UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM ~~10-Q/A~~10-Q

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

For the quarterly period ended September 30, ~~2016~~2017

[ ] 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 1-33926

TRECORA RESOURCES

(Exact name of registrant as specified in its charter)

DELAWARE	75-1256622
(State or other jurisdiction of	(I.R.S. employer incorporation or
organization)	identification no.)

1650 Hwy 6 South, Suite 190	77478
Sugar Land, Texas	(Zip code)
(Address of principal executive offices)

~~Registrant’s~~Registrant's telephone number, including area code: (409) 385-8300

Former name, former address and former fiscal year, if

changed since last report.

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 Date 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 X No

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

Large accelerated filer ____ Accelerated filer _ X__

Non-accelerated filer ____ (Do not check if a smaller reporting company) Smaller reporting company ____

Emerging growth company_____

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.____

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

Yes No X_

Number of shares of the Registrant's Common Stock (par value $0.10 per share), outstanding at November ~~1, 2016: 24,506,846.~~4, 2017: 24,306,119.

~~EXPLANATORY NOTE~~

Trecora Resources (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) in order to record its gain related to an additional equity issuance by Al Masane Al Kobra Mining Co. (“AMAK”), a Saudi Arabian closed joint stock company in which the Company has an investment accounted for by the equity method, and to correct its equity in earnings of AMAK.

~~Restatement of Consolidated Financial Statements~~

The unaudited consolidated statements of income for the three and nine months ended September 30, 2016, have been restated to properly reflect an error in the Company’s equity in earnings of AMAK and a gain from the additional equity issuance by AMAK for that three and nine month period, the unaudited consolidated balance sheet as of September 30, 2016, has been restated to reflect the effect of correcting the error on the balance of the investment in AMAK and associated deferred taxes, and the unaudited consolidated statements of stockholders’ equity and cash flows and the notes to the unaudited consolidated financial statements have been restated to make the associated changes required by the adjustments described above. For a discussion of the equity in earnings of AMAK and the accounting errors identified, see “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—AMAK Review and Restatement” and Note 3 of Notes to Consolidated Financial Statements (Unaudited) included in “Part I, Item 1—Financial Statements.”

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

In addition, changes necessitated by the restatement of the Company’s September 30, 2016, unaudited consolidated financial statements have been made in Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Disclosure Controls and Procedures and Internal Control Over Financial Reporting~~

Management reassessed its evaluation of the effectiveness of disclosure controls and procedures and our internal control over financial reporting as of June 30, 2016, and as of September 30, 2016, and concluded that a deficiency in the design and operating effectiveness of our internal controls represents a material weakness in our internal control over financial reporting and, therefore, that we did not maintain effective disclosure controls and procedures or internal control over financial reporting as of June 30, 2016, and September 30, 2016. For a description of the material weakness identified by management and management’s plan to remediate the material weakness, see “Part I, Item 4 — Controls and Procedures.”

~~Risk Factors~~

~~An additional risk factor has been added in Part II, Item 1A – Risk Factors.~~

~~Amended Reports~~

Except as set forth above, no other material changes have been made from the originally filed Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016, and except as set forth above this Amendment No. 1 speaks as of the date of the original filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, and does not reflect events that may have occurred subsequent to the date of the original filing on Form 10-Q.

~~This Amended Quarterly Report on Form 10-Q/A reflects amendments to the following items:~~

•~~Part I, Item 1 — Financial Statements~~

•~~Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

•~~Part I, Item 4 — Controls and Procedures~~

•~~Part II, Item 1A — Risk Factors~~

•~~Part II, Item 6 — Exhibits~~

The Company’s Chief Executive Officer and Chief Financial Officer are providing currently dated certifications in connection with this Amended Quarterly Report on Form 10-Q/A. See Exhibits 31.1, 31.2, 32.1 and 32.2.

TABLE OF CONTENTS

Item Number and Description

PART I – FINANCIAL INFORMATION
I ~~TEM~~ITEM 1. Financial Statements
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statement of ~~Stockholders’~~Stockholders' Equity	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5

ITEM 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations		20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		3231

ITEM 4. Controls and Procedures		3231
	PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings		3332

ITEM 1A. Risk Factors		3332

ITEM 6. Exhibits		3332

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	SEPTEMBER 30, 2016 (Restated – see Note 3) (unaudited)			DECEMBER 31, 2015		SEPTEMBER 30, 2017 (unaudited)			DECEMBER 31, 2016
ASSETS	(thousands of dollars)					(thousands of dollars)
Current Assets
Cash and cash equivalents	$	7,587		$	18,623
Cash						$	4,219		$	8,389
Trade receivables, net		19,829			19,474		22,738			22,193
Inventories		18,376			15,804		12,849			17,871
Prepaid expenses and other assets		3,939			2,392		3,276			3,511
Taxes receivable		3,578			7,672		3,764			3,983
Deferred income taxes		1,703			2,116
Total current assets		55,012			66,081		46,846			55,947

Plant, pipeline and equipment, net		129,738			96,907		172,048			140,009

Goodwill		21,798			21,798		21,798			21,798
Other intangible assets, net		23,134			24,549
Intangible assets, net							21,273			22,669
Investment in AMAK		53,127			47,697		44,225			49,386
Mineral properties in the United States		588			588		588			588
Other assets		109			171		21			87

TOTAL ASSETS	$	283,506		$	257,791	$	306,799		$	290,484
LIABILITIES
Current Liabilities
Accounts payable	$	9,229		$	8,090	$	12,381		$	13,306
Current portion of derivative instruments		80			118		7			58
Accrued liabilities		4,228			4,062		6,304			2,017
Current portion of post-retirement benefit		480			294		308			316
Current portion of long-term debt		8,061			8,061		8,061			10,145
Current portion of other liabilities		771			2,050		1,131			870
Total current liabilities		22,849			22,675		28,192			26,712

Long-term debt, net of current portion		70,123			73,169		81,011			73,107
Post-retirement benefit, net of current portion		649			649		897			897
Derivative instruments, net of current portion		8			59
Other liabilities, net of current portion		2,383			2,351		1,681			2,309
Deferred income taxes		22,941			16,503		24,654			23,083
Total liabilities		118,953			115,406		136,435			126,108

EQUITY
Common stock‑authorized 40 million shares of $.10 par value; issued and outstanding 24.2 million and 24.1 million shares in 2016 and 2015, respectively		2,451			2,416
Common stock‑authorized 40 million shares of $.10 par value; issued 24.5 million in 2017 and 2016 and outstanding 24.3 million and 24.2 million shares in 2017 and 2016, respectively							2,451			2,451
Additional paid-in capital		52,804			50,662		55,344			53,474
Common stock in treasury, at cost 0.3 million shares		(284	)		-
Common stock in treasury, at cost							(203	)		(284	)
Retained earnings		109,293			89,018		112,483			108,446
Total Trecora Resources Stockholders’ Equity		164,264			142,096
Total Trecora Resources Stockholders' Equity							170,075			164,087
Noncontrolling Interest		289			289		289			289
Total equity		164,553			142,385		170,364			164,376

TOTAL LIABILITIES AND EQUITY	$	283,506		$	257,791	$	306,799		$	290,484

See notes to consolidated financial statements.

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	THREE MONTHS ENDED						NINE MONTHS ENDED						THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,						SEPTEMBER 30,						SEPTEMBER 30,
	2016 (Restated – see Note 3)			2015			2016 (Restated – see Note 3)			2015			2017			2016			2017			2016
	(thousands of dollars)												(thousands of dollars)
REVENUES
Petrochemical and Product Sales	$	52,115		$	63,190		$	143,662		$	170,396		$	58,030		$	52,115		$	165,945		$	143,662
Processing Fees		5,027			3,748			14,534			11,035			3,478			5,027			13,220			14,534
		57,142			66,938			158,196			181,431			61,508			57,142			179,165			158,196

OPERATING COSTS AND EXPENSES
Cost of Sales and Processing
(including depreciation and amortization of $2,373, $2,118, $6,620, and $6,083, respectively)		48,237			50,903			125,946			135,679
(including depreciation and amortization of $2,565, $2,373, $7,311, and $6,620, respectively)														51,638			48,237			147,570			125,946

GROSS PROFIT		8,905			16,035			32,250			45,752			9,870			8,905			31,595			32,250

GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative		4,585			4,778			15,525			14,886			5,660			4,585			17,621			15,525
Depreciation		192			194			556			579			245			192			655			556
		4,777			4,972			16,081			15,465			5,905			4,777			18,276			16,081

OPERATING INCOME		4,128			11,063			16,169			30,287			3,965			4,128			13,319			16,169

OTHER INCOME (EXPENSE)
Interest Expense		(568	)		(535	)		(1,803	)		(1,718	)		(795	)		(568	)		(2,109	)		(1,803	)
Bargain purchase gain from acquisition		-			-			11,549			-			--			--			--			11,549
Equity in Earnings (Losses) of AMAK		(2,089	)		(2,054	)		2,261			(2,364	)		(897	)		(2,089	)		(5,161	)		2,261
Gain from Additional Equity Issuance by AMAK		3,168			-			3,168			-			--			3,168			--			3,168
Miscellaneous Income (Expense)		(72	)		7			38			6			22			(72	)		(42	)		38
		439			(2,582	)		15,213			(4,076	)		(1,670	)		439			(7,312	)		15,213

INCOME BEFORE INCOME TAXES		4,567			8,481			31,382			26,211			2,295			4,567			6,007			31,382

INCOME TAXES		1,768			3,163			11,107			8,735			577			1,768			1,970			11,107

NET INCOME		2,799			5,318			20,275			17,476			1,718			2,799			4,037			20,275

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		--			--			--			--			--			--			--			--

NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES	$	2,799		$	5,318		$	20,275		$	17,476		$	1,718		$	2,799		$	4,037		$	20,275

Basic Earnings per Common Share
Net Income Attributable to Trecora Resources (dollars)	$	0.12		$	0.22		$	0.83		$	0.72		$	0.07		$	0.12		$	0.17		$	0.83

Basic Weighted Average Number of Common Shares Outstanding		24,223			24,369			24,304			24,344			24,304			24,223			24,267			24,304

Diluted Earnings per Common Share
Net Income Attributable to Trecora Resources (dollars)	$	0.11		$	0.21		$	0.81		$	0.69		$	0.07		$	0.11		$	0.16		$	0.81

Diluted Weighted Average Number of Common Shares Outstanding		24,921			25,228			24,964			25,176			25,157			24,921			25,082			24,964

See notes to consolidated financial statements.

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

	TRECORA RESOURCES STOCKHOLDERS																		TRECORA RESOURCES STOCKHOLDERS
	COMMON STOCK				ADDITIONAL PAID-IN			TREASURY			RETAINED				NON- CONTROLLING		TOTAL		COMMON STOCK				ADDITIONAL PAID-IN			TREASURY			RETAINED					NON- CONTROLLING		TOTAL
	SHARES		AMOUNT		EARNINGS			STOCK			EARNINGS		TOTAL		INTEREST		EQUITY		SHARES		AMOUNT		CAPITAL			STOCK			EARNINGS		TOTAL			INTEREST		EQUITY
	(thousands)		(thousands of dollars)																(thousands)		(thousands of dollars)
JANUARY 1, 2016		24,158	$	2,416	$	50,662		$	-		$	89,018	$	142,096	$	289	$	142,385
JANUARY 1, 2017																				24,222	$	2,451	$	53,474		$	(284	)	$	108,446	$	164,087		$	289	$	164,376

Stock options
Issued to Directors		-		-		143			-			-		143		-		143		-		-		90			-			-		90			-		90
Issued to Employees		-		-		926			-			-		926		-		926		-		-		884			-			-		884			-		884
Issued to Former Director		-		-		48			-			-		48		-		48
Restricted Common Stock
Issued to Directors		-		-		137			-			-		137		-		137		-		-		230			-			-		230			-		230
Issued to Employees		-		-		568			-			-		568		-		568		-		-		801			-			-		801			-		801
Common stock
Issued to Directors		13		2		58			-			-		60		-		60		25		-		(79	)		25			-		(54	)		-		(54	)
Issued to Employees		51		3		(8	)		16			-		11		-		11		56		-		(56	)		56			-		-			-		-
Treasury stock transferred from TOCCO to TREC				30		270			(300	)				-				-
Net Income (Restated – see Note 3)		-		-		-			-			20,275		20,275		-		20,275
Net Income																				-		-		-			-			4,037		4,037			-		4,037

SEPTEMBER 30, 2016		24,222	$	2,451	$	52,804		$	(284	)	$	109,293	$	164,264	$	289	$	164,553
September 30, 2017																				24,303	$	2,451	$	55,344		$	(203	)	$	112,483	$	170,075		$	289	$	170,364

See notes to consolidated financial statements.

