CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES

At September 30, 2014 and 2013 and for each of the nine months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:



	2014		2013
	% of Revenues	% of Receivables	% of Revenues	% of Receivables
Customer 1	28%	—%	1%	—%
Customer 2	13%	8%	46%	27%
Customer 3	11%	—%	10%	—%
Customer 4	9%	47%	—%	—%
Customer 5	7%	12%	8%	16%
Customer 6	2%	11%	—%	—%
Customer 7	—%	—%	10%	16%
Customer 8	—%	—%	2%	24%

At September 30, 2014 and 2013 and for each of the nine months then ended, the Company's segment revenues were comprised of the following customer concentrations:



	% of Revenue by Segment 2014			% Revenue by Segment 2013
	Black Oil	Refining	Recovery	Black Oil	Refining	Recovery
Customer 1	100%	—%	—%	100%	—%	—%
Customer 2	8%	92%	—%	17%	83%	—%
Customer 3	—%	100%	—%	—%	100%	—%
Customer 4	92%	—%	2%	—%	—%	—%
Customer 5	—%	100%	—%	—%	100%	—%
Customer 6	94%	—%	6%	—%	—%	—%
Customer 7	—%	—%	—%	77%	23%	—%
Customer 8	—%	—%	—%	100%	—%	—%

The Company purchases goods and services from one company that represented 10% of total purchases for the nine months ended September 30, 2014 and one company that represented 11% for the nine months ended September 30, 2013.

As a result of the Omega Refining acquisition on May 2, 2014, the Company assumed a feedstock purchase contract with an unrelated third party. The Company is required to purchase a minimum of 15,200,000 gallons of used motor oil per year until the contract expires on December 31, 2014. As of September 30, 2014, the company has purchased approximately 11,200,000 gallons from this vendor, leaving a 4,000,000 gallon purchase obligation. The purchase price for this contract is calculated as discount to Platts U.S. Gulf Coast No. 6 Fuel Oil, 3% Sulphur per gallon for the month prior to the date the product is released.

The Company has had various debt facilities available for use, of which there was $43,427,439 and $10,158,333 outstanding as of September 30, 2014 and September 30, 2013, respectively. See Note 5 for further details.

In February 2013, Bank of America agreed to lease the Company up to $1,025,000 of equipment to enhance the Thermal Chemical Extraction Process (TCEP) operation, which went into effect in April 2013. Under the current terms of the lease agreement, there are 60 monthly payments of approximately $13,328.

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 products that the Company can economically produce.

The Company, in its normal course of business, is involved in various other claims and legal action. In the opinion of management, the outcome of these claims and actions will not have a material adverse impact upon the financial position of the Company.

We intend to take advantage of any potential tax benefits related to net operating losses (“NOLs”) acquired as part of the Company's April 2009 merger with World Waste Technologies, Inc. ("World Waste"). 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. As of December 31, 2013, the Company had utilized approximately $11.25 million of these NOLs leaving approximately $30.75 million of potential NOLs of which we expect to utilize approximately $2.6 million for the nine months ended September 30, 2014. The Company recorded a change in valuation allowance for the nine months ended September 30, 2014 of approximately $879,210.

Additionally, pursuant to a Consulting Agreement previously entered into with Heartland Group Holdings, LLC ("Heartland") in July 2014, pursuant to which Vertex Operating, LLC (the Company's wholly-owned subsidiary, "Vertex Operating") agreed to provide consulting services to Heartland (the "Consulting Agreement") while the parties negotiated the definitive terms of a purchase agreement relating to the acquisition by the Company of substantially all the assets of Heartland, which agreement was entered into by both parties in October, 2014. Vertex Operating agreed to reimburse Heartland for its operating losses (on a cash basis net of interest, depreciation, corporate overhead expenses and insurance proceeds received)(“Operating Losses”) during the period from July 16, 2014 through the earlier of the closing of the purchase agreement or the termination of the purchase agreement, which reimbursement (estimated to total approximately $1.8 to $2 million at closing) will be paid to Heartland at the closing, or if the closing does not occur as a result of the breach of the purchase agreement or default thereunder by Vertex Operating (or its affiliates), or the failure of any closing condition of Vertex Operating (or its affiliates) thereunder, such amount is due within thirty days of the date it has been determined that such closing will not occur. In the event the closing does not occur due to the breach or default by Heartland (or its affiliates) of the purchase agreement, Heartland is required to reimburse Vertex Refining OH, LLC, a wholly-owned subsidiary of Vertex Operating ("Vertex OH") for costs and expenses incurred by it and Vertex Operating in connection with such Operating Losses. The closing of the purchase agreement is anticipated to occur prior to the end of November 2014.

Vertex OH and Vertex Operating also agreed to share equally with Heartland in the costs of certain projects undertaken by Heartland prior to the closing of the purchase agreement, provided that Heartland is not required to pay more than $788,500 of its costs associated with such project costs (a substantial portion of which amount has been fully funded by Heartland to date) which are estimated to total approximately $1.6 million. In connection therewith, following the closing, Vertex OH will first pay, up to the amount expended by Heartland as of closing for such costs, any amounts due in connection with such projects, and the remaining amount of such projects will be split equally by Vertex OH and Heartland. All projects undertaken following closing, if any, are in the sole discretion of Vertex OH. Additionally, in the event of the termination of the purchase agreement due to a breach or default by Heartland (or its affiliates) under the purchase agreement, subject to any cure provision, Heartland is required to reimburse Vertex OH for any costs or expenses incurred by it or Vertex Operating in connection with such capital projects and pay Vertex OH’s portion of any capital project committed to prior to the date of termination, within thirty days of the date it has been determined that the closing will not occur. No amounts had been expended for these capital projects as of September 30, 2014.