warrants
contain a cashless exercise provision (exercisable after six months have past
from the date of issuance of any warrant) whereby the holder can affect a
cashless exercise of any portion of the shares of common stock issuable in
connection with the exercise of the warrant which have not been previously
registered by the Company.  The warrants have a term of three
years.  The right to shares of common stock issuable in connection
with the exercise of the warrants (“Warrant Shares”) is redeemable by the
Company in its sole discretion at a redemption price of $0.01 per Warrant Share,
in the event the Company’s common stock trades at or above $3.00 per share for
at least ten consecutive trading days, after providing the holder at least 30
days notice of the Company’s intention to exercise such redemptive
right.
 F-18
 Item
9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure





On June
24, 2009, Stonefield Josephson, Inc. ("Stonefield") was
notified that the client auditor relationship between World Waste Technologies,
Inc. (the "World
Waste”) and Stonefield was terminated as World Waste was merged into
Vertex Merger Sub, LLC, in connection with the Merger and Vertex became the
successor entity to World Waste.  LBB & Associates Ltd., LLP, of
Houston, Texas ("LBB"), which served
as Vertex’s independent auditor prior to the date of the Merger assumed
Stonefield’s duties as principal independent public accountant of the successor
entity to the Merger, Vertex, for the fiscal year ended December 31,
2008.





Stonefield's
report on the financial statements of World Waste for the fiscal years ended
December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles except for concerns about World Waste's ability to
continue as a going concern.





In
connection with the audit of World Waste's fiscal years ended December 31, 2008
and December 31, 2007, and in the subsequent interim period through June 24,
2009 (the date the relationship with Stonefield ceased) there were no
disagreements between Stonefield and World Waste on a matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Stonefield
would have caused Stonefield to make reference to the subject matter of the
disagreement in connection with its report on World Waste 's financial
statements.





There
have been no reportable events as provided in Item 304(a)(1)(iv) of Regulation
S-K during World Waste 's fiscal years ended December 31, 2008 and December 31,
2007 and in the subsequent interim period through June 24, 2009 (the date the
relationship with Stonefield ceased).





World
Waste authorized Stonefield to respond fully to any inquiries of LBB relating to
their engagement as Vertex's independent accountant. Vertex has requested that
Stonefield review the disclosure and Stonefield has been given an opportunity to
furnish Vertex with a letter addressed to the Commission containing any new
information, clarification of Vertex 's expression of its views, or the respect
in which it does not agree with the statements made by Vertex herein. Such
letter is incorporated by reference as an exhibit to this Report.





Vertex
has not previously consulted with LBB regarding either (i) the application of
accounting principles to a specific completed or contemplated transaction; (ii)
the type of audit opinion that might be rendered on World Waste's financial
statements; or (iii) a reportable event (as provided in Item 304(a)(1)(iv) of
Regulation S-K) during World Waste's fiscal years ended December 31, 2008 and
December 31, 2007, and any later interim period, including the interim period up
to and including the date the relationship with Stonefield ceased. LBB has
reviewed the disclosure required by Item 304(a) before it was filed with the
Commission and has been provided an opportunity to furnish Vertex with a letter
addressed to the Commission containing any new information, clarification of
Vertex's expression of its views, or the respects in which it does not agree
with the statements made by Vertex in response to Item 304 (a).  LBB
did not furnish a letter to the Commission.





Item
9A(T). Controls and Procedures





Evaluation of Disclosure
Controls and Procedures





Our
management, with the participation of our Principal Executive Officer and
Principal Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) as of
the end of the period covered by this Annual Report on Form 10-K. In designing
and evaluating the disclosure controls and procedures, management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives.
In addition, the design of disclosure controls and procedures must reflect the
fact that there are resource constraints and that management is required to
apply its judgment in evaluating the benefits of possible controls and
procedures relative to their costs.


-42-


Based on
our evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures are designed at a
reasonable assurance level and are effective to provide reasonable assurance
that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required
disclosure.


Management’s Annual Report
on Internal Control over Financial Reporting





We
regularly review our system of internal control over financial reporting to
ensure we maintain an effective internal control environment. There were no
changes in our internal control over financial reporting that occurred during
the period covered by this Annual Report on Form 10-K that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended.  Our internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.




Our
internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets,
(ii) provide reasonable assurance that transactions are recoded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors, and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on our financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management,
including our principal executive officer and principal financial officer,
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control over Financial Reporting - Guidance for
Smaller Public Companies.





There
were no changes in our internal controls over financial reporting during the
quarter ended December 31, 2009.  Based on our assessment and those
criteria, our management believes that Vertex maintained effective internal
control over financial reporting as of December 31, 2009.





This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's report in this
annual report.





Item
9B. Other Information





None.


-43-


Part
III




Item
10. Directors, Executive Officers and Corporate Governance





Directors are elected at each meeting
of stockholders and hold office until the next annual meeting of stockholders
and the election and qualifications of their successors. Executive officers are
elected by and serve at the discretion of the board of directors.Set forth below is
information regarding the executive officers and directors of Vertex as of the
filing of this report:





Name
            Age
            PositionBenjamin
      P. Cowart
            41
            Chairman
      of the Board of Directors, President and Chief Executive
      OfficerChristopher
      Stratton
            41
            Chief
      Financial OfficerMatthew
      Lieb
            38
            Chief
      Operating OfficerChris
      Carlson
            37
            Secretary
      and Vice President of FinanceJohn
      Pimentel
            43
            DirectorDan
      Borgen
            48
            DirectorDavid
      L. Phillips
            52
            DirectorIngram
      Lee
            49
            Director
      and Treasurer





OFFICER
AND DIRECTOR BIOS:




BENJAMIN P. COWART - DIRECTOR, CHIEF
EXECUTIVE OFFICER AND PRESIDENT (Age 41): Mr. Cowart, the president of
the General Partner for Vertex LP, has been involved in the petroleum recycling
industry for over 20 years. Mr. Cowart is the founder of the Vertex group of
companies and has served such companies since 2001. Mr. Cowart is the founder,
Chief Executive Officer, President and Chairman of the Board of Vertex. As a
leader in the recycling field, Mr. Cowart helped pioneer the reclamation
industry by developing recycling options for many residual materials once
managed as a hazardous waste. Mr. Cowart co-authored the industry's first
e-commerce operating system for the digital management of petroleum waste and
residual materials. Mr. Cowart was awarded the 2003 Business Man of the Year
from The National Republican Congressional Committee, and served on NORA's Board
of Directors and as President in 2008. Mr. Cowart has taken an active role in
the petroleum industry with his involvement in speaking, consulting, chairing,
and serving on various committees and industry associations. Prior to the
formation of Vertex LP, Mr. Cowart served as the Vice President of Aaron Oil
Company, a regional recycler in Alabama.





CHRISTOPHER STRATTON – CHIEF
FINANCIAL OFFICER (Age 41): Mr. Stratton has served as Chief Financial
Officer of Vertex since August 24, 2009.  Mr. Stratton served as
Director of Finance for CITI in the Global Commodities Group, a position which
he held since June 2005.  Prior to joining CITI, Mr. Stratton served
as a Senior Manager with PricewaterhouseCoopers, LLC, from July 1998 to June
2005.  From May 1990 to July 1997, Mr. Stratton co-founded and was
employed as Vice President by Marketlink International, Inc., an international
trade company which performed commodity trading of industrial products
throughout North America, South America, Europe and Asia.  Mr.
Stratton obtained his Bachelor of Business Administration in Accounting from
Baylor University in 1991 and his Master of Business Administration(Finance and
Entrepreneurship) from Rice University in 1999.  Mr. Stratton is also
a Certified Public Accountant.  He is a member of the American
Institute of Certified Public Accountants, the Texas Society of Certified Public
Accountants and the Rice University Jones Graduate School of Management
Partners.





MATTHEW LIEB - CHIEF OPERATING
OFFICER (Age 38): Mr. Lieb has served as the Chief Operating Officer of
Vertex since the closing of the Merger. Mr. Lieb previously served as World
Waste's Chief Operating Officer from May 2007 until the effective date of the
Merger. Since 1999, Mr. Lieb served as Chairman of the Board and Chief Executive
Officer of Kingsley Management LLC, a company he founded that acquired and
operated car wash facilities.  Mr. Lieb holds a BS in Finance from
Georgetown University and an MBA from Harvard Business School.


-44-


JOHN PIMENTEL - DIRECTOR(Age
43): Mr. Pimentel was appointed to the Board of Directors of Vertex in
connection with the closing of the Merger, and is the Vertex Series A preferred
stock appointee to the Board. Mr. Pimentel served as the Chief Executive Officer
of World Waste from the fourth quarter of 2005 and as a member of the World
Waste board of directors since early 2004 until the effective date of the
Merger. Currently, Mr. Pimentel is developing a range of renewable energy
generation projects in the Western United States.  Mr. Pimentel was
employed as a non-executive employee of the Company from the closing of the
Merger until June 2009, but Mr. Pimentel continues to serve as a Director of the
Company.  Previously, he worked with Cagan McAfee Capital Partners,
responsible for portfolio company management, strategy and investment
structuring in industries including energy and technology. Mr. Pimentel was one
of the co-founders of Pacific Ethanol (NASDAQ: PEIX) where he served as a
director from 2003 to 2005. He has also served on the boards of Particle
Drilling (NASDAQ: PDRT) and Evolution Petroleum (Amex: EVO). Mr. Pimentel has
also worked for Bain & Company in its Private Equity Group, as well as that
firm's general consulting practice. Mr. Pimentel has extensive operating
experience including service as Deputy Secretary for Transportation for the
State of California where he oversaw a $4.5 billion budget and 28,000 employees.
Mr. Pimentel has an MBA from Harvard Business School and a BA from the
University of California, Berkeley.





DAN BORGEN - DIRECTOR (Age
48): Mr. Borgen was appointed a director of Vertex in June 2008. Mr. Borgen
currently serves as Chairman, Chief Executive Officer and President of U.S.
Development Group LLC ("USD"), where he has
worked since May 1995. In his current role, Mr. Borgen guides all senior aspects
of USD's corporate activities. USD is comprised of wholly owned subsidiaries
that focus on industrial development, logistics, products terminaling, power
corridors, financial services and gasification. In addition to his work with
USD, Mr. Borgen has served as President of U.S. Right-of-Way Corporation since
June 1993. Prior to this, Mr. Borgen worked for eleven years as an investment
banker serving as Merger & Acquisition Director, Portfolio Manager and as a
member of the Executive Committee for strategic planning and development. His
activities were focused on manufacturing, food service, oil and gas
exploration/production, telecommunications, banking and Western European
finance. In his capacity as an investment banker, Mr. Borgen served as Vice
President of The Oxford Group from July 1990 to June 1993, Vice
President/Principal of The Paramount Companies from July 1985 to April 1990 and
Manager - Investor Relations of Invoil Inc. from April 1982 to June
1985.





DAVID L. PHILLIPS - DIRECTOR
(Age 52): Mr. Phillips was appointed a director of Vertex in June 2008. Mr.
Phillips is currently the Managing Partner of Bilateral Initiatives LLP, an
international business-to-business consulting firm specializing in providing key
strategic expansion and corporate growth advice to the chairman and chief
executive level members of various firms. Mr. Phillips is also Managing Partner
of Phillips International Law Group PLLC, a worldwide recognized international
law firm specializing in mergers, acquisitions, project development and EPC
construction work with a focus on the international energy landscape in the oil,
gas, chemical and power downstream sector and the alternative energy industry.
Mr. Phillips' clients include worldwide energy companies, including several
Middle East National Oil Companies. Prior to his founding of Bilateral
Initiatives LLP and the Phillips International Law Group, Mr. Phillips was a
Partner at the law firm of Jackson Walker LLP from May 2002 until May 2008 and
chaired several of the firm's practice areas over that period. Prior to working
at Jackson Walker LLP, from May 1995 to May 2002 Mr. Phillips served as a chief
executive officer in the former KeySpan Energy Corporation, a $14 billion public
energy conglomerate based in New York City, and as a member of the board of
directors of certain KeySpan subsidiaries. From June 1991 to May 1995, Mr.
Phillips served as a chief executive officer in Equitable Resources, Inc. a $6
billion public gas utility holding company based in Pittsburgh, Pennsylvania,
and as a member of the board of directors of certain Equitable subsidiaries. Mr.
Phillips also served as the General Counsel to Eastex Energy Inc., a public
midstream energy company, from June 1985 to May 1991, which was later acquired
by El Paso Energy and ultimately Enterprise Products LP.





In
addition to his current roles at Bilateral Initiatives LLP and Phillips
International Law Group PLLC, Mr. Phillips is the Chairman of the Board of
Directors and the Executive Board of Advisors, Ambassadors, Ministers &
Former US Cabinet Secretaries of the Bilateral US Arab Chamber of Commerce
(BUSACC).


-45-


Mr.
Phillips received his bachelor's degree from the University of Texas in August
1984 and his Juris Doctor from the South Texas College of Law in August 1988.
Mr. Phillips is a member of State Bar of Texas, International Bar Association,
American Bar Association, and the Houston Bar Association; he is also a member
of the Oil, Gas & Energy Law Section, the Business Law Section, and the
Corporate Counsel Section of the State Bar of Texas and Houston Bar Association.
Additionally, he is a member of the Natural Resources, Energy and Environmental
Law Section of the American Bar Association & International Bar
Association.





INGRAM LEE - DIRECTOR AND
TREASURER (Age 49): Mr. Lee has been a director and treasurer of Vertex
since its inception in May 2008. Since May 1993, he has worked at PTI,
Incorporated ("PTI") where he
currently serves as the President. In his current role with PTI, Mr. Lee is
responsible for overseeing trading, purchasing, blending, training and sales of
both residual and distillate petroleum products. Prior to joining PTI, Mr. Lee
was a Trading Manager at Coastal Corporation (currently El Paso Corporation)
from 1988 to 1993, responsible for the trading of over 20 million barrels per
year of heavy oil and distillate products in and out of South America, Mexico
and the Caribbean. From 1985 to 1988, Mr. Lee was an Operations/Blending Manager
for Challenger Petroleum USA, Inc. Prior to this, he worked as a field manager
for Torco Oil Company from 1982 to 1985 and a petroleum dispatcher and
laboratory coordinator for E.W. Saybolt Petroleum Inspection Company from 1979
to 1982. Mr. Lee has been involved in aspects of the petroleum products trading
industry for 28 years, from purchasing and sales to operations and
transportation.





CHRIS CARLSON – SECRETARY AND VICE
PRESIDENT OF FINANCE (Age 37): Mr. Carlson has served as Secretary of
Vertex and Vice President of Finance since inception. Mr. Carlson brings a range
of experience to his role as the Vice President for Vertex LP. Mr. Carlson
oversees all risk management, investments, e-commerce applications, and
day-to-day financial accounting of Vertex LP and its subsidiaries. Mr. Carlson
worked for FuelQuest, Inc. before joining Vertex LP in 2001. There he worked as
a Project Lead managing implementations of e-commerce services for new
customers. In addition, he also planned and developed testing requirements for
e-commerce applications. Mr. Carlson was with Pagenet, a wireless communications
company prior to FuelQuest, Inc. where he worked as a Strategic Account
Supervisor. Mr. Carlson earned his BS degree in Business Finance from the
University of Houston.





Significant
Employees:





Greg
Wallace – Vice President of Refining and Marketing




Mr. Wallace
provides Vertex with over 17 years of experience in the petroleum and chemicals
trading industry. Mr. Wallace manages several departments for Vertex LP,
including processing, used oil recovery technology, purchasing and selling of
various petrochemical products, and transportation of lube oils and solvents.
Prior to joining Vertex LP in 2005, Mr. Wallace was President of TRW
Trading, a company that he co-founded in 2001. Mr. Wallace has served in
various management roles ranging from marketing a variety of gasoline
blendstocks, various solvents, waste recycling, hazardous/non-hazardous
handling, and then later becoming qualified to perform oil spill prevention and
response. Mr. Wallace began his petrochemical career with Valley Solvents
& Chemicals, where he served as project General Manager responsible for
sourcing used feedstocks and selling products into favorable
markets.




John
Strickland - Manager Of Supply




Mr.
Strickland serves as the Manager of Supply of
Vertex.  Mr. Strickland joined Vertex LP in late 2007 where he
currently serves as the Manager of Supply. Mr. Strickland has over 21 years
experience in management roles of developing companies in the recycling of used
oils and the fuel blending business. In his various positions, he has developed
used oil collection fleets, environment services (non-hazardous),  Terminal
business of #6-oil from water ports and helped develop software for used oil
collection fleets. Mr. Strickland was the General Manager of Texpar Energy
inc. from 1999 to 2003 and Special Project Manager for Texpar Energy, L.L.C.
from 2004 to 2007. From 1986 to 1999, he was the General Manager and Vice-
President of Sellers Oil Inc., then one of the largest recycling and fuel
marketers of used oil and #6-fuel oil in the southeast.


-46-


Related
Party Transaction Committee




We have
formed a Related Party Transaction Committee (the “Related Party Transaction
Committee”). The Related Party Transaction Committee is chaired by Mr.
Phillips and includes Mr. Borgen and Mr. Pimentel. The Related Party Transaction
Committee is required to include at least two “independent
directors” (defined to mean any individual who does not beneficially own
more than 5% of the outstanding voting shares of Vertex, is not employed by, or
an officer of, Vertex or any entity related to Benjamin P. Cowart, is not a
director or manager of any such company, is not a family member of Mr. Cowart,
and would qualify as an “Independent Director”
as defined in the rules and regulations of the New York Stock Exchange). This
Related Party Transaction Committee is charged with the review and pre-approval
of any and all related party transactions, including between Vertex and Vertex
LP, Mr. Cowart, or any other company or individual which may be affiliated with
Mr. Cowart.




Other
Committees




Vertex
has also appointed a Compensation Committee, chaired by Mr. Borgen and includes
Mr. Phillips, and Mr. Lee.  The Audit Committee, chaired by Mr.
Pimentel includes Mr. Borgen and Mr. Phillips.




Compensation
of Officers and Directors




In
consideration for agreeing to serve as a director of Vertex, on May 16,
2008 each of Messrs. Borgen, Lee and Phillips were granted an option to
acquire up to 20,000 shares of Vertex’s common stock at an exercise price of
$1.20 per share. The options expire if unexercised on the earlier of (a) the
tenth anniversary of the grant date or (b) three months after the termination of
the director’s service to Vertex. The options vest at the rate of 25% of the
total options per year on each annual anniversary of the grant date, assuming
that the director is continuing to provide services to Vertex on such date. The
options also contain a cashless exercise provision.




In
connection with the Merger, Vertex entered into an employment agreement with
Benjamin P. Cowart pursuant to which Mr. Cowart serves as its Chief
Executive Officer for a term of five years at a base salary of $190,000, and a
bonus payment (to be determined in the sole discretion of Vertex’s compensation
committee), as described in greater detail above.




Effective
July 15, 2009, the Company’s Board of Directors approved the Company’s 2009
Stock Incentive Plan and the grant of an aggregate of 815,000 stock options to
certain employees, Directors and officers of the Company.  The
Company’s 2009 Stock Incentive Plan (the “2009 Plan”), which is
subject to shareholder approval within twelve (12) months of the adoption date
of the Plan, and which allows the Board of Directors to grant up to an aggregate
of 1,575,000 qualified and non-qualified stock options, restricted stock and
performance based awards of securities to the Company’s officers, Directors and
consultants to help attract and retain qualified Company personnel.




Pursuant
to and in connection with the 2009 Plan, the Board of Directors granted an
aggregate of 315,000 incentive stock options to certain of the Company’s
employees in consideration for services rendered and to be rendered to the
Company (the “Employee
Options”).  Included in the Employee Option grants were the
grant of options to purchase 25,000 shares to Chris Carlson, the Secretary and
Vice President of the Company; and options to purchase 50,000 shares to Matthew
Lieb, the Chief Operating Officer of the Company.




The Board
of Directors also approved the grant of non-qualified stock options to purchase
100,000 shares to Christopher Stratton, pursuant to the 2009 Plan and contingent
upon Mr. Stratton’s acceptance of the Letter Agreement, which Letter Agreement
has since been accepted by Mr. Stratton (the “Stratton
Options”).


-47-


Additionally,
pursuant to and in connection with the 2009 Plan, the Board of Directors granted
an aggregate of non-qualified stock options to purchase 320,000 shares to the
Company’s Directors as follows in consideration for services rendered and to be
rendered to the Company (the “Director Options,”
and collectively with the Employee Options, and the Stratton Options, the “Employee and Director
Options”):




Dan
      Borgen, Director
              80,000
      optionsIngram
      Lee, Director
              80,000
      optionsDavid
      Phillips, Director
              80,000
      optionsJohn
      Pimentel, Director
              80,000
      options





Finally,
the Board of Directors granted Benjamin P. Cowart, the Chief Executive Officer,
President, Chairman of the Board of Directors and largest shareholder of the
Company non-qualified stock options to purchase 80,000 shares in consideration
for services rendered and to be rendered to the Company (the “Cowart Options” and
together with the Employee and Director Options, the “Options”).




The
Employee and Director Options were granted at an exercise price of $0.45 per
share, which represented the mean between the highest and lowest quoted selling
prices of the Company’s common stock on the grant date (July 15, 2009)(the
“Mean Selling
Price”).  The Cowart Options have an exercise price of $0.50,
which represents greater than 110% of the Mean Selling Price, as required by the
2009 Plan, as Mr. Cowart is a greater than 10% shareholder of the
Company.




All of
the Options vest at the rate of 1⁄4 of each grantee’s options per year on the
anniversary date of such grants, subject to accelerated vesting in the event of
a change of control of the Company, and expire upon the earlier of (a) 90 days
following the termination of their employment (or in the case of a Director,
such Director’s appointment) with the Company; and (b) ten years from the grant
date in the case of the Employee and Director Options and five years from the
grant date in connection with the Cowart Options, as otherwise provided in the
option agreements evidencing each grant.




Vertex
has entered into an executive employment agreement with Mr. Lieb, pursuant
to which he will serve as Vertex’s Chief Operating Officer, as described above,
a letter agreement with Mr. Stratton, pursuant to which he will serve as
Vertex’s Chief Financial Officer, and Mr. Wallace, pursuant to which he will
serve as the Company’s Vice President of Refining and Marketing, as described
below.





Employment
Agreements




Mr. Cowart’s
compensation package includes (1) a base salary of $190,000, subject to annual
increases as determined in the sole discretion of the compensation committee of
Vertex’s board of directors, and (2) a bonus payment determined in the sole
discretion of the compensation committee. Mr. Cowart will also be eligible
to participate in Vertex’s stock option plan and other benefit plans. Vertex may
terminate Mr. Cowart’s employment for “cause” (which is
defined to include, among other things, a material breach of the agreement by
Mr. Cowart). Mr. Cowart may terminate his agreement upon delivery to
Vertex of written notice of termination for any reason, including “good reason,” which
is defined to include, among other things, a material breach of the agreement by
Vertex, or a modification of Mr. Cowart’s duties such that they are
inconsistent with the position and title of Chief Executive
Officer.




Upon
termination of the agreement on the five-year anniversary thereof, or for “cause,”
Mr. Cowart will be entitled to any salary accrued through such termination
date, as well as any other benefits to which he may be entitled under any stock
plan or other benefit plan that Vertex maintains. If such agreement is
terminated without “cause” or
Mr. Cowart resigns for “good reason,”
Mr. Cowart will be entitled to continue to receive his salary then in
effect for a period of six months following the date of
termination.




Pursuant
to the agreement, as long as Mr. Cowart is employed thereunder and for a
period of six months thereafter, he may not engage or participate in any
business that is in competition in any manner whatsoever with Vertex’s business
(as presently or hereafter conducted), subject to certain
exceptions.


-48-


Although
Mr. Cowart will be prohibited from competing with Vertex while he is
employed with Vertex he will only be prohibited from competing for six months
after his employment with Vertex ends. Additionally, none of Mr. Cowart’s
affiliated companies, including Vertex LP, will be prohibited from competing
with Vertex following the closing of the merger. Accordingly, Mr. Cowart or
these entities could be in a position to use industry experience gained while
working with Vertex to compete with Vertex.




With an
effective date of April 16, 2009, Vertex entered into an employment agreement
with Matthew Lieb.  Pursuant to the terms of the employment agreement,
Mr. Lieb is to serve as the Chief Operating Officer of Vertex, for a term of
four years, renewable for additional one year periods
thereafter.  Pursuant to the employment agreement, so long as Mr. Lieb
is employed by Vertex and for 12 months following the termination of his
employment, Mr. Lieb is prohibited from competing with Vertex. Pursuant to the
employment agreement, Mr. Lieb is to receive a salary of $150,000 per
year.




If Mr.
Lieb’s employment agreement is terminated without cause by the Company or for
good reason by such executive, he is to receive severance pay equal to three
months of salary during the first 12 months of the term of the agreement and six
months following the initial 12 month term.  If his employment is
terminated for any other reason, he is to receive any compensation earned as of
the termination date.




Mr. Lieb
was also granted options in connection with the entry into his employment
agreement.  Mr. Lieb was granted an aggregate of options to purchase
200,000 shares, of which options to purchase 25,000 shares vested immediately
and options to purchase 175,000 shares are to vest quarterly, at the rate of
10,937 per quarter, over the sixteen fiscal quarters following the first fiscal
quarter after the effective grant date of the options, subject to acceleration
and forfeiture as provided in the option agreement.  The exercise
price of the option grants was set by the Board of Directors, based on the
closing bid price of Vertex’s common stock on May 9, 2009, at $0.50 per share,
which includes the effects of the December 2008 1:10 reverse stock split of
Vertex’s common stock, which has been retroactively reflected
herein.




Vertex
entered into a letter agreement (the “Letter Agreement”)
with Christopher Stratton, pursuant to which Mr. Stratton agreed to serve as
Chief Financial Officer of the Company, effective August 24, 2009, which Letter
Agreement and appointment was subsequently approved and ratified by the Board of
Directors.  Pursuant to the Letter Agreement, Mr. Stratton agreed to
serve as the Company’s Chief Financial Officer; we agreed to pay Mr. Stratton
$204,000 per year, payable every two weeks and to grant Mr. Stratton options to
purchase 100,000 shares of the Company’s common stock; and Mr. Stratton agreed
to certain other terms and conditions of the Letter Agreement and to be bound by
the terms and conditions of the Company’s Proprietary information and Inventions
Agreement. Pursuant to the Letter Agreement, which provides for the employment
of Mr. Stratton to be “at-will,” we also
agreed that if Mr. Stratton’s employment is terminated by us for any reason
without cause prior to April 1, 2010, that we would pay Mr. Stratton a one-time
lump sum severance payment of $30,000.




On or
around February 22, 2010, with an effective date of April 16, 2009 (the date the
Merger closed), Vertex entered into an Employment Agreement with Greg Wallace,
pursuant to which Mr. Wallace agreed to serve as the Vice President of Refining
and Marketing of Vertex (the “Wallace Employment
Agreement”).  The Wallace Employment Agreement incorporated
certain terms and conditions of a pre-existing employment agreement between Mr.
Wallace and Vertex LP.   The Wallace Employment Agreement remains
in effect until July 14, 2013, unless terminated earlier as described below. Mr.
Wallace is to receive a base salary of $125,000 for the twelve month period
ending April 15, 2010 pursuant to the terms of the Wallace Employment Agreement
and $135,000 per year for each remaining twelve month period during the term of
the agreement.  Mr. Wallace also received stock options to purchase an
aggregate of 100,000 shares of common stock of the Company at $0.45 per share,
vesting at the rate of 1⁄4 of such options per year, which were granted to Mr.
Wallace on July 15, 2009, and stock options to purchase an aggregate of 124,000
shares of the Company’s common stock at an exercise price of $1.20 per share,
vesting at the rate of 1⁄4 of such options per year, which were granted to Mr.
Wallace on May 16, 2008, which options are subject to the terms and conditions
of the Stock Option Agreements evidencing such grants.


-49-


The Wallace Employment Agreement can
be terminated by the Company for any reason, including for “Cause” – defined as a
vote by the Board of Directors of the Company that Mr. Wallace should be
dismissed as a result of (i) the commission of any act by Mr. Wallace
constituting financial dishonesty against the Company (which act would be
chargeable as a crime under applicable law); (ii) Wallace’s engaging in any
other act of dishonesty, fraud, intentional misrepresentation, moral turpitude,
illegality or harassment, which, as determined in good faith by the Board of
Directors is reasonably likely to: (A) materially adversely affect the business
or the reputation of the Company with its current or prospective customers,
suppliers, lenders and/or other third parties with whom it might do business; or
(B) negligently expose the Company to a risk of civil or criminal legal damages,
liabilities or penalties; (iii) the repeated failure by Mr. Wallace to follow
the directives of the Board of Directors; or (iv) Mr. Wallace’s inadequate
performance of his duties to the Company, if not cured within thirty days of
notice from the Company.




The
Wallace Employment Agreement can be terminated by Mr. Wallace for any reason,
including “Good
Reason”, which is defined as (i) the assignment to Mr. Wallace of any
duties materially inconsistent with Mr. Wallace’s positions, duties, authority,
responsibilities and reporting requirements as provided in the Wallace
Employment Agreement; or (ii) the Company of the Board of Directors taking any
action which would require Mr. Wallace to be based outside of Houston, Texas,
subject to the exclusions described in further detail in the Wallace Employment
Agreement.




In the
event the Wallace Employment Agreement is terminated by the Company for Cause,
or by reason of Mr. Wallace’s death, or if Mr. Wallace terminates the Wallace
Employment Agreement for any reason other than Good Reason, Mr. Wallace is due
any and all salary and other compensation earned by him as of the date of
termination.  In the event the Wallace Employment Agreement is
terminated other than for Cause by the Company, by reason of Mr. Wallace’s
disability, or by Mr. Wallace for Good Reason, Mr. Wallace is due severance pay
equal to 10 weeks salary, if the termination occurs prior to June 30, 2010; and
equal to 10 weeks of severance pay, plus two additional weeks of severance pay
for each year that has past since June 30, 2010.  Additionally, Mr.
Wallace agreed that he would not directly or indirectly, compete with the
Company for a period of six months following the termination of his employment
with the Company as an employee, employer, consultant, agent, investor,
principal, partner, stockholder (except as provided in the Wallace Employment
Agreement), corporate officer or director of any entity.




The description of the various
employment agreements described above are subject in all respects to the actual
terms and conditions of such agreements.





-50-


SECTION
16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Section
16(a) of the securities Exchange Act of 1934, as amended, requires our
directors, executive officers and persons who own more than 10% of a class of
our equity securities which are registered under the Exchange Act of 1934, as
amended, to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes of ownership of such registered securities.
Such executive officers, directors and greater than 10% beneficial owners are
required by Commission regulation to furnish us with copies of all Section 16(a)
forms filed by such reporting persons.





To our
knowledge, based solely on a review of the copies of such reports furnished to
us Benjamin P. Cowart, Christopher Stratton, Matthew Lieb, Chris Carlson, John
Pimentel, Dan Borgen, David L. Phillips, and Ingram Lee, are currently subject
to Section 16(a) filing requirements and have made their required filings with
the Commission, we also believe that Trellus Management Company, LLC is subject
to the Section 16(a) filing requirements and may not have made their required
filings with the Commission to date.





Item
11. Executive Compensation





The following table sets for
information concerning the compensation of our Chief Executive Officer, Chief
Financial Officer and Chief Operating Officer, which represent the Company’s
principal executive officer (the Chief Executive Officer), and the Company’s two
most highly compensated officers other than the principal executive
officer:





SUMMARY
COMPENSATION TABLE(1)




Name
      and principal position
            
            Year
      Ended December 31,
            
            Salary
      ($)
            
            Bonus
      ($)
            
            
            Stock
      Awards ($)
            
            Option
      Awards ($)
            
            All
      other Compensation ($)
            
            Total
      ($)Benjamin
      P. Cowart
            
            2009
            
            $
            146,520
            (6)
            
            $
            38,000
            (5)
            
            $
            0
            
            $
            3,600
            (2)
            
            $
            0
            
            $
            188,120Chairman
      and CEOMatthew
      Lieb
            
            2009
            
            $
            113,077
            (6)
            
            $
            17,500
            (5)
            
            $
            0
            
            $
            23,932
            (2)
            
            $
            0
            
            $
            154,509Chief
      Operating Officer
            
            2008
            
            $
            162,000
            
            
            $
            0
            
            
            $
            0
            
            $
            0
            
            
            $
            0
            
            $
            162,000Former
      Chief Operating Officer of World Waste (4)
            
            2007
            
            $
            124,941
            (3)
            
            $
            0
            
            
            $
            0
            
            $
            396,100
            (2)
            
            $
            0
            
            $
            521,041Christopher
      Stratton
            
            2009
            
            $
            78,277
            (6)
            
            $
            7,500
            (5)
            
            $
            0
            
            $
            4,500
            (2)
            
            $
            0
            
            $
            90,287Chief
      Financial OfficerChris
      Carlson
            
            2009
            
            $
            74,727
            (6)
            
            $
            25,000
            (5)
            
            $
            0
            
            $
            29,160
            (2)
            
            $
            0
            
            $
            128,887Secretary
      & VP of FinanceJohn
      Pimentel
            
            2008
            
            $
            180,000
            
            
            $
            0
            
            
            $
            0
            
            $
            32,987
            (2)
            
            $
            0
            
            $
            212,987Former
      Chief Executive Officer of World Waste
            
            2007
            
            $
            180,000
            
            
            
            
            
            
            $
            0
            
            $
            936,410
            (2)
            
            $
            0
            
            $
            1,116,430$
            0Adam
      Shore
            
            2008
            
            $
            80,000
            
            
            $
            0
            
            
            $
            0
            
            $
            0
            
            
            $
            0
            
            $
            80,000Former
      Interim Chief Financial Officer of World WasteDavid
      Rane
            
            2008
            
            $
            18,667
            
            
            $
            0
            
            
            $
            0
            
            $
            7,497
            
            
            $
            0
            
            $
            26,164Former
      Chief Financial Officer of World Waste
            
            2007
            
            $
            224,000
            
            
            $
            0
            
            
            $
            0
            
            $
            247,500
            (2)
            
            $
            0
            
            $
            471,500





-51-


(1)  Does
not include perquisites and other personal benefits in amounts less than 10% of
the total annual salary and other compensation. No executive officer of the
Company received any Non-Equity Incentive Plan Compensation or Nonqualified
Deferred Compensation Earnings during the periods presented.  The
Company was formed as a Nevada corporation on May 14, 2008.  As a
result of the Merger which closed on April 16, 2009, as the successor entity of
World Waste (as described in greater detail above), we assumed World Waste’s
filing obligations with the Securities and Exchange Commission.  As
such, the information in the table above for the years ended December 2007 and
2008 relates to compensation paid to officers of World Waste, whereas the
compensation for the year ended December 31, 2009, relates to compensation paid
to officers of the Company following the Merger.





(2)
Represents the fair value of the grant of certain options to purchase shares of
our common stock form fiscal 2009 (and World Waste common stock for fiscal 2008
and 2007) calculated in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718.





(3)
Includes $23,833 paid to Mr. Lieb as consulting fees.





(4) Mr.
Lieb served as the Chief Operating Officer of World Waste until April 16, 2009,
the effective date of the Merger, at which time he began working for the Company
as its Chief Operating Officer.





(5)
Represents 2009 bonus amounts that have been accrued for as of December 31, 2009
but have not been paid to date.





(6)
Represents 2009 compensation received subsequent to the effective date
of the merger on April 16, 2009.





Board
of Directors Compensation:





The
following table sets forth summary information concerning the compensation we
paid to directors during the year ended December 31, 2009:




NAME
      (1)
            
            FEES
      EARNED OR PAID IN CASH ($)
            
            OPTION
      AWARDS ($)
            
            TOTAL
      ($)David
      Phillips
            
            16,500
      (3)
            
            7,605
      (2)
            
            24,105Dan
      Borgen
            
            16,000
      (3)
            
            7,605
      (2)
            
            23,605Ingram
      Lee
            
            12,500
      (3)
            
            7,605
      (2)
            
            20,105John
      Pimentel
            
            16,500
      (3)
            
            3,600
      (2)
            
            20,100





No
Director received any Stock Awards, Non-Equity Incentive Plan Compensation,
Nonqualified Deferred Compensation Earnings or other compensation during the
fiscal year ended December 31, 2009.





(1) Mr.
Cowart did not receive any compensation separate from the consideration he
received as an officer of the Company for the year ended December 31, 2009 in
consideration for his service to the Board as a Director of the
Company.





(2)
Represents the fair value of the grant of certain options to purchase shares of
our common stock calculated in accordance with Financial Accounting Standards
Board Accounting Standards Codification Topic 718.





(3)
$10,000 of the referenced amounts have been accrued but not
paid.


-52-


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(1)





Name
            Number
      of securities underlying unexercised options (#)
              Exercisable
            Equity
      Incentive Plan Awards: Number of securities underlying unexercised options
      (#)
              Unexercisable
            Equity
      Incentive Plan Awards: Number of Securities underlying unexercised
      unearned options (#)
            Option
      exercise price ($)
            Option
      expiration date
            Number
      of shares or units of stock that have not vested (#)
            Market
      value of shares or units of stock that have not vested ($)
            Equity
      incentive plan awards: number of unearned shares, units or other rights
      that have not vested (#)
            Equity
      incentive plan awards: Market or payout value of unearned shares, units or
      other rights that have not vestedBenjamin
      P. Cowart
              CEO
            -
            -
            80,000
            $0.50
            7/15/14
            -
            -
            -
            -Christopher
      Stratton
              CFO
            -
            -
            100,000
            $0.45
            7/15/19
            -
            -
            -
            -Ingram
      Lee
              Treasurer
            5,000
            -
            15,000
            $1.20
            5/16/18
            -
            -
            -
            -Ingram
      Lee
              Treasurer
            -
            -
            80,000
            $0.45
            7/15/19
            -
            -
            -
            -Chris
      Carlson
              Secretary
            35,000
            -
            105,000
            $1.20
            5/16/18
            -
            -
            -
            -Chris
      Carlson
              Secretary
            -
            -
            25,000
            $0.45
            7/15/19
            -
            -
            -
            -Matthew
      Lieb
              COO
            68,752
            -
            131,248
            $0.50
            1/28/19
            -
            -
            -
            -Matthew
      Lieb
              COO
            -
            -
            50,000
            $0.45
            7/15/19
            -
            -
            -
            -Matthew
      Lieb
              COO
            40,000
            -
            -
            $14.20
            5/21/17
            -
            -
            -
            -





(1) The
table above only includes equity awards granted in consideration for services
rendered by the named executives disclosed above, and does not include any
warrants granted in connection with the closing of the Merger as otherwise
disclosed herein.





-53-


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





BENEFICIAL
OWNERSHIP OF SECURITIES




BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT




The
following table sets forth certain information regarding the beneficial
ownership of Vertex’s common stock as of March 15, 2010 by (i) each person who
is known by Vertex to own beneficially more than five percent (5%) of
Vertex’s outstanding common stock; (ii) each of Vertex’s directors; (iii) each
of Vertex’s executive officers; and (iv) all of Vertex’s current executive
officers and directors as a group. As of March 15, 2010, 8,254,256 shares of
Vertex common stock were issued and outstanding and approximately 4,755,666
shares of Series A Preferred Stock (which each vote one voting share on
shareholder matters) were issued and outstanding for approximately 13,009,992
voting shares.  There were also 100,000 shares of Series B Preferred
Stock issued and outstanding, which shares have no voting rights (other than on
matters concerning the Series B Preferred Stock).




Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting and/or investing power with respect to securities. Vertex believes that,
except as otherwise noted and subject to applicable community property laws,
each person named in the following table has sole investment and voting power
with respect to the shares of common stock shown as beneficially owned by such
person.




Shareholder
      Name
            
            Number
      of Shares Beneficially Owned
            
            Percent
      (1)Benjamin
      P. Cowart
              Chief
      Executive Officer and Chairman
            
            8,252,161
            (a)
            60.3%Christopher
      Stratton
              Chief
      Financial Officer
            
            -
            (b)
            *John
      Pimentel
              Director
            
            413,279
            (c)
            3.1%Ingram
      Lee
              Treasurer
      and Director
            
            228,331
            (d)
            1.8%Dan
      Borgen
              Director
            
            5,000
            (e)
            *David
      Phillips
              Director
            
            5,000
            (f)
            *Chris
      Carlson
              Secretary
            
            404,522
            (g)
            3.1%Matthew
      Lieb
              Chief
      Operating Officer
            
            108,752
            (h)
            *Trellus
      Management Company, LLC
            (i)
            1,981,627
            (j)
            15.1%350
      Madison Avenue, 8th Floor
              New
      York, New York 10017Total
      Officers and Directors
              (8
      Persons)
            
            8,796,179
            
            61.9%





*
Indicates beneficial ownership of less than 1% of the total outstanding common
stock.


-54-


(1) Based
on 8,254,256 shares of Vertex common stock issued and outstanding and 4,755,666
shares of Series A Preferred Stock issued and outstanding (which each vote one
voting share on shareholder matters) totaling 13,009,992 voting shares.
Additionally, shares of common stock subject to options, warrants or other
convertible securities that are currently exercisable or convertible, or
exercisable or convertible within 60 days of March 15, 2010, are deemed to be
outstanding and to be beneficially owned by the person or group holding such
options, warrants or other convertible securities for the purpose of computing
the percentage ownership of such person or group, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person or group. Unless otherwise indicated, the address for each of the
officers or Directors listed in the table above is 1331 Gemini Street, Suite
250, Houston, Texas 77058.





(a)
Includes 55,311 shares held by VTX, Inc., which Mr. Cowart serves as President
of and is deemed to beneficially own ("VTX").  Also
includes warrants to purchase an aggregate of 7,789 shares of the Company's
common stock held by VTX, at various exercise prices from $1.55 to $37.00 per
share, and with various expiration dates from between April 28,
2010 and February 26, 2018, granted to VTX, as a Partner of Vertex LP, for
consideration in connection with the Merger (as described above)(the "Make-Whole
Warrants").  Also includes Make-Whole Warrants to purchase an
aggregate of 658,690 shares of our common stock held personally by Mr.
Cowart.  Does not include options to purchase 80,000 shares of the
Company's common stock at an exercise price of $0.50 per share, which options
have not vested to Mr. Cowart to date. Also
includes 3,330,883 voting shares subject to voting agreements entered into with
various shareholders of Vertex, which voting agreements remain in effect until
April 16, 2012.


(b) Does
not include options to purchase 100,000 shares of the Company's common stock at
an exercise price of $0.45 per share, which options have not vested to Mr.
Stratton to date.





(c)
Includes 35,000 shares held by Mr. Pimentel's wife, 3,030 shares of the
Company's Series A Preferred Stock, warrants to acquire 250 shares of our common
stock at an exercise price of $27.50 per share, options to acquire 125,000
shares of our common stock at exercise prices between $1.55 and $14.20 per share
and options to acquire 150,000 shares of common stock at an exercise price of
$0.50 per share.  Does not include options to purchase 80,000 shares
of the Company's common stock at an exercise price of $0.45 per share, which
options have not vested to Mr. Pimentel to date.





(d)
Includes 182,622 shares owned by PTI, Inc., which are beneficially owned by Mr.
Lee ("PTI") and
10,000 shares owned by Mr. Lee.  Also includes Make-Whole Warrants to
purchase 25,709 shares of our common stock owned by PTI, and options to
purchase 10,000 shares of the Company's common stock at an exercise price of
$1.20 per share.  Does not include options to purchase 10,000 shares
of the Company's common stock at an exercise price of $1.20 per share, or
options to purchase 80,000 shares of the Company’s common stock at an exercise
price of $0.45 per share, which options have not vested to Mr. Lee to
date.





(e)
Includes options to purchase 5,000 shares of the Company's common stock at an
exercise price of $1.20 per share.  Does not include options to
purchase 15,000 shares of the Company's common stock at an exercise price of
$1.20 per share, or options to purchase 80,000 shares of the Company’s common
stock at an exercise price of $0.45 per share, which options have not vested to
Mr. Borgen to date.





(f)
Includes options to purchase 5,000 shares of the Company's common stock at an
exercise price of $1.20 per share.  Does not include options to
purchase 15,000 shares of the Company's common stock at an exercise price of
$1.20 per share, or options to purchase 80,000 shares of the Company’s common
stock at an exercise price of $0.45 per share which options have not vested to
Mr. Phillips to date.


-55-


(g)
Includes Make-Whole Warrants to purchase 41,278 shares of our common stock
and options to purchase 70,000 shares of the Company's common stock at an
exercise price of $1.20 per share.  Does not include options to
purchase 70,000 shares of the Company's common stock at an exercise price
of $1.20 per share, or options to purchase 25,000 shares of the Company’s common
stock at an exercise price of $0.45 per share which options have not vested to
Mr. Carlson to date.





(h)
Includes options to purchase 40,000 shares of our common stock at an exercise
price of $14.20 per share and options to purchase 68,752 shares of our common
stock at an exercise price of $0.50 per share.  Does not include
options to purchase 131,248 shares of the Company's common stock at an exercise
price of $1.20 per share, or options to purchase 50,000 shares of the Company’s
common stock at an exercise price of $0.45 per share which options have not
vested to Mr. Lieb to date.





(i)
Represents shares and warrants beneficially owned by Trellus Offshore Fund
Limited, Trellus Partners, II and Trellus Partners, LP, which are beneficially
owned by Trellus Management Company, LLC.





(j)
Includes 1,841,625 shares of Series A Preferred Stock of the Company and
warrants to purchase 100,000 shares of the Company's common stock at an exercise
price of $27.50 and warrants to purchase 40,000 shares of the Company's common
stock at an exercise price of $0.10 per share.





Item
13. Certain relationships and related Transactions, and Director
Independence





The
following information describes various related parties and affiliates of
Vertex, VTX, Inc, which is wholly-owned by Mr. Cowart, the Chief Executive
Officer and Chairman of Vertex, is the general partner of all of the entities
described below.




Vertex
Holdings (Vertex LP)




Vertex
sub-leases office space from Vertex LP at its current principal executive office
located at 1331 Gemini St., Suite 250, Houston, Texas 77058. The office rent is
approximately $6,629 per month for 3,250 square feet, and the facility lease
expires in June 2012.




CrossRoad
Carriers (“CRC”)




CRC is a
transportation company engaged in the transporting of petroleum fuels, bio
fuels, and chemicals, and is 95.1% owned by Vertex LP and affiliated with
Benjamin P. Cowart, Vertex’s Chairman and Chief Executive Officer, who serves as
the general partner of CRC through VTX, Inc., an entity owned by
Mr. Cowart. CRC provides transport services for Vertex LP and Vertex as
well as for various third parties. The total costs and terms associated with the
transportation fees that CRC charges Vertex are substantially similar to the
terms granted to CRC’s other clients (including Vertex LP), which Vertex
believes approximate current market rates.




Approximately
60% of feedstock that comes into Vertex is transported by CRC, and 85-90% of
Vertex’s trucking needs are fulfilled by CRC.




Vertex
Recovery (“VR”)




VR is a
generator solutions company for the proper recycling and management of petroleum
products, 92.5% owned by Vertex LP, whose general partner is VTX. VR receives
used petroleum products from various third parties and generally works as a
broker for used petroleum products. VR sells products to Vertex LP and/or acts
as a broker in connection with sales. Approximately 25-35% (including H&H
and H&H Baytown (described below)) of Vertex’s total feedstock come from
VR.




VR’s
established business practice is for Vertex to have the first option to accept
or not to accept any feedstock streams which VR becomes aware of at the current
market price.




VR is a
“third party
supplier” - a company that collects used petroleum products (“Feedstock”) from
various Generators and then resells such feedstock. A “Generator” is any
person or entity whose activity or process produces used oil or whose activity
first causes used oil to be subject to regulation (for example, an automotive
service center that performs oil changes). Vertex is not currently a Generator
or a Third Party Supplier, but is only a purchaser of feedstock through VR
and/or through alternative third party suppliers.


-56-


H&H
Oil (Austin, Texas) (“H&H”)




H&H
is a wholly-owned business unit of VR and is a used oil collection company.
H&H sells product to Vertex and third parties. Historically, approximately
10% of Vertex’s feedstock has come from H&H, and approximately 40% of
H&H’s feedstock has been sold to Vertex.




H&H
Oil (Baytown, Texas) (“H&H-Baytown”)




H&H
Baytown is a wholly-owned business unit of VR and is a used oil collection
company. H&H Baytown sells product to Vertex. Historically, approximately
10% of Vertex’s feedstock has come from H&H Baytown, and approximately 65%
of H&H-Baytown’s feedstock has been sold to Vertex.




H&H
Oil (Corpus Christi, Texas) (“H&H-Corpus”)




H&H
Corpus is a wholly-owned business unit of VR and is a used oil collection
company. H&H Corpus sells product to Vertex.  Historically,
approximately 1% of Vertex’s feedstock has come from H&H Corpus, and
approximately 5% of H&H-Corpus’s feedstock has been sold to
Vertex.




Cedar
Marine Terminal (“CMT”)




CMT is a
marine terminal 99% owned by Vertex LP that is engaged in the storage and
terminaling of petroleum fuels. CMT is contracted to store products for Vertex
and Vertex LP, as well as third parties. CMT’s general partner is
VTX.




Approximately
40% of Vertex’s feedstock is terminaled and stored at CMT. Historically,
approximately 80% of the feedstock that is terminaled at CMT belongs to Vertex,
with an additional approximately 10% owned by companies affiliated with Vertex
LP. The remaining approximately 10% belongs to an unrelated third
party.




CMT is
the operator of our licensed “thermal/chemical extraction
technology” - a process infrastructure located at the Cedar Marine
Terminal, operated and managed by CMT, consisting of multiple tanks, associated
piping and proprietary design and engineering for the thermal/chemical
extraction of used motor oil. Vertex pursuant to the Operating and Licensing
Agreement described below,  licensed the technology from CMT, at a
price equal to the documented development costs plus 10%.  CMT
operates the actual thermal/chemical extraction process and Vertex pays them the
operations cost plus 10%.  Although it is currently anticipated that
Vertex LP and Vertex will be the only entities using the thermal/chemical
extraction technology, because the license will be non-exclusive, CMT may
license the technology to other parties and/or sell the technology outright. CMT
currently provides terminalling services to Vertex competitors and may increase
the volume of such services in the future.




Additionally,
pursuant to the Asset Transfer Agreement (described above) and the terms of the
Merger, Vertex was required to pay $1.6 million to Vertex LP, of which $0.9
million has been paid to date.  As such, Vertex is following a payment
schedule agreed to by the Related Party Transaction Committee along with Vertex,
LP which leaves approximately $0.7 million remaining, which we plan to pay in
full by May 2010.




Vertex
Residual Management (“VRM”)




VRM is an
environmental consulting services company which is 69% owned by Vertex LP and
controlled by Mr. Cowart through his ownership of VTX. VRM provides
environmental compliance, residual management and regulatory oversight services
(including permitting) to Vertex, Vertex LP and other affiliated companies, as
well as third parties.




Vertex LP
has an arrangement with VRM pursuant to which VRM provides services to Vertex LP
and all of the other Vertex LP-related parties at cost, at the rate of 426 hours
per month at $50 per hour for each entity, adjustable every six months. Vertex
is responsible for its pro-rata share of the monthly fee payable to VRM pursuant
to the pre-existing arrangement between VRM and Vertex LP, which has continued
following the Merger.




-----------------------------------------


-57-


Affiliated
Employees




Certain
employees of Vertex spend a portion of their time working on behalf of companies
that are affiliates of Mr. Cowart. These employees are not compensated by
Vertex for any time dedicated to those companies.





Services
Agreement





In
connection with the Merger, Vertex LP and Vertex entered into a Services
Agreement (the “Services
Agreement”).  Pursuant to the Services Agreement, Vertex LP
(through its various affiliates) agreed to perform services for Vertex, billed
at the lesser of (a) the rates Vertex LP charges to non-affiliates, and (b)
rates less than the amount Vertex LP charges to non-affiliates as mutually
agreed between the parties, including the following:





·
            Transportation
      services through CrossRoad Carriers for the transportation of Vertex's
      feedstock and refined and re-refined petroleum
  products;





·
            Environmental
      compliance and regulatory oversight services to be performed by Vertex
      Residual Management Group LP., and





·
            Terminaling
      services through Cedar Marine Terminals for the storage and loading out of
      feedstock by barge, unless such services are covered under a separate
      agreement entered into between the
Parties.





The
Services Agreement has a term of five (5) years, but can be terminated at any
time with the mutual consent of both parties, with thirty days prior written
notice in the event any provision of the agreement is breached, by the
non-breaching party, or at any time with five (5) days written notice if Mr.
Cowart is no longer employed by Vertex.





Operating
and Licensing Agreement





Additionally,
in connection with the Merger and effective as of the effective date of the
Merger, Cedar Marine Terminals, L.P. (“CMT”) and Vertex
entered into an Operating and Licensing Agreement (the “Operating
Agreement”).  Pursuant to the Operating Agreement, CMT agreed
to provide services to Vertex in connection with the operation of the Terminal
run by CMT, and the operations of and use of certain proprietary technology
relating to the re-refining of certain oil feedstock referred to as its “Thermal/chemical extraction
process” (“TCEP”), in connection
with a Terminaling Agreement by and between CMT and
Vertex.  Additionally, Vertex has the right, following the payment of
the R&D Costs (as defined below) to use the first 33,000 monthly barrels of
the capacity of TCEP pursuant to the terms of the Operating Agreement, with CMT
being provided the right to use the next 20,000 barrels of capacity and any
additional capacity allocated pro rata (based on the percentages above), subject
to separate mutually agreeable allocations.





The
Operating Agreement has a term expiring on February 28, 2017, and can be
terminated (a) by the mutual consent of both parties, (b) with thirty days prior
written notice, if any term of the agreement is breached, by the non-breaching
party, or (c) at any time after the R&D Costs (as defined below) are paid
and Mr. Cowart’s employment has been terminated by Vertex.





In
consideration for the services to be rendered pursuant to the Operating
Agreement, Vertex agreed to pay CMT its actual costs and expenses associated
with providing such services, plus 10%, subject to a maximum price per gallon of
$0.40, subject to TCEP meeting certain minimum volume requirements as provided
in the agreement.  The maximum price to be paid per gallon is subject
to change based on the mutual agreement of both parties.


-58-


Pursuant
to the Operating Agreement, Vertex also has the right to a non-revocable,
non-transferable, royalty-free, perpetual (except as provided in the agreement)
license to use the technology associated with the operations of TCEP in any
market in the world (the “License”), provided
that Vertex pays CMT the documented net development costs of TCEP, which we have
fully paid for in the amount of $1,731,889 to date (the “R&D
Costs”).





The
License expires automatically in the event Vertex (i) becomes insolvent or takes
any action which constitutes its admission of inability to pay its debts as they
mature; (ii) makes an assignment for the benefit of creditors, files a petition
in bankruptcy, petitions or applies to any tribunal for the appointment of a
custodian, receiver or a trustee for it or a substantial portion of its assets;
(iii) commences any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation or statute of any
jurisdiction, whether now or hereafter in effect; (iv) has filed against it any
such petition or application in which an order for relief is entered or which
remains undismissed for a period of ninety (90) days or more; (v) indicates its
consent to, approval of or acquiescence in any such petition, application,
proceeding or order for relief or the appointment of a custodian, receiver or
trustee for it or a substantial portion of its assets; or (vi) suffers any such
custodianship, receivership or trusteeship to continue un-discharged for a
period of ninety (90) days or more; or dissolves or winds up its
assets.




Right
of First Refusal Agreement





Effective
as of the date of the Merger, Vertex has the right, pursuant to a Right of First
Refusal Agreement (the “Right of First Refusal
Agreement”), to (a) match any third party offer to purchase Vertex
Holdings LP, or any of its subsidiaries or assets (the “Property”) within
thirty (30) days of the date such offer is received by Vertex, and (b) following
the expiration of eighteen (18) months following the effective date of the
Merger, to purchase any of the Property at a price to be determined by an
independent third-party evaluation expert mutually agreed upon by the
parties.  The Right of First Refusal Agreement, and the rights
provided for therein remain in effect as long as Mr. Cowart is employed by
Vertex.





Item
14. Principal Accounting Fees and Services





The Company appointed LBB &
Associates Ltd., LLP as independent auditors to audit the consolidated financial
statements of the Company for the fiscal years ended December 31, 2008 and
December 31, 2009:





Following is a summary of the fees
expensed relating to professional services rendered by the principal accountants
for the fiscal years ended December 31, 2009 and December 31, 2008:








Fee
      Category
              
              2009
      Fees
              
              
              2008
      FeesAudit
      Fees
              
              $
              54,915
              
              
              $
              68,300All
      Other Fees
              
              $
              9,625
              
              
              $
              129,771Total
      Fees
              
              $
              64,540
              
              
              $
              198,071








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Part
IV





Item
15. Exhibits, Financial Statement Schedules





EXHIBIT NO.
            DESCRIPTION2.1(1)
            Amendment
      No. 5, dated as of March 31, 2009, to Amended and Restated Agreement and
      Plan of Merger by and among World Waste Technologies, Inc., Vertex
      Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex
      Merger Sub, LLC and Benjamin P. Cowart.3.1(2)
            Articles
      of Incorporation (and amendments thereto) of Vertex Energy,
      Inc.3.2(1)
            Amended
      and Restated Certificate of Designation of Rights, Preferences and
      Privileges of Vertex Energy, Inc.'s Series A Convertible Preferred
      Stock.3.3(2)
            Withdrawal
      of Designation of the Company’s Series B Preferred
Stock3.4(4)
            Series
      B Convertible Preferred Stock Filing3.5(2)
            Bylaws
      of Vertex Energy, Inc.4.1(2)
            Vertex
      Energy, Inc., 2008 Stock Incentive Plan4.2(3)
            2009
      Stock Incentive Plan of Vertex Energy, Inc.10.1(2)
            Asset
      Transfer Agreement10.2(2)
            Services
      Agreement10.3(2)
            Right
      of First Refusal Agreement10.4(2)
            Operating
      and Licensing Agreement10.5(2)
            Employment
      Agreement with Benjamin P. Cowart10.6(2)
            Employment
      Agreement with John Pimentel





10.7(2)
            Employment
      Agreement with Matthew Lieb10.8(2)
            Letter
      Loan Agreement with Regions Bank10.9(2)
            Line
      of Credit with Regions Bank10.10(2)
            Security
      Agreement with Regions Bank10.11(3)
            Letter
      Agreement with Christopher Stratton14.1(2)
            Code
      of Ethics16.1(2)
            Letter
      from Stonefield Josephson, Inc.31.1*
            Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act.  -60-
 31.2*
            Certification
      of Acting Principal Accounting Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act.32.1*
            Certification
      of Principal Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act32.2*
            Certification
      of Acting Principal Accounting Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act99.1(2)
            Audited
      Financial Statements of Vertex Holdings, L.P. formerly Vertex Energy, L.P.
      (certain assets, liabilities and operations related to its black oil
      division and certain assets, liabilities and operations of the refining
      and marketing division) for the years ended December 31, 2008 and
      200799.2(2)
            Unaudited
      Financial Statements of Vertex Holdings, L.P. formerly Vertex Energy, L.P.
      (certain assets, liabilities and operations related to its black oil
      division and certain assets, liabilities and operations of the refining
      and marketing division) for the three months ended March 31, 2009 and
      200899.3(2)
            Audited
      Financial Statements of Vertex Energy, Inc. as of December 31,
      200899.4(2)
            Unaudited
      Interim Financial Statements of Vertex Energy, Inc. for the three months
      ended March 31, 2009 and 200899.5(2)
            Pro
      Forma Financial Statements of Vertex Energy, Inc.99.6(2)
            Glossary
      of Selected Terms





* Filed
herewith.





(1) Filed
as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission
on April 8, 2009, and incorporated herein by reference.





(2) Filed
as an exhibit to the registrant’s Report on Form 8-K/A. filed with the
Commission on June 26, 2009, and incorporated herein by reference.





(3) Filed
as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission
on July 31, 2009, and incorporated herein by reference.





(4) Filed
as an exhibit to the registrant’s Report on Form 8-K, filed with the Commission
on January 14, 2010, and incorporated herein by reference.





-61-


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, hereunto
duly authorized.





VERTEX
      ENERGY, INC.Date:
      March 30, 2010
              By: /s/ Benjamin P.
      CowartBenjamin
      P. CowartChief
      Executive Officer(Principal
      Executive Officer)Date:
      March 30, 2010
              By: /s/ Christopher
  StrattonChristopher
      StrattonChief
      Financial Officer(Principal
      Financial Officer)


In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.





By:
            /s/ Benjamin P. Cowart
            
            By:
            /s/ Christopher StrattonBenjamin
      P. Cowart
              Chief
      Executive Officer
              (Principal
      Executive Officer)
              and
      Chairman
            
            
            Christopher
      Stratton
              Chief
      Financial Officer,
              (Principal
      Accounting Officer)Date:
            March
      30, 2010
            
            Date:
            March
      30, 2010By:
            /s/ Ingram
      Lee
            
            By:
            /s/ Dan BorgenIngram
      Lee
              Director
            
            
            Dan
      Borgen
                DirectorDate:
            March
      30, 2010
            
            Date:
            March 30, 2010By:
            /s/ John
      PimentelJohn Pimentel
              DirectorDate:
            March
      30, 2010











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