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	NINE MONTHS ENDED
	SEPTEMBER 30,
	2017			2016
	(thousands of dollars)
OPERATING ACTIVITIES
Net Income	$	4,037		$	20,275
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation		6,570			5,761
Amortization of Intangible Assets		1,396			1,415
Unrealized Gain on Derivative Instruments		(51	)		(89	)
Share-based Compensation		2,005			1,882
Deferred Income Taxes		1,571			6,851
Postretirement Obligation		(8	)		186
Bargain purchase gain		-			(11,549	)
Equity in (earnings) losses of AMAK		5,161			(2,261	)
Gain from Additional Equity Issuance by AMAK		-			(3,168	)
Amortization of loan fees		154			213
Changes in Operating Assets and Liabilities:
Increase in Trade Receivables		(545	)		(355	)
Decrease in Taxes Receivable		218			4,094
(Increase) Decrease in Inventories		5,022			(2,573	)
(Increase) Decrease in Prepaid Expenses and Other Assets		387			(1,494	)
Increase in Accounts Payable and Accrued Liabilities		3,356			1,304
Increase (Decrease) in Other Liabilities		281			(418	)

Net Cash Provided by Operating Activities		29,554			20,074

INVESTING ACTIVITIES
Additions to Plant, Pipeline and Equipment		(39,250	)		(25,860	)
Cash paid for acquisition of BASF facility		-			(2,011	)
Advances to AMAK, net		(86	)		-
Cash Used in Investing Activities		(39,336	)		(27,871	)

FINANCING ACTIVITIES
Issuance of Common Stock		25			11
Payments related to tax withholding for stock-based compensation		(80	)		-
Addition to Long-Term Debt		14,000			3,000
Repayment of Long-Term Debt		(8,333	)		(6,250	)

Net Cash Provided by (Used in) Financing Activities		5,612			(3,239	)

NET DECREASE IN CASH		(4,170	)		(11,036	)

CASH AT BEGINNING OF PERIOD		8,389			18,623

CASH AND AT END OF PERIOD	$	4,219		$	7,587

NINE MONTHS ENDED
SEPTEMBER 30,

2016
(Restated – see Note 3)
2015
(thousands of dollars)
OPERATING ACTIVITIES
  Net Income $ 20,275 $ 17,476
  Adjustments to Reconcile Net Income of Trecora Resources
    To Net Cash Provided by Operating Activities:
    Depreciation 5,761 5,231
    Amortization of Intangible Assets 1,415 1,217
    Unrealized Gain on Derivative Instruments (89 ) (332 )
    Share-based Compensation 1,882 1,794
    Deferred Income Taxes 6,851 (231 )
    Postretirement Obligation 186 6
    Bargain purchase gain (11,549 ) -
    Equity in (earnings) losses of AMAK (2,261 ) 2,364
    Gain from Additional Equity Issuance by AMAK (3,168 ) -
  Changes in Operating Assets and Liabilities:
    (Increase) Decrease in Trade Receivables (355 ) 5,441
    Decrease in Taxes Receivable 4,094 434
    (Increase) Decrease in Inventories (2,573 ) 302
    (Increase) Decrease in Prepaid Expenses and Other Assets (1,281 ) 112
    Increase (Decrease) in Accounts Payable and Accrued Liabilities 1,304 (342 )
    Increase (Decrease) in Other Liabilities (418 ) 1,690

    Net Cash Provided by Operating Activities 20,074 35,162

INVESTING ACTIVITIES
  Additions to Plant, Pipeline and Equipment (25,860 ) (23,540 )
  Cash paid for acquisition of BASF facility (2,011 ) -
  Acquisition Goodwill Adjustment - (47 )
    Cash Used in Investing Activities (27,871 ) (23,587 )

FINANCING ACTIVITIES
  Issuance of Common Stock 11 46
  Addition to Long-Term Debt 3,000 -
  Repayment of Long-Term Debt (6,250 ) (5,250 )

    Net Cash Used in Financing Activities (3,239 ) (5,204 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,036 ) 6,371

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,623 8,506

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,587 $ 14,877

Supplemental disclosure of cash flow information:
Cash payments for interest	$	3,034	$	1,804
Cash payments for taxes, net of refunds	$	227	$	277
Supplemental disclosure of non-cash items:
Capital expansion amortized to depreciation expense	$	642	$	829
Estimated earnout liability	$	-	$	733

Supplemental disclosure of cash flow information:
  Cash payments for interest $ 1,804 $ 1,147
  Cash payments for taxes, net of refunds $ 277 $ 6,902
Supplemental disclosure of non-cash items:
  Capital expansion amortized to depreciation expense $ 829 $ 599
   Estimated Earnout Liability (Note 7) $ 733 $ -

See notes to consolidated financial statements.

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. GENERAL

Organization

Trecora Resources (the ~~“Company”~~"Company"), was incorporated in the State of Delaware in 1967. Our principal business activities are the manufacturing of various specialty hydrocarbons and synthetic waxes and the provision of custom processing services. Unless the context requires otherwise, references to ~~“we,” “us,” “our,”~~"we," "us," "our," and the ~~“Company”~~"Company" are intended to mean Trecora Resources and its subsidiaries.

This document includes the following abbreviations:

(1)	TREC – Trecora Resources

(2)	TOCCO – Texas Oil & Chemical Co. II, Inc. – Wholly owned subsidiary of TREC and parent of SHR and TC

(3)	SHR – South Hampton Resources, Inc. – Petrochemical segment and parent of GSPL

(4)	GSPL – Gulf State Pipe Line Co, Inc. – Pipeline support for the petrochemical segment

(5)	TC – Trecora Chemical, Inc. – Specialty wax segment

(6)	AMAK – Al Masane Al Kobra Mining Company – Mining equity investment – 33% ownership

(7)	PEVM – Pioche Ely Valley Mines, Inc. – Inactive mine - 55% ownership

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ~~(“GAAP”~~("GAAP") for interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and, therefore, should be read in conjunction with the financial statements and related notes contained in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

The unaudited condensed financial statements included in this document have been prepared on the same basis as the annual condensed financial statements and in ~~management’s~~management's opinion reflect all adjustments, including normal recurring adjustments, necessary to present fairly the ~~Company’s~~Company's financial position, results of operations and cash flows for the interim periods presented. We have made estimates and judgments affecting the amounts reported in this document. The actual results that we experience may differ materially from our estimates. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.

Operating results for the ~~three and~~ nine months ended September 30, ~~2016,~~2017, are not necessarily indicative of results for the year ending December 31, ~~2016.~~2017.

We currently operate in two segments, specialty petrochemical products and specialty synthetic waxes. All revenue originates from United ~~States’~~States' sources, and all long-lived assets owned are located in the United States.

In addition, ~~the Company owns~~we own a 33% interest in AMAK, a Saudi Arabian closed joint stock company which owns, operates and is developing mining assets in Saudi Arabia. We account for our investment under the equity method of accounting. See Note 17.

Certain reclassifications have been made to the Statements of Income for the three and nine months ended September 30, 2015, in order to conform with the presentation of the three and nine months ended September 30, 2016. These reclassifications had no effect on the previously reported net income for the three and nine months ended September 30, 2015, as previously reported.

~~In addition, certain reclassifications have been made to the~~ Consolidated Balance ~~Sheets~~Sheet for the year ended December 31, ~~2015,~~2016, related to our adoption of ~~ASU 2015-03 and ASU 2015-15~~Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2015-17 as noted below in Note 2.

The impact of the adoption ASU 2015-17 on the Company's previously issued December 31, 2016, balance sheet is as follows:

Table of Contents

	As Originally Reported		As Retrospectively Adjusted
	(in thousands)
Deferred income tax asset, current	$	1,615	$	-
Total current assets		57,562		55,947
Total assets		292,099		290,484
Deferred income tax liability, noncurrent		24,698		23,083
Total liabilities		127,723		126,108
Total liabilities and equity		292,099		290,484

2. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements of FASB Accounting Standards Codification ("ASC") Topic 605, Revenue Recognitionand most industry-specific guidance throughout the Accounting Standards Codification, resulting in the creation of FASB ASC Topic 606, Revenue from Contracts with Customers. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This ASU provides alternative methods of retrospective adoption and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption would be permitted but not b~~efore~~before annual periods beginning after December 15, 2016.The Company is ~~currently assessing~~evaluating the ~~potential~~ impact of ~~adopting this ASU on its consolidated~~these amendments, although it does not expect the amendments to have a significant impact to the Company's financial ~~statements and related disclosures.~~

~~In April 2015 the FASB issued ASU No. 2015-03,~~ ~~Interest - Imputation~~position or results of ~~Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.~~operation. The amendments ~~in this ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in~~could potentially impact the ~~balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition~~accounting procedures and ~~measurement guidance for debt issuance costs are not affected by the amendments in this ASU 2015-03. In August 2015 the FASB issued ASU No. 2015-15,~~ Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. ASU 2015-15 was issued to address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements that were not found ASU 2015-03. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratablyprocesses over the ~~term~~recognition of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. These standards are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and should be applied retrospectively.certain revenue sources. The Company ~~adopted ASU 2015-03~~has begun developing processes and ~~ASU 2015-15~~procedures to ensure it is fully compliant with these amendments at ~~and for~~ the ~~nine months ended September 30, 2016. At September 30, 2016, and December 31, 2015, related net loan fees~~date of ~~approximately $0.8 million and $1.2 million, respectively, have been netted against long term debt.~~adoption.

In November 2015 the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred ~~Taxes~~Taxes.. The new standard eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company ~~is currently assessing~~implemented ASU 2015-17 by classifying all of it deferred tax assets (liabilities) as noncurrent on January 1, 2017. See Note 1 for effect to the ~~potential impact of adopting this ASU on its consolidated financial statements and related disclosures.~~Balance Sheet for December 31, 2016

In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company has several lease agreements for which the amendments will require the Company to recognize a lease liability to make lease payments and a right-of-use asset which will represent its right to use the underlying asset for the lease term. The Company is currently ~~assessing~~reviewing the ~~potential impact~~amendments to ensure it is fully compliant by the adoption date and does not expect to early adopt. As permitted by the amendments, the Company is anticipating electing an accounting policy to not recognize lease assets and lease liabilities for leases with a term of ~~adopting this ASU on~~twelve months or less. The Company is currently in the process of fully evaluating the amendments and will subsequently implement new processes which are not expected to significantly change since the Company already has processes for certain lease agreements that recognize the lease assets and lease liabilities. In addition, the Company will change its ~~consolidated financial statements and related disclosures.~~current accounting policies to comply with the amendments with such changes as mentioned above.

In March 2016 the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which will reduce complexity in accounting standards related to share-based payment transactions, including, among others, (1) accounting for income taxes, (2) classification of excess tax benefits on the statement of cash flow, (3) forfeitures, and (4) statutory tax withholding requirements. The ASU is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. The Company implemented the amendments as of January 1, 2017. The stock based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies and, therefore, there is ~~currently assessing~~no material change in the ~~potential impact~~Company's financial position or results of operation, as a result of adopting this ~~ASU~~Update. For additional information on ~~its consolidated financial statements and related disclosures.~~ the stock-based compensation plan, see Note 13.

~~3. RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

The accompanying unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2016, have been restated to correct AMAK’s accounting error which reduced our equity in earnings of AMAK by approximately $2.8 million and to record a $3.2 million gain resulting from an increase in our share of the net assets of

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~~AMAK based upon~~

In January 2017 the ~~July 2016 equity raise as described~~FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in ~~Note 17. In~~ASU 2017-04 simplify the ~~originally issued unaudited financial statements as~~measurement of ~~and~~goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under these amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the ~~three~~amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and ~~nine months~~annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company has goodwill from a prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value. During the year ended ~~September 30,~~December 31, 2016, ~~we did~~the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company's goodwill was not ~~record~~considered impaired. Although the ~~correct equity in earnings or correctly record~~Company cannot anticipate future goodwill impairment assessments, based on the ~~gain (with~~most recent assessment, it is unlikely that an impairment amount would need to be calculated and, therefore, the Company does not anticipate a ~~corresponding increase in our investment) in accordance with ASC 323-10-40-1.~~material impact from these amendments to the Company's financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

~~The effects of the restatement are as follows:~~

September 30, 2016
(unaudited)
As Reported As Restated
(thousands of dollars)
Consolidated Balance Sheets
Investment in AMAK $ 52,776 $ 53,127
Total Assets 283,155 283,506
Deferred Income Taxes 22,817 22,941
Total Liabilities 118,829 118,953
Retained Earnings 109,066 109,293
Total Trecora Resources Stockholders’ Equity 164,037 164,264
Total Equity 164,326 164,553
Total Liabilities and Equity 283,155 283,506

Three Months Ended
September 30, 2016

Nine Months Ended
September 30, 2016

(unaudited)
As Reported As Restated As Reported As Restated
(thousands of dollars)
Consolidated Statements of Income
Equity in earnings (losses) of AMAK $ (2,089 ) $ (2,089 ) $ 5,079 $ 2,261
Gain on Additional Equity Issuance by AMAK - 3,168 - 3,168
Total other income (expense) (2,729 ) 439 14,863 15,213
Income before income taxes 1,399 4,567 31,032 31,382
Income tax expense 659 1,768 10,984 11,107
Net income attributable to Trecora Resources 740 2,799 20,048 20,275

Basic earnings per common share (dollars) $ 0.03 $ 0.12 $ 0.82 $ 0.83
Diluted earnings per common share (dollars) $ 0.03 $ 0.11 $ 0.80 $ 0.81

September 30, 2016
(unaudited)
As Reported As Restated
(thousands of dollars)
Consolidated Statement of Stockholders’ Equity
Net Income $ 20,048 $ 20,275
Retained Earnings 109,066 109,293
Total 164,037 164,264
Total Equity 164,326 164,553

Consolidated Statements of Cash Flows
Operating Activities
Net income $ 20,048 $ 20,275
Deferred income taxes 6,728 6,851
Equity in (earnings) loss of AMAK (5,079 ) (2,261 )
Gain on Additional Equity Issuance by AMAK - (3,168 )

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4.3. TRADE RECEIVABLES

Trade receivables, net, consisted of the following:

	September 30, 2016			December 31, 2015			September 30, 2017			December 31, 2016
	(thousands of dollars)						(thousands of dollars)
Trade receivables	$	20,129		$	19,684		$	23,038		$	22,493
Less allowance for doubtful accounts		(300	)		(210	)		(300	)		(300	)
Trade receivables, net	$	19,829		$	19,474		$	22,738		$	22,193

Trade receivables serves as collateral for our amended and restated credit agreement. See Note 10.

4. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consisted of the following:

	September 30, 2017		December 31, 2016
	(thousands of dollars)
Prepaid license	$	1,919	$	1,919
Prepaid catalyst		55		187
Prepaid insurance		255		797
Other prepaid expenses and assets		1,047		608
Total	$	3,276	$	3,511

5. INVENTORIES

Inventories ~~include~~included the following:

	September 30, 2016		December 31, 2015		September 30, 2017		December 31, 2016
	(thousands of dollars)				(thousands of dollars)
Raw material	$	2,074	$	2,905	$	2,390	$	3,627
Work in process		72		56		66		12
Finished products		16,230		12,843		9,960		14,232
Spare parts					��	433		-
Total inventory	$	18,376	$	15,804	$	12,849	$	17,871

Effective January 1, 2017, we changed the inventory basis of SHR to FIFO. We believe that the use of FIFO more accurately reflects current inventory valuation. The drop in crude oil prices over the last several years has caused LIFO

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value of inventory to be above the FIFO value for each period presented. There was no LIFO reserve in any of the periods in this filing; therefore, no change is reflected in our current statements for the retrospective application.

Prior to this change, the difference between the calculated value of inventory under the FIFO and LIFO bases ~~generates~~generated either a recorded LIFO reserve (i.e., where FIFO value exceeds the LIFO value) or an unrecorded negative LIFO reserve (i.e., where LIFO value exceeds the FIFO value). In the latter case, in order to ensure that inventory iswas reported at the lower of cost or market and in accordance with ASC 330-10, we dodid not increase the stated value of our inventory to the LIFO value.

At ~~September 30, 2016, and~~ December 31, ~~2015,~~2016, LIFO value of petrochemical inventory exceeded FIFO; therefore, in accordance with the above policy, no LIFO reserve was recorded.

Inventory serves as collateral for our amended and restated credit agreement. See Note 10.

Inventory included petrochemical products in transit valued at approximately ~~$2.8~~$2.7 million and ~~$2.7~~$2.1 million at September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, respectively.

Beginning January 1, 2017, due to the expansion of our plant assets at SHR and TC, we began inventorying spare parts for the repair and maintenance of our plant, pipeline and equipment.

6. PLANT, PIPELINE AND EQUIPMENT

Plant, pipeline and equipment consisted of the following:

	September 30, 2016			December 31, 2015			September 30, 2017			December 31, 2016
	(thousands of dollars)						(thousands of dollars)
Platinum catalyst	$	1,612		$	1,612
Platinum catalyst metal							$	1,612		$	1,612
Land		5,376			4,577			5,428			5,376
Plant, pipeline and equipment		153,529			128,302			183,472			154,107
Construction in progress		22,207			8,980			42,930			33,391
Total plant, pipeline and equipment		182,724			143,471			233,442			194,486
Less accumulated depreciation		(52,986	)		(46,564	)		(61,394	)		(54,477	)
Net plant, pipeline and equipment	$	129,738		$	96,907		$	172,048		$	140,009

Plant, pipeline, and equipment serve as collateral for our amended and restated credit agreement. See Note 10.

Interest capitalized for construction was approximately $218,000 and $52,000 for the three and $878,000 and $124,000 for the ~~three and~~ nine months ended September 30, ~~2016~~2017, and ~~$27,000 and $122,000 for the three and nine months ended~~ September 30, ~~2015.~~2016, respectively.

Construction in progress during the first nine months of ~~2016~~2017 included equipment purchased for the ~~hydrogenation expansion~~hydrogenation/distillation project and updates to B Plant equipment at the TC ~~facility, the~~facility; new reformer unit, tankage upgrades, and ~~a new cooling tower for D train, both~~an addition to the rail spur at SHR.

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~~In May 2016 we purchased the recently shuttered BASF facility adjacent to our TC facility. See Note 7 for additional information.~~

Amortization relating to the platinum catalyst which is included in cost of sales was approximately ~~$25,000~~$0 and ~~$21,000~~$25,000 for the three months and ~~approximately~~$25,000 and $72,000 ~~and $63,000~~ for the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively.

7. ~~ACQUISITION OF BASF FACILITY~~

On May 2, 2016, we purchased the idle BASF facility adjacent to our TC facility in exchange for $2.0 million in cash, transaction costs of approximately $11,000 plus an earnout provision calculated through calendar year 2020 based upon revenue generated by the facility but limited to $1.8 million. The cash payment was funded by working capital. The purchased facility includes production equipment similar to TC’s plus equipment that broadens TC's capabilities and potential markets. The 6.5-acre site also includes substantial storage capacity, several rail and truck loading sites and utility tie-ins to TC. We refer to the facility as “B Plant”.

We have accounted for the purchase in accordance with the acquisition method of accounting under Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the tangible assets and liabilities acquired at the acquisition date. These estimates are provisional and may be adjusted in future filings.

~~The assets and liabilities acquired have been included in our consolidated balance sheets and our consolidated statements of income since the date of acquisition.~~

~~We recorded an $11.5 million bargain purchase gain on the transaction as calculated in the table below (in thousands).~~

Cash paid $ 2,011
Estimated earnout liability 733
Purchase Price $ 2,744

Fixed assets at FMV
Land 980
Site improvements 30
Buildings 1,350
Production equipment 11,933
14,293

Bargain purchase gain $ 11,549

~~The business acquired has been idle for the periods presented thus proforma financial presentation would be identical to our consolidated results. We began operating the new facility in June 2016.~~

8. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and intangible assets were recorded in relation to the acquisition of TC on October 1, 2014.

~~Intangible Assets~~

The following tables summarize the gross carrying amounts and accumulated amortization of intangible assets by major class (in thousands):

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	September 30, 2016							September 30, 2017
Intangible assets subject to amortization (Definite-lived)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	16,852	$	(2,247	)	$	14,605	$	16,852	$	(3,370	)	$	13,482
Non-compete agreements		94		(38	)		56		94		(57	)		37
Licenses and permits		1,471		(258	)		1,213		1,471		(364	)		1,107
Developed technology		6,131		(1,226	)		4,905		6,131		(1,839	)		4,292
		24,548		(3,769	)		20,779		24,548		(5,630	)		18,918
Intangible assets not subject to amortization (Indefinite-lived)
Emissions Allowance		197		-			197		197		-			197
Trade name		2,158		-			2,158		2,158		-			2,158
Total	$	26,903	$	(3,769	)	$	23,134	$	26,903	$	(5,630	)	$	21,273

	December 31, 2015							December 31, 2016
Intangible assets subject to amortization (Definite-lived)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	16,852	$	(1,404	)	$	15,448	$	16,852	$	(2,527	)	$	14,325
Non-compete agreements		94		(24	)		70		94		(43	)		51
Licenses and permits		1,471		(160	)		1,311		1,471		(285	)		1,186
Developed technology		6,131		(766	)		5,365		6,131		(1,379	)		4,752
		24,548		(2,354	)		22,194		24,548		(4,234	)		20,314
Intangible assets not subject to amortization (Indefinite-lived)
Emissions Allowance		197		-			197		197		-			197
Trade name		2,158		-			2,158		2,158		-			2,158
Total	$	26,903	$	(2,354	)	$	24,549	$	26,903	$	(4,234	)	$	22,669

Amortization expense for intangible assets included in cost of sales for the three months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, was approximately ~~$471,000~~$466,000 and $471,000 ~~respectively~~ and for the nine months ended September 30, ~~2016,~~2017 and ~~2015,~~2016, was approximately ~~$1,415,000~~$1,396,000 and ~~$1,413,000,~~$1,415,000, respectively.

Based on identified intangible assets that are subject to amortization as of September 30, ~~2016,~~2017, we expect future amortization expenses for each period to be as follows (in thousands):

	Remainder of 2016		2017		2018		2019		2020		Thereafter		Remainder of 2017		2018		2019		2020		2021		Thereafter
Customer relationships	$	281	$	1,123	$	1,123	$	1,123	$	1,123	$	9,832	$	282	$	1,123	$	1,123	$	1,123		1,123	$	8,710
Non-compete agreements		6		19		19		12		-		-		5		19		12		-		-		-
Licenses and permits		26		106		106		106		106		763		26		106		106		106		106		656
Developed technology		153		613		613		613		613		2,300		153		613		613		613		613		1,687
Total future amortization expense	$	466	$	1,861	$	1,861	$	1,854	$	1,842	$	12,895	$	466	$	1,861	$	1,854	$	1,842	$	1,842	$	11,053

8. NET INCOME PER COMMON SHARE ATTRIBUTABLE TO TRECORA RESOURCES

The following table (in thousands, except per share amounts) sets forth the computation of basic and diluted net income per share attributable to Trecora Resources for the three and nine months ended September 30, 2017, and 2016, ~~and 2015,~~ respectively.

Three Months Ended
September 30, 2016 (restated)

Three Months Ended
September 30, 2015

Per Share Per Share
Income Shares Amount Income Shares Amount
Basic Net Income per Share:
Net Income Attributable to Trecora Resources $ 2,799 24,223 $ 0.12 $ 5,318 24,369 $ 0.22

Unvested restricted stock grant 304 148
Dilutive stock options outstanding 394 711

Diluted Net Income per Share:
Net Income Attributable to Trecora Resources $ 2,799 24,921 $ 0.11 $ 5,318 25,228 $ 0.21

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109

	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016
					Per Share						Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic Net Income per Share:
Net Income Attributable to Trecora Resources	$	1,718		24,304	$	0.07	$	2,799		24,223	$	0.12

Unvested restricted stock grant				379						304
Dilutive stock options outstanding				474						394

Diluted Net Income per Share:
Net Income Attributable to Trecora Resources	$	1,718		25,157	$	0.07	$	2,799		24,921	$	0.11

	Nine Months Ended September 30, 2016 (restated)						Nine Months Ended September 30, 2015						Nine Months Ended September 30, 2017						Nine Months Ended September 30, 2016
					Per Share						Per Share						Per Share						Per Share
	Income		Shares		Amount		Income		Shares		Amount		Income		Shares		Amount		Income		Shares		Amount
Basic Net Income per Share:
Net Income Attributable to Trecora Resources	$	20,275		24,304	$	0.83	$	17,476		24,344	$	0.72	$	4,037		24,267	$	0.17	$	20,275		24,304	$	0.83

Unvested restricted stock grant				297						138						360						297
Dilutive stock options outstanding				363						694						455						363

Diluted Net Income per Share:
Net Income Attributable to Trecora Resources	$	20,275		24,964	$	0.81	$	17,476		25,176	$	0.69	$	4,037		25,082	$	0.16	$	20,275		24,964	$	0.81

At September 30, 2017, and 2016, 1,334,087 and ~~2015,~~ 1,348,437 ~~and 1,497,771~~ potential common stock shares, respectively were issuable upon the exercise of options and warrants.

~~The earnings per share calculations for the periods ended September 30, 2016, and 2015, include 284,011 and 300,000 shares~~9. ACCRUED LIABILITIES

Accrued liabilities consisted of the Company, respectively that are held in the treasury. In June 2016 these 300,000 shares previously owned by TOCCO were transferred up to the Company at cost to be held in treasury for future issuances.following:

	September 30, 2017		December 31, 2016
	(thousands of dollars)
Accrued property taxes	$	2,188	$	-
Accrued payroll		1,563		1,097
Accrued officer compensation		900		-
Accrued shortfall fees		586		-
Other		1,067		920
Total	$	6,304	$	2,017

10. LIABILITIES AND LONG-TERM DEBT

On October 1, 2014, we entered into an Amended and Restated Credit Agreement ~~(“ARC”~~("ARC") with the lenders which from time to time are parties to the ARC and Bank of America, N.A., as Administrative Agent for the Lenders, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Lead Arranger. On March 28, 2017, we entered into a Second Amendment to the ARC with terms which increase the Maximum Consolidated Leverage Ratio financial covenant of 3.25x to 4.00x at March 31, 2017, and 4.25x at June 30, 2017, before stepping down to 3.75x at September 30, 2017, 3.50x at December 31, 2017, and reverting to the original financial covenant of 3.25x at March 31, 2018.

~~Under~~

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For Fiscal Quarter Ending	Maximum Consolidated Leverage Ratio
March 31, 2017	4.00 to 1.00
June 30, 2017	4.25 to 1.00
September 30, 2017	3.75 to 1.00
December 31, 2017	3.50 to 1.00
March 31, 2018 and each fiscal quarter thereafter	3.25 to 1.00

The Second Amendment also reduces the ~~ARC, we may borrow, repay~~Minimum Consolidated Fixed Charge Coverage Ratio of 1.25x to 1.10x at March 31, 2017, 1.05x at June 30, 2017 and ~~re-borrow revolving loans~~September 30, 2017, 1.10x at December 31, 2017, before reverting to the original financial covenant of 1.25x at March 31, 2018.

For Fiscal Quarter Ending	Minimum Consolidated Fixed Charge Coverage Ratio
March 31, 2017	1.10 to 1.00
June 30, 2017	1.05 to 1.00
September 30, 2017	1.05 to 1.00
December 31, 2017	1.10 to 1.00
March 31, 2018 and each fiscal quarter thereafter	1.25 to 1.00

Also, under the terms of the Second Amendment, two additional levels of pricing were added – levels 4 and 5.

Level	Consolidated Leverage Ratio	LIBOR Margin	Base Rate Margin	Commitment Fee
1	Less than 1.50 to 1.00	2.00%	1.00%	0.25%
2	Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00	2.25%	1.25%	0.25%
3	Greater than or equal to 2.00 to 1.00 but less than 3.00 to 1.00	2.50%	1.50%	0.375%
4	Greater than or equal to 3.00 to 1.00 but less than 3.50 to 1.00	2.75%	1.75%	0.375%
5	Greater than or equal to 3.50 to 1.00	3.00%	2.00%	0.375%

We were in compliance with all covenants at September 30, 2017.

On July 25, 2017, Texas Oil & Chemical Co. II, Inc. ("TOCCO"), South Hampton Resources, Inc. ("SHR"), Gulf State Pipe Line Company, Inc. ("GSPL"), and Trecora Chemical, Inc. ("TC") (SHR, GSPL and TC collectively the "Guarantors") entered into a Third Amendment to Amended and Restated Credit Agreement ("3rd Amendment") with the lenders which from time to time ~~during~~are parties to the ~~period ending September 30, 2019, up~~Amended and Restated Credit Agreement (collectively, the "Lenders") and Bank of America, N.A., a national banking association, as Administrative Agent for the Lenders. The 3rd Amendment increased the Revolving Facility from $40,000,000 to ~~but not exceeding $40.0 million. All outstanding loans under~~$60,000,000. There were no other changes to the Revolving Facility. Under the ARC as amended, we have a $60.0 million revolving ~~loans must be repaid~~line of credit which matures on October 1, 2019. As of September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, there was a long-term amount of ~~$4.0~~$23.0 million and ~~$1.0~~$9.0 million outstanding, respectively. The interest rate on the loan varies according to several options. Interest on the loan is paid monthly and a commitment fee of ~~0.37%~~between 0.25% and 0.375% is due quarterly on the unused portion of the loan. At September 30, ~~2016,~~2017, approximately ~~$36.0~~$37.0 million was available to be ~~drawn; however, in order to~~drawn. Under the Second Amendment we could draw $31.0 million and maintain compliance with our ~~covenants, we may only draw approximately $35.0 million.~~covenants.

Under the ARC, we also borrowed $70.0 million in a single advance term loan (the ~~“Acquisition Loan”~~"Acquisition Loan") to partially finance the acquisition of TC. Interest on the Acquisition Loan is payable quarterly using a ten year commercial style amortization. Principal is also payable on the last business day of each March, June, September and December in an amount equal to $1,750,000, provided that the final installment on the September 30, 2019, maturity date shall be in an amount equal to the then outstanding unpaid principal balance of the Acquisition Loan. At September 30, ~~2016,~~2017, there was a short-term amount of $7.0 million and a long-term amount of ~~$49.0~~$42.0 million outstanding. At December 31, ~~2015,~~2016, there was a short-term amount of ~~$7.0~~$8.8 million and a long-term amount of ~~$54.3~~$47.3 million outstanding.

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Under the ARC, we also had the right to borrow $25.0 million in a multiple advance loan (“("Term ~~Loans”~~Loans"). Borrowing availability under the Term Loans ended on December 31, 2015. The Term Loans converted from a multiple advance loan to a ~~“mini-perm”~~"mini-perm" loan once certain obligations were fulfilled such as certification that construction of D-Train was completed in a good and workmanlike manner, receipt of applicable permits and releases from governmental authorities, and receipt of releases of liens from the contractor and each subcontractor and supplier. Interest on the Term Loans is paid monthly. At September 30, ~~2016,~~2017, there was a short-term amount of $1.3 million and a long-term amount of ~~$17.7~~$16.3 million outstanding. At December 31, ~~2015,~~2016, there was a short-term amount of ~~$1.3~~$1.7 million and a long-term amount of ~~$18.7~~$17.3 million outstanding.

Debt issuance costs of approximately ~~$0.8~~$0.6 million and ~~$1.2~~$0.7 million for the periods ended September 30, ~~2016~~2017, and December 31, ~~2015,~~2016, have been netted against outstanding loan ~~balances per ASU 2015-03 and ASU 2015-15.~~balances. The interest rate on all of the above loans varies according to several options as defined in the ARC. At September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, the rate was ~~2.77%~~3.74% and ~~2.42%~~3.27%, respectively. ~~We were in compliance with all covenants at September 30, 2016.~~

The following table summarizes the carrying amounts and debt issuance costs of our long-term debt (in thousands):

	September 30, 2017		December 31, 2016

Acquisition loan	$	49,000	$	56,000
Term loan		17,666		19,000
Revolving facility		23,000		9,000
Total		89,666		84,000
Less debt issuance costs		594		748
Carrying balance of debt	$	89,072	$	83,252

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11. FAIR VALUE MEASUREMENTS

The following items are measured at fair value on a recurring basis subject to disclosure requirements of ASC Topic 820 at September 30, ~~2016,~~2017, and December 31, ~~2015:~~

2016:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

			Fair Value Measurements Using								Fair Value Measurements Using
	September 30, 2016		Level 1		Level 2		Level 3		September 30, 2017		Level 1		Level 2		Level 3
	(thousands of dollars)								(thousands of dollars)
Liabilities:
Interest rate swap	$	88		-	$	88		-	$	7		-	$	7		-

			Fair Value Measurements Using								Fair Value Measurements Using
	December 31, 2015		Level 1		Level 2		Level 3		December 31, 2016		Level 1		Level 2		Level 3
	(thousands of dollars)								(thousands of dollars)
Liabilities:
Interest rate swap	$	177		-	$	177		-	$	58		-	$	58		-

The carrying value of cash, ~~and cash equivalents,~~ trade receivables, accounts payable, accrued liabilities, and other liabilities approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of variable rate long term debt reflects recent market transactions and approximate carrying value. We used other observable inputs that would qualify as Level 2 inputs to make our assessment of the approximate fair value of our cash, ~~and cash equivalents,~~ trade receivables, accounts payable, accrued liabilities, other liabilities and variable rate long term debt. The fair value of the derivative instruments are described below.

~~Commodity Financial Instruments~~

~~We periodically enter into financial instruments to hedge the cost of natural gasoline (the primary feedstock) and natural gas (used as fuel to operate the plant).~~

We assess the fair value of the financial swaps on feedstock using quoted prices in active markets for identical assets or liabilities (Level 1 of fair value hierarchy). At September 30, 2016, and December 31, 2015, no commodity financial instruments were outstanding. For additional information see Note 12.

Interest Rate Swap

In March 2008 we entered into an interest rate swap agreement with Bank of America related to a $10.0 million term loan secured by plant, pipeline and equipment. The interest rate swap was designed to minimize the effect of changes in the London InterBank Offered Rate ~~(“LIBOR”~~("LIBOR") rate. We had designated the interest rate swap as a cash flow hedge under ASC Topic 815, Derivatives and Hedging; however, due to the ARC, we felt that the hedge was no longer entirely effective. Due to the time required to make the determination and the immateriality of the hedge, we began treating it as ineffective as of October 1, 2014.

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We assess the fair value of the interest rate swap using a present value model that includes quoted LIBOR rates and the nonperformance risk of the Company and Bank of America based on the Credit Default Swap Market (Level 2 of fair value hierarchy).

We have consistently applied valuation techniques in all periods presented and believe we have obtained the most accurate information available for the types of derivative contracts we hold. See discussion of our derivative instruments in Note 12.

12. DERIVATIVE INSTRUMENTS

~~Commodity Financial Contracts~~

Hydrocarbon based manufacturers, such as the Company, are significantly impacted by changes in feedstock and natural gas prices. Not considering derivative transactions, feedstock and natural gas used for the nine months ended September 30, 2016, and 2015, represented approximately 61.6% and 70.0% of our petrochemical operating expenses, respectively. The significant percentage decrease of petrochemical operating expenses illustrates the impact that feedstock price changes have

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~~on our operations. During the first quarter of 2016, feedstock prices declined industry-wide but rebounded during the following quarters to second half 2015 levels.~~

We endeavor to acquire feedstock and natural gas at the lowest possible cost. Our primary feedstock (natural gasoline) is traded over the counter and not on organized futures exchanges. Financially settled instruments (fixed price swaps) are the principal vehicle used to give some predictability to feed prices. We do not purchase or hold any derivative financial instruments for trading or speculative purposes and hedging is limited by our risk management policy to a maximum of 40% of monthly feedstock requirements.

~~Typically, financial contracts are not designated as hedges. As of September 30, 2016, we had no outstanding committed financial contracts.~~

~~The following tables detail (in thousands) the impact the agreements had on the financial statements:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015

Unrealized gain $ - $ - $ - $ 180
Realized loss - - - (180 )
Net gain $ - $ - $ - $ -

The realized and unrealized gains/(losses) are recorded in Cost of Sales and Processing for the periods ended September 30, 2016, and 2015. As a percentage of Cost of Sales and Processing, realized and unrealized gains/(losses) accounted for 0% for the three and nine months ended September 30, 2016, and 2015.

Interest Rate Swap

In March 2008, we entered into a pay-fixed, receive-variable interest rate swap agreement with Bank of America related to a $10.0 million (later increased to $14 million) term loan secured by plant, pipeline and equipment. The effective date of the interest rate swap agreement was August 15, 2008, and terminates on December 15, 2017. The notional amount of the interest rate swap was ~~$2.0~~$1.0 million and ~~$2.75~~$1.75 million at September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, respectively. We receive credit for payments of variable rate interest made on the term loan at the ~~loan’s~~loan's variable rates, which are based upon the London InterBank Offered Rate (LIBOR), and pay Bank of America an interest rate of 5.83% less the credit on the interest rate swap. We originally designated the transaction as a cash flow hedge according to ASC Topic 815, Derivatives and Hedging. Beginning on August 15, 2008, the derivative instrument was reported at fair value with any changes in fair value reported within other comprehensive income (loss) in the ~~Company’s~~Company's Statement of ~~Stockholders’~~Stockholders' Equity. We entered into the interest rate swap to minimize the effect of changes in the LIBOR rate.

~~The following table shows (in thousands) the impact the agreement had on the financial statements:~~

September 30, 2016 December 31, 2015

Fair value of interest rate swap - liability $ 88 $ 177

Due to the ARC discussed in Note 10, we believe that the hedge is no longer entirely effective; therefore, we began treating the interest rate swap as ineffective at that point. The changes in fair value are now recorded in the Statement of Income. For the three months ended September 30, 2017, an unrealized loss of approximately $1,000 and a realized loss of approximately $14,000 were recorded. For the nine months ended September 30, 2017, an unrealized gain of approximately $1,000 and a realized loss of approximately $53,000 were recorded. For the three months ended September 30, 2016, an unrealized gain of approximately $5,000 and a realized loss of approximately $30,000 were recorded. For the nine months ended September 30, 2016, an unrealized loss of approximately $9,000 and a realized loss of approximately $100,000 were recorded. ~~For~~

The following table shows (in thousands) the ~~three months ended September 30, 2015, an unrealized loss of approximately $3,000 and a realized loss of approximately $46,000 were recorded. For~~impact the ~~nine months ended September 30, 2015, an unrealized gain of approximately $6,000 and a realized loss of approximately $147,000 were recorded.~~agreement had on the financial statements:

	September 30, 2017		December 31, 2016

Fair value of interest rate swap - liability	$	7	$	58

13. STOCK-BASED COMPENSATION

Stock-based compensation of approximately ~~$608,000~~$716,000 and ~~$506,000~~$608,000 during the three months and ~~$1,882,000~~$2,005,000 and ~~$1,794,000~~$1,882,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, was recognized.

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Restricted Stock Unit Awards

On ~~May 17, 2016,~~June 16, 2017, we awarded approximately ~~28,000~~127,000 shares of restricted stock to a director at a grant date price of $10.68. The restricted stock award vests over 4 years in 25% increments. Director’s compensation recognized during the three and nine months ended September 30, 2016, was approximately $19,000 and $31,000, respectively.

~~On March 1, 2016, we awarded approximately 135,000 shares of restricted stock~~units to officers at a grant date price of ~~$9.39.~~$11.40. One-half of the restricted stock ~~vests~~units vest ratably over 3three years. The other half vests at the end of ~~the~~ three years based upon the performance metrics of return on invested capital and earnings per share growth. The number of shares actually granted will be adjusted based upon relative performance to our peers. Compensation expense recognized during the three and nine months ended September 30, ~~2016,~~2017, was approximately ~~$105,000~~$121,000 and ~~$246,000.~~$161,000, respectively.

~~On January 29, 2016, we awarded 35,333 shares~~Director compensation of restricted stock to a director at a grant date price of $10.52. The restricted stock award vests over 5 years in 20% increments with the first tranche issued on January 29, 2016. Director’s compensation recognizedapproximately $56,000 and $19,000 during the three months and $169,000 and $32,000 during the nine months ended September 30, 2017, and 2016, respectively, was ~~approximately $19,000 and $124,000.~~recognized related to restricted stock unit awards granted to directors vesting through 2020.

~~Directors’~~Officer compensation of approximately $106,000 and $105,000 was recognized during the three months and $316,000 and $246,000 during the nine months ended September 30, 2017, and 2016, respectively, related to restricted stock unit awards granted to officers. One-half of the restricted stock units vest ratably over three years. The other half vests at the end of the three years based upon the performance metrics of return on invested capital and earnings per share growth. The number of shares actually granted will be adjusted based upon relative performance to our peers.

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Director compensation of approximately $0 and $19,000 was recognized during the three months and $6,000 and $124,000 during the nine months ended September 30, 2017, and 2016, respectively, related to an award of restricted stock units to a director. The restricted stock unit award vests over 4 years in 20% increments.

Director compensation of approximately $19,000 and $19,000 during the three months and ~~$40,000~~$56,000 and ~~$25,000~~$40,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, was recognized related to restricted stock unit grants vesting through 2020.

Employee compensation of approximately $108,000 and $108,000 during the three months and $323,000 and ~~$287,000 during~~$323,000 for the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, was recognized related to restricted stock units with a 4 year vesting period which was awarded to officers. This restricted stock vests through 2019.

~~Employee compensation of approximately $0 and $270,000 during the three and nine months ended September 30, 2015, for fully vested restricted~~Restricted stock ~~which was awarded to various employees.~~

~~Restricted stock~~units activity in the first nine months of ~~2016~~2017 was as follows:

	Shares of Restricted Stock			Weighted Average Grant Date Price per Share		Shares of Restricted Stock Units			Weighted Average Grant Date Price per Share

Outstanding at January 1, 2016		148,040		$	14.14
Outstanding at January 1, 2017							350,891		$	11.44
Granted		198,354			9.77		127,281		$	11.40
Forfeited							(21,201	)	$	10.52
Vested		(42,575	)		13.60		(78,362	)	$	12.00
Outstanding at September 30, 2016		303,819		$	11.37
Outstanding at September 30, 2017							378,608		$	11.37

Stock Option and Warrant Awards

A summary of the status of our stock option awards and warrants is presented below:

Number of Stock Options & Warrants

Weighted Average Exercise Price per Share

Weighted
Average
Remaining
Contractual
Life

Outstanding at January 1, 2016 1,376,437 $ 7.68
   Granted -- --
   Exercised (28,000 ) 2.39
   Expired -- --
   Cancelled -- --
   Forfeited -- --
Outstanding at September 30, 2016 1,348,437 $ 7.79 5.4
Exercisable at September 30, 2016 835,937 $ 7.53 5.4

	Number of Stock Options & Warrants			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life

Outstanding at January 1, 2017		1,348,437		$	7.79
Granted		--			--
Exercised		(14,350	)		2.90
Expired		--			--
Cancelled		--			--
Forfeited		--			--
Outstanding at September 30, 2017		1,334,087		$	7.84		4.5
Exercisable at September 30, 2017		989,087		$	8.19		4.8

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The fair value of the options granted were calculated using the Black Scholes option valuation model with the assumptions as disclosed in prior quarterly and annual filings.

~~Directors’~~Directors' compensation of approximately $30,000 and ~~$46,000~~$30,000 during the three months and ~~$143,000~~$90,000 and ~~$174,000~~$143,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, was recognized related to options to purchase shares vesting through 2017.

Employee compensation of approximately ~~$308,000~~$277,000 and ~~$309,000~~$308,000 during the three months and ~~$926,000~~$884,000 and ~~$965,000~~$926,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, was recognized related to options with a 4 year vesting period which were awarded to officers and key employees. These options vest through 2018.

Post-retirement compensation of approximately $0 and ~~$24,000~~$0 was recognized during the three months and ~~$49,000~~$0 and ~~$73,000~~$49,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, related to options awarded to Mr. Hatem El Khalidi in July

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2009. On May 9, 2010, the Board of Directors determined that Mr. El Khalidi forfeited these options and other retirement benefits when he made various demands against the Company and other AMAK Saudi shareholders which would benefit him personally and were not in the best interests of the Company and its shareholders. The Company is litigating its right to withdraw the options and benefits and as such, these options and benefits continue to be shown as outstanding. See further discussion in Note 19.

See the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, for additional information.

14. SEGMENT INFORMATION

We operate through business segments according to the nature and economic characteristics of our products as well as the manner in which the information is used internally by our key decision maker, who is our Chief Executive Officer. Segment data may include rounding differences.

Our petrochemical segment includes SHR and GSPL. Our specialty wax segment ~~includes TC which includes the newly acquired plant discussed in Note 7.~~is TC. We also separately identify our corporate overhead which includes financing and administrative activities such as legal, accounting, consulting, investor relations, officer and director compensation, corporate insurance, and other administrative costs.

	Three Months Ended September 30, 2016										Three Months Ended September 30, 2017
	Petrochemical		Specialty Wax			Corporate			Consolidated		Petrochemical		Specialty Wax			Corporate			Consolidated
	(in thousands)										(in thousands)
Product sales	$	47,250	$	4,864		$	-		$	52,114	$	52,440	$	5,590		$	-		$	58,030
Processing fees		2,909		2,119			-			5,028		1,519		1,959			-			3,478
Net revenues		50,159		6,983			-			57,142
Total revenues												53,959		7,549			-			61,508
Operating profit (loss) before depreciation and amortization		7,813		118			(1,238	)		6,693		9,319		(587	)		(1,957	)		6,775
Operating profit (loss)		6,366		(987	)		(1,251	)		4,128		7,735		(1,795	)		(1,975	)		3,965
Profit (loss) before taxes												7,149		(1,975	)		(2,879	)		2,295
Depreciation and amortization		1,447		1,105			13			2,565		1,584		1,208			18			2,810
Capital expenditures		5,411		4,066						9,477		9,426		1,991			-			11,417

	Nine Months Ended September 30, 2016										Nine Months Ended September 30, 2017
	Petrochemical		Specialty Wax			Corporate			Consolidated		Petrochemical		Specialty Wax			Corporate			Consolidated
	(in thousands)										(in thousands)
Product sales	$	129,076	$	14,585		$	-		$	143,661	$	147,339	$	18,606		$	-		$	165,945
Processing fees		6,769		7,766			-			14,535		5,078		8,142			-			13,220
Net revenues		135,845		22,351			-			158,196
Total revenues												152,417		26,748			-			179,165
Operating profit (loss) before depreciation and amortization		25,699		2,774			(5,128	)		23,345		26,294		969			(5,978	)		21,285
Operating profit (loss)		21,488		(171	)		(5,148	)		16,169		21,610		(2,264	)		(6,027	)		13,319
Profit (loss) before taxes												19,750		(2,534	)		(11,209	)		6,007
Depreciation and amortization		4,211		2,945			20			7,176		4,684		3,233			49			7,966
Capital expenditures		16,812		11,059						27,871		27,203		12,047			-			39,250

	Three Months Ended September 30, 2016
	Petrochemical		Specialty Wax			Corporate			Consolidated
	(in thousands)
Product sales	$	47,250	$	4,865		$	-		$	52,115
Processing fees		2,909		2,118			-			5,027
Total revenues		50,159		6,983			-			57,142
Operating profit (loss) before depreciation and amortization		7,813		118			(1,238	)		6,693
Operating profit (loss)		6,366		(987	)		(1,251	)		4,128
Profit (loss) before taxes		5,812		(1,063	)		(182	)		4,567
Depreciation and amortization		1,447		1,105			13			2,565
Capital expenditures		5,411		4,066			-			9,477

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	Nine Months Ended September 30, 2016
	Petrochemical		Specialty Wax			Corporate			Consolidated
	(in thousands)
Product sales	$	129,076	$	14,585		$	-		$	143,661
Processing fees		6,769		7,766			-			14,535
Total revenues		135,845		22,351			-			158,196
Operating profit (loss) before depreciation and amortization		25,699		2,774			(5,128	)		23,345
Operating profit (loss)		21,488		(171	)		(5,148	)		16,169
Profit before taxes*		19,696		11,427			259			31,382
Depreciation and amortization		4,211		2,945			20			7,176
Capital expenditures		16,812		11,059			-			27,871

*Profit (loss) before taxes for the specialty wax segment includes a bargain purchase gain of $11.5 million.

Three Months Ended September 30, 2015
Petrochemical Specialty Wax Corporate Consolidated
(in thousands)
Product sales $ 59,122 $ 4,068 $ - $ 63,190
Processing fees 1,364 2,384 - 3,748
Net revenues 60,486 6,452 - 66,938
Operating profit (loss) before depreciation and amortization 13,636 1,393 (1,654 ) 13,375
Operating profit (loss) 12,557 178 (1,672 ) 11,063
Depreciation and amortization 1,079 1,215 18 2,312
Capital expenditures 4,857 1,766 6,623

	September 30, 2017
	Petrochemical		Specialty Wax		Corporate		Eliminations			Consolidated
	(in thousands)
Goodwill and intangible assets, net	$	-	$	43,071	$	-	$	-		$	43,071
Total assets		246,679		116,494		94,747		(151,121	)		306,799

Nine Months Ended September 30, 2015
Petrochemical Specialty Wax Corporate Consolidated
(in thousands)
Product sales $ 158,647 $ 11,749 $ - $ 170,396
Processing fees 4,409 6,626 - 11,035
Net revenues 163,056 18,375 - 181,431
Operating profit (loss) before depreciation and amortization 38,197 3,897 (5,145 ) 36,949
Operating profit (loss) 35,075 375 (5,163 ) 30,287
Depreciation and amortization 3,122 3,522 18 6,662
Capital expenditures 17,876 5,664 23,540

September 30, 2016 (restated)

Petrochemical Specialty Wax Corporate Eliminations Consolidated
(in thousands)
Goodwill and intangible assets, net $ - $ 44,932 $ - $ - $ 44,932
Total assets 209,319 104,924 100,615 (131,352 ) 283,506

	Year Ended December 31, 2015											Year Ended December 31, 2016
	Petrochemical		Specialty Wax		Corporate		Eliminations			Consolidated		Petrochemical		Specialty Wax		Corporate		Eliminations			Consolidated
	(in thousands)											(in thousands)
Goodwill and intangible assets, net	$	-	$	46,347	$	-	$	-		$	46,347	$	-	$	44,467	$	-	$	-		$	44,467
Total assets		195,358		86,076		98,728		(122,371	)		257,791		219,376		113,676		106,428		(148,996	)		290,484

15. INCOME TAXES

We file an income tax return in the U.S. federal jurisdiction and a margin tax return in Texas. We received notification from the Internal Revenue Service ("IRS") in November 2016 that the December 31, 2014, tax return was selected for audit. In April 2017 the audit was expanded to include the year ended December 31, 2015 to review the refund claim related to research and development activities. The audit is ongoing, and we do not expect any adjustment to the return. If any issues addressed in the audit are resolved in a manner not consistent with our expectation, provisions will be adjusted in the period the resolution occurs. Tax returns for ~~the years 2011 through 2015~~various jurisdictions remain open for examination ~~in various tax jurisdictions in which we operate.~~for the years 2013 through 2016. As of September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, we recognized no material adjustments in connection with uncertain tax positions. The effective tax rate varies from the federal statutory rate of 35% primarily as a result of state tax expense and stock based compensation offset by the manufacturing ~~deduction.~~deduction and research and development. The ~~income tax expense~~application for the change in accounting method for inventory from LIFO to FIFO and the ~~current quarter includes adjustments to previous estimates of permanent differences indicated above. During 2015 we made estimated tax payments based on the tax law in effect prior~~change for spare parts inventory are being submitted to the ~~reinstatement of bonus depreciation in December 2015. On October 4, 2016, we received a refund of approximately $1.9 million in connection with these overpayments.~~IRS.

16. POST-RETIREMENT OBLIGATIONS

In January 2008 an amended retirement agreement was entered into with Mr. Hatem El Khalidi; however, on May 9, 2010, the Board of Directors terminated the agreement due to actions of Mr. El Khalidi. See Notes 13 and 19. All amounts which have not met termination dates remain recorded until a resolution is achieved. As of September 30, ~~2016,~~2017, and ~~2015,~~December 31, 2016, approximately $1.0 million remained outstanding and was included in post-retirement benefits.

In July 2015 we entered into a retirement agreement with former CEO, Nicholas Carter. As of September 30, 2017, and December 31, 2016, approximately $0.3 million remained outstanding and was included in post-retirement obligations.

See the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, for additional information.

17. INVESTMENT IN AMAK

In July 2016 AMAK issued four million shares to provide additional funds for ongoing exploration work and mine start-up activities. Arab Mining Co. ~~(“Armico”~~("Armico") purchased 3.75 million shares at 20 Saudi Riyals per share (USD$5.33 per share) and the remaining 250,000 shares are for future use as employee incentives. We did not participate in the offering, thereby reducing our ownership percentage in AMAK to 33.44% from 35.25%.

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reducing our ownership percentage in AMAK to 33.44% from 35.25%. As a result of this equity raise, our share of the net assets of AMAK increased approximately $3.2 million which we recognized as a gain (with a corresponding increase in its investment) in accordance with ASC 323-10-40-1.

As of September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, the Company had a non-controlling equity interest of 33.44% ~~and 35.25%, respectively~~ in AMAK of approximately ~~$53.1~~$44.2 million and ~~$47.7~~$49.4 million, respectively. This investment is accounted for under the equity method. There were no events or changes in circumstances that may have an adverse effect on the fair value of our investment in AMAK at September 30, ~~2016.~~2017.

~~AMAK’s~~AMAK's financial statements were prepared in the functional currency of AMAK which is the Saudi Riyal (SR). In June 1986 the SR was officially pegged to the U. S. Dollar (USD) at a fixed exchange rate of 1 USD to 3.75 SR.

The summarized results of operation and financial position for AMAK are as follows:

Results of Operations

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2016 (restated)			2015			2016 (restated)			2015			2017			2016			2017			2016
	(Thousands of Dollars)												(Thousands of Dollars)
Sales	$	318		$	19,874		$	9,921		$	38,458		$	9,709		$	318		$	11,965		$	9,921
Gross profit (loss)		(4,747	)		(2,711	)		(7,556	)		35

Gross loss														(1,307	)		(4,747	)		(11,515	)		(7,556	)
General, administrative and other expenses		2,463			4,067			6,986			9,605			2,382			2,463			6,942			6,986
Loss from operations	$	(7,210	)	$	(6,778	)	$	(14,542	)	$	(9,570	)	$	(3,689	)	$	(7,210	)	$	(18,457	)	$	(14,542	)
Gain on settlement with former operator		-			-			17,440			-
Gain on settlements with former operator														-			-			-			17,440
Net income (loss)	$	(7,210	)	$	(6,778	)	$	2,898		$	(9,570	)	$	(3,689	)	$	(7,210	)	$	(18,457	)	$	2,898

Gain on ~~settlement~~settlements with former operator of approximately $0 during the three months ended and $17.4 million during the nine months ended September 30, 2016, relates to a settlement with the former operator of the mine resulting in a reduction of previously accrued operating expenses.

Depreciation and amortization was ~~$3.2~~$6.2 million and ~~$4.2~~$3.2 million for the three months and ~~$8.6~~$16.9 million and ~~$15.3~~$8.6 million for the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively. Therefore, net income ~~(loss)~~ before depreciation and amortization was as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2016
(restated)
2015
2016
(restated)
2015
(Thousands of Dollars)
Net income (loss) before depreciation and amortization $ (4,021 ) $ (2,543 ) $ 11,504 $ 5,680

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
	(Thousands of Dollars)
Net income (loss) before depreciation and amortization	$	2,525	$	(4,021	)	$	(1,577	)	$	11,504

Financial Position

	September 30,		December 31,		September 30,		December 31,
	2016 (restated)		2015		2017		2016
	(Thousands of Dollars)				(Thousands of Dollars)
Current assets	$	27,159	$	26,078	$	22,839	$	22,860
Noncurrent assets		260,142		259,527		247,335		251,741
Total assets	$	287,301	$	285,605	$	270,174	$	274,601

Current liabilities	$	2,883	$	22,740	$	26,315	$	8,005
Long term liabilities		87,994		89,364		78,265		82,546
Shareholders' equity		196,424		173,501		165,594		184,050
	$	287,301	$	285,605	$	270,174	$	274,601

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The equity in the income or loss of AMAK reflected on the consolidated statements of income for the three and nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, is comprised of the following:

Three months ended
September 30,

Nine months ended
September 30,

2016 2015
2016
(restated)
2015
(Thousands of Dollars)
AMAK Net Income (Loss) $ (7,210 ) $ (6,778 ) $ 2,898 $ (9,570 )
Zakat tax applicable to Saudi Arabian shareholders only - - 320 -
AMAK Net Income (Loss) before Saudi Arabian shareholders’ portion of Zakat $ (7,210 ) $ (6,778 ) $ 3,218 $ (9,570 )

Company’s share of income (loss) reported by AMAK $ (2,426 ) $ (2,391 ) $ 1,250 $ (3,375 )
Amortization of difference between Company’s investment in AMAK and Company’s share of net assets of AMAK 337 337 1,011 1,011
Equity in earnings (loss) of AMAK $ (2,089 ) $ (2,054 ) $ 2,261 $ (2,364 )

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The difference between our effective share of income (loss) from our investment and our actual ownership percentage is attributable to the changes in our ownership percentage during the third quarter as well as, the portion of net income (loss) in the first six months of 2016.

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(Thousands of Dollars)
AMAK Net Income (Loss)	$	(3,689	)	$	(7,210	)	$	(18,457	)	$	2,898
Zakat tax applicable to Saudi Arabian shareholders only		-			-			-			320
AMAK Net Income (Loss) before Saudi Arabian shareholders' portion of Zakat	$	(3,689	)	$	(7,210	)	$	(18,457	)	$	3,218

Company's share of income (loss) reported by AMAK	$	(1,234	)	$	(2,426	)	$	(6,172	)	$	1,250
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK		337			337			1,011			1,011
Equity in earnings (loss) of AMAK	$	(897	)	$	(2,089	)	$	(5,161	)	$	2,261

See our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, for additional information.

We have an advance due from AMAK for reimbursement of fees associated with AMAK Board meetings. We have not advanced any cash to AMAK during 2017.

18. RELATED PARTY TRANSACTIONS

Consulting fees of approximately $0 and $0 were incurred during the three months and ~~$33,000~~$27,000 and ~~$25,000~~$33,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively from IHS Global FZ LLC of which Company Director Gary K Adams ~~holds~~held the position of Chief Advisor – ~~Chemicals.~~Chemicals until April 1, 2017.

Consulting fees of approximately ~~$17,000~~$19,000 and ~~$13,000~~$17,000 were incurred during the three months and ~~$52,000~~$56,000 and ~~$13,000~~$52,000 during the nine months ended September 30, ~~2016,~~2017, and ~~2015,~~2016, respectively, from Chairman of the Board, Nicholas Carter. Due to his history and experience with the Company and to provide continuity after his retirement, a three year consulting agreement was entered into with Mr. Carter in July 2015.

19. COMMITMENTS AND CONTINGENCIES

Guarantees –

On October 24, 2010, we executed a limited Guarantee in favor of the Saudi Industrial Development Fund ~~(“SIDF”~~("SIDF") whereby we agreed to guaranty up to 41% of the SIDF loan to AMAK in the principal amount of 330.0 million Saudi Riyals (US$88.0 million) (the ~~“Loan”~~"Loan"). The term of the loan is through June 2019. As a condition of the Loan, SIDF required all shareholders of AMAK to execute personal or corporate Guarantees; as a result, our guarantee is for approximately 135.33 million Saudi Riyals (US$36.1 million). The loan was necessary to continue construction of the AMAK facilities and provide working capital needs. We received no consideration in connection with extending the guarantee and did so to maintain and enhance the value of its investment. The total amount outstanding to the SIDF at September 30, ~~2016,~~2017, was ~~310.0~~305.0 million Saudi Riyals (US$~~82.7~~81.3 million).

Litigation -

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 any legal proceedings that we believe 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.

On March 21, 2011, Mr. El Khalidi filed suit against the Company in Texas alleging breach of contract and other claims. The 88th Judicial District Court of Hardin County, Texas dismissed all claims and counterclaims for want of prosecution in this matter on July 24, 2013. The Ninth Court of Appeals subsequently affirmed the dismissal for want of prosecution and the Supreme Court of Texas denied Mr. El ~~Khalidi’s~~Khalidi's petition for review. On May 1, 2014, Mr. El Khalidi refiled his lawsuit against the Company for breach of contract and defamation in the 356th Judicial District Court of Hardin County, Texas. The case was transferred to the 88th Judicial District Court of Hardin County, Texas. On September 1, 2016, the Court dismissed all of Mr. El ~~Khalidi’s~~Khalidi's claims and causes of action with prejudice. ~~It is anticipated that~~ Mr. El Khalidi ~~will appeal~~appealed, and the ~~dismissal.~~issues have been fully briefed. Liabilities of approximately $1.0 million remain recorded, and the options will continue to accrue in accordance with their own terms until all matters are ~~resolved pending appeal.~~resolved.

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On or about August 3, 2015, SHR received notice of a lawsuit filed in the 14th Judicial District Court of Calcasieu Parish, Louisiana. The suit alleges that the plaintiff became ill from exposure to benzene. SHR placed its insurers on notice. Its insurers retained a law firm based in Louisiana to defend SHR.

~~On or about March 18, 2016, SHR received notice of a lawsuit filed in the 172~~^nd Judicial District Court of Jefferson County, Texas. The suit alleges that the plaintiff became ill from exposure to benzene. SHR placed its insurers on notice and plans to vigorously defend the case.

~~On or about August 2, 2016, SHR received notice of a lawsuit filed in the 58~~^th Judicial District Court of Jefferson County, Texas. The suit alleges that the plaintiff became ill from exposure to benzene. SHR placed its insurers on notice and plans to vigorously defend the case.

Environmental Remediation -

Amounts charged to expense for various activities related to environmental monitoring, compliance, and improvements were approximately ~~$136,000~~$119,000 and ~~$144,000~~$136,000 for the three months and ~~$437,000~~$444,000 and ~~$473,000~~$437,000 for the nine months ended September 30, 2017, and 2016, ~~and 2015,~~ respectively.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD LOOKING AND CAUTIONARY STATEMENTS

Except for the historical information and discussion contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in the economic environment; the ~~Company’s~~Company's failure to meet growth and productivity objectives; fluctuations in revenues and purchases; impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the ~~Company’s~~Company's pension plans; ineffective internal controls; the ~~Company’s~~Company's use of accounting estimates; competitive conditions; the ~~Company’s~~Company's ability to attract and retain key personnel and its reliance on critical skills; impact of relationships with critical suppliers; currency fluctuations; impact of changes in market liquidity conditions and customer credit risk on receivables; the ~~Company’s~~Company's ability to successfully manage acquisitions and alliances; general economic conditions domestically and internationally; insufficient cash flows from operating activities; difficulties in obtaining financing; outstanding debt and other financial and legal obligations; industry cycles; specialty petrochemical product and mineral prices; feedstock availability; technological developments; regulatory changes; foreign government instability; foreign legal and political concepts; and foreign currency fluctuations, as well as other risks detailed in the Company's filings with the U.S. Securities and Exchange Commission, including this release, all of which are difficult to predict and many of which are beyond the Company's control.

Overview

The following discussion and analysis of our financial results, as well as the accompanying unaudited consolidated financial statements and related notes to consolidated financial statements to which they refer, are the responsibility of our management. Our accounting and financial reporting fairly reflect our business model involving the manufacturing and marketing of petrochemical products and synthetic waxes. Our business model involves the manufacture and sale of tangible products and the provision of custom processing services. Our consistent approach to providing high purity products and quality services to our customers has helped to ~~sustain~~maintain our current position as a preferred supplier of various petrochemical products.

The discussion and analysis of financial condition and the results of operations which appears below should be read in conjunction with the ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements which appear in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

We believe we are well-positioned to ~~participate~~benefit from capital investments that we have recently completed or that are in ~~new investments~~progress. As a result of the D Train expansion which was completed in 2014, we now have sufficient pentane capacity to ~~grow~~readily maintain our share of market growth for the ~~Company.~~foreseeable future. Both the advanced reformer unit and the hydrogenation/distillation project will provide increased revenue and gross margin. While petrochemical prices are volatile on a short-term basis and volumes depend on the demand of our ~~customers’~~customers' products and overall customer efficiency, our investment decisions are based on our long-term business ~~outlook using a disciplined approach in selecting and pursuing the most attractive investment opportunities.~~outlook.

~~The drop in petroleum prices, which began in mid-September of 2014~~We continue to emphasize operational excellence and ~~continued into the first quarter of 2016, began reversing in the second quarter~~our competitive advantages achieved through our high quality products and ~~continued into the third quarter of 2016. Our average feedstock price per gallon in the third quarter of 2016 increased approximately 18%~~outstanding customer service and responsiveness. We believe these attributes are an important differentiation from ~~the first quarter of 2016. The contract pricing formulas we use to sell the majority of~~ our ~~products typically have a 30 day trailing feed cost basis; and therefore, are slightly favorable to us during falling prices but are unfavorable when prices rise.~~

~~AMAK Review and Restatement~~

During the second quarter of 2016, AMAK incorrectly recorded a gain from the assumption of spare part inventory acquired from the former operator. As a result, we calculated our equity in earnings from AMAK based upon incorrect information. The amount of the gain reflected on our previously issued statements was approximately $3.2 million; however, there was no gain from the assumption of spare parts. There was an additional gain on the settlement with the former operator of approximately $1.2 million which would amount to $0.4 million equity in earnings on our financial statements.

During the third quarter of 2016, AMAK issued 4.0 million shares of which 3.75 million shares were issued at 20 SR per share (USD$5.33 per share) and the remaining 250,000 shares are for future use as employee incentives. As a result of this equity raise, our share of the net assets of AMAK increased approximately $3.2 million which we failed to recognize as a gain (with a corresponding increase in its investment) in accordance with ASC 323-10-40-1.

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~~See Note 3 of the Notes to the Consolidated Financial Statements for additional information.~~

~~Nature of Accounting Errors~~

The Audit Committee, after review of the errors with respect to AMAK, concluded that the errors in our previously issued financial statements were the result of unintentional accounting errors or mistakes and inadequate and ineffective internal controls, and were not the result of any deliberate attempt to misstate financial statements, misrepresent the Company’s financial condition or results of operations, or deceive or defraud investors.

~~Control Deficiencies and Remedial Errors~~

Management has identified deficiencies in the design and operating effectiveness of our internal controls that, collectively, represent a material weakness in our internal control over financial reporting as of June 30, 2016, and September 30, 2016. The deficiencies are the result of management’s failure to design, implement and maintain adequate operational and internal controls and processes to apply the appropriate level of review and oversight to the accounting and disclosure for significant, infrequently occurring transactions such as unusual gains or losses and additional equity issuances by AMAK, our equity investment. Management has engaged in remediation efforts to address the material weakness.

~~For a description of the deficiencies that led to the material weakness, as well as a description of our planned remediation efforts, see “Part I, Item 4 — Controls and Procedures.”~~

All of the financial information presented in this “Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been revised to reflect the restatement described above. For additional information about the restatement, see Note 3 of Notes to Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.”competitors.

Review of Third Quarter and Year-to-Date ~~2016~~2017 Results

We reported third quarter ~~2016~~2017 earnings of ~~$2.8~~$1.7 million down from ~~$5.3~~$2.8 million from ~~the~~ third quarter ~~of 2015.~~2016. Diluted earnings per share of ~~$0.11~~$0.07 were reported for ~~2016,~~2017, down from ~~$0.21~~$0.11 in ~~2015.~~2016. Sales volume of our petrochemical products ~~decreased 16.0%~~increased 8.2%, and sales revenue from our petrochemical products ~~decreased 20.1%~~increased 11.0% as compared to ~~the~~ third quarter ~~of 2015.~~2016. Prime product petrochemical sales volumes (which exclude by-product sales) were ~~down 8.9%~~up 5.5% over ~~the~~ third quarter 2016. Wax sales revenue was up 14.9% compared to third quarter 2016. Gross profit margin increased to 16.0% of ~~2015.~~sales in third quarter 2017 from 15.6% in third quarter 2016.

We reported year-to-date ~~2016~~2017 earnings of ~~$20.3~~$4.0 million updown from ~~$17.5~~$20.3 million from the first nine months of ~~2015. We~~2016. Diluted earnings per share of $0.16 were reported for 2017, down from $0.81 in the first nine months of 2016. During the first nine months of 2016 we recorded a bargain purchase gain on the BASF acquisition of $11.5 million ~~from the BASF acquisition in the second quarter~~ and a gain ~~from~~on the additional equity issuance by AMAK of $3.2 million, ~~in the third quarter~~ which significantly impacted ~~our 2016 earnings. Diluted~~both earnings and earnings per ~~share~~share. Sales volume

Table of ~~$0.81 were reported for 2016, up from $0.69 in 2015. Sales volume~~ Contents

of our petrochemical products ~~decreased 6.9%~~increased 4.3%, and sales revenue from our petrochemical products ~~decreased 18.6%~~increased 14.1% as compared to the first nine months of ~~2015.~~2016. Prime product petrochemical sales volumes (which exclude by-product sales) were ~~down 5.8%~~up 6.5% over the first nine months of ~~2015.~~2016. Wax sales revenue was up 27.6% from first nine months of 2016. Gross profit margin declined from 20.4% to 17.6%. This was largely due to higher feedstock costs, higher operating costs, and costs related to Hurricane Harvey.

Hurricane Harvey Impact

The financial impact of Hurricane Harvey to our company was significant. Harvey made landfall on the Texas Gulf Coast on August 25 and affected operations at both SHR and TC. We estimate the total negative impact to EBITDA was approximately $1.5 million to $1.8 million. This includes expenses related to generator rentals, overtime labor, and maintenance and repairs of approximately $0.7 million. This estimate also includes lost sales due to outages at customer and supplier facilities. Neither of our facilities suffered any significant damage.

Non-GAAP Financial Measures

We include in this Quarterly Report the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Adjusted Net Income and provide reconciliations from our most directly comparable financial measures to those measures.

We define EBITDA as net income plus interest expense including derivative gains and losses, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA plus share-based compensation, plus or minus equity in ~~AMAK’s~~AMAK's earnings and losses or gains from equity issuances and plus or minus gains or losses on acquisitions. We define Adjusted Net Income as net income plus or minus tax effected equity in ~~AMAK’s~~AMAK's earnings and losses and plus or minus tax effected gains or losses on acquisitions. These measures are not measures of financial performance or liquidity under U.S. GAAP and should be considered in addition to, not as a substitute for, net income (loss), nor as an indicator of cash flows reported in accordance with U.S. GAAP. These measures are used as supplemental financial measures by management and external users of our financial statements such as investors, banks, research analysts and others. We believe that these non-GAAP measures are useful as they exclude transactions not related to our core cash operating activities.

The following table presents a reconciliation of net income, our most directly comparable GAAP financial performance measure for each of the periods presented, to EBITDA, Adjusted EBITDA, and Adjusted Net Income.

	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017		2016
	(Thousands of Dollars)
Net Income	$	1,718	$	2,799		$	4,037	$	20,275

Interest expense		795		568			2,109		1,803
Depreciation and amortization		2,810		2,565			7,966		7,176
Income tax expense		577		1,768			1,970		11,107
EBITDA	$	5,900	$	7,700		$	16,082	$	40,361

Share-based compensation		716		608			2,005		1,882
Bargain purchase gain on BASF acquisition		-		-			-		(11,549	)
Gain from additional equity issuance by AMAK		-		(3,168	)		-		(3,168	)
Equity in (earnings) losses of AMAK		897		2,089			5,161		(2,261	)
Adjusted EBITDA	$	7,513	$	7,229		$	23,248	$	25,265

Net Income	$	1,718	$	2,799		$	4,037	$	20,275

Equity in (earnings) losses of AMAK	$	897	$	2,089		$	5,161	$	(2,261	)
Gain from additional equity issuance by AMAK		-		(3,168	)		-		(3,168	)
Bargain purchase gain on BASF acquisition		-		-			-		(11,549	)
Total of equity in (earnings) losses of AMAK and bargain purchase gain on BASF acquisition		897		(1,079	)		5,161		(16,978	)
Taxes at statutory rate of 35%		314		378			1,806		5,943
Tax effected equity in (earnings) losses of AMAK and bargain purchase gain on BASF acquisition		583		(701	)		3,355		(11,035	)
Adjusted Net Income	$	2,301	$	2,098		$	7,392	$	9,240

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Three months ended
September 30,

Nine months ended
September 30,

2016
(restated)
2015
2016
(restated)
2015
Net Income $ 2,799 $ 5,318 $ 20,275 $ 17,476

    Interest expense 568 535 1,803 1,718
    Depreciation and amortization 2,565 2,312 7,176 6,662
    Income tax expense 1,768 3,163 11,107 8,735
EBITDA $ 7,700 $ 11,328 $ 40,361 $ 34,591

    Share-based compensation 608 505 1,882 1,794
    Bargain purchase gain on BASF acquisition - - (11,549 ) -
    Gain from additional equity issuance by AMAK (3,168 ) - (3,168 ) -
    Equity in (earnings) losses of AMAK 2,089 2,054 (2,261 ) 2,364
Adjusted EBITDA $ 7,229 $ 13,887 $ 25,265 $ 38,749

Net Income $ 2,799 $ 5,318 $ 20,275 $ 17,476

        Equity in (earnings) losses of AMAK $ 2,089 $ 2,054 $ (2,261 ) $ 2,364
    Gain from additional equity issuance by AMAK (3,168 ) - (3,168 ) -
    Bargain purchase gain on BASF acquisition - - (11,549 ) -
    Total of equity in (earnings) losses and gain on acquisition (1,079 ) $ 2,054 (16,978 ) 2,364
    Taxes at statutory rate of 35% 378 (719 ) 5,943 (827 )
    Tax effected equity in (earnings) losses and gain on acquisition (701 ) 1,335 (11,035 ) 1,537
Adjusted Net Income $ 2,098 $ 6,653 $ 9,240 $ 19,013

Liquidity and Capital Resources

Working Capital

Our approximate working capital days are summarized as follows:

	September 30, 2016	December 31, 2015	September 30, 2015	September 30, 2017		December 31, 2016		September 30, 2016
Days sales outstanding in accounts receivable	34.3	29.4	34.4		34.6		38.2		34.3
Days sales outstanding in inventory	31.8	23.8	18.8		19.6		30.2		31.8
Days sales outstanding in accounts payable	16.0	12.2	12.5		18.9		22.9		16.0
Days of working capital	50.2	41.0	40.6		35.4		45.5		50.2

Our days sales outstanding in accounts receivable ~~increased~~decreased due to ~~an increase~~a decrease in ~~deferred~~ sales ~~with longer payment terms.~~during September because of the hurricane. Our days sales outstanding in inventory ~~increased as of the end of the third quarter of 2016 primarily~~decreased due to ~~our~~a concerted effort to reduce inventory ~~policy~~on hand at ~~SHR. For preparedness sake, we like to store additional inventory in~~both facilities and reduced production associated with the ~~June through November time period which is typically hurricane season in the Gulf of Mexico.~~storm. Our days sales outstanding in accounts payable ~~has increased~~decreased due to construction expenses ~~being incurred~~ for ~~capital projects.~~the hydrogenation/distillation project at TC nearing completion. Since days of working capital is calculated using the above three metrics, it ~~increased~~decreased for the reasons discussed.

Cash ~~and cash equivalents~~ decreased ~~$11.0~~$4.2 million during the nine months ended September 30, ~~2016,~~2017, as compared to ~~an increase~~a decrease of ~~$6.4~~$11.0 million for the nine months ended September 30, ~~2015.~~2016. Our total available liquidity which includes cash ~~and cash equivalents~~ and available revolving borrowing capacity under the ARC was approximately ~~$42.6~~$35.2 million and ~~$57.6~~$37.9 million at September 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, respectively.

The change in cash ~~and cash equivalents~~ is summarized as follows:

	2016			2015			2017			2016
Net cash provided by (used in)	(thousands of dollars)						(thousands of dollars)
Operating activities	$	20,074		$	35,162		$	29,554		$	20,074
Investing activities		(27,871	)		(23,587	)		(39,336	)		(27,871	)
Financing activities		(3,239	)		(5,204	)		5,612			(3,239	)
Increase (decrease) in cash and equivalents	$	(11,036	)	$	6,371
Cash and cash equivalents	$	7,587		$	14,877
Decrease in cash							$	(4,170	)	$	(11,036	)
Cash							$	4,219		$	7,587

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Operating Activities

Cash provided by operating activities totaled ~~$20.1~~$29.6 million for the first nine months of ~~2016, $15.1~~2017 $9.5 million ~~lower~~higher than ~~2015.~~2016. For the first nine months of ~~2016~~2017 net income ~~increased~~decreased by approximately ~~$2.8~~$16.2 million as compared to the corresponding period of ~~2015.~~2016. Major non-cash items affecting 2017 income included increases in deferred taxes of $1.6 million and equity in losses of AMAK of $5.2 million. Major non-cash items affecting 2016 income included increases in deferred taxes of $6.9 million, bargain purchase gain from the BASF acquisition of $11.5 million, gain from additional equity issuance by AMAK of $3.2 million and equity in earnings of AMAK of $2.3 million.

Factors leading to ~~a decrease~~an increase in cash provided by operating activities included:

~~Trade receivables increased~~Inventory decreased approximately ~~$0.4~~$5.0 million (due to an effort to decrease inventory on hand at both facilities and downtime associated with the hurricane which impacted production) as compared to ~~a decrease~~an increase of approximately ~~$5.4~~$2.6 million in ~~2015 (due to a decrease in average selling price from fourth quarter 2014),~~

·	~~Inventory increased approximately $2.6 million~~2016 (due to lower sales volume) ~~as compared to a decrease of approximately $0.3 in 2015,~~;

Prepaid expenses and other assets ~~increased~~decreased approximately $0.4 million (primarily due to a reduction in prepaid insurance due to a finance arrangement) as compared to an increase of approximately $1.3 million in 2016 (due primarily to an increase in prepaid insurance because of higher premiums based upon our higher asset base) ~~as compared to decrease of approximately $0.1 million in 2015,~~; and

~~Other~~Accounts payable and accrued liabilities ~~decreased approximately $0.4~~increased $3.4 million (due to ~~the recognition of deferred revenue from processing customers)~~an increase in construction expenditures) as compared to an increase of approximately ~~$1.7~~$1.3 million in ~~2015 (due~~2016 (also due to ~~payments received from processing customers)~~increased construction expenditures).

These ~~uses~~ sources of cash were partially offset by the following ~~increases~~decrease in cash provided by operations:

Income tax receivable decreased $0.2 million (due to an adjustment to current taxes related to the change to the LIFO method for inventory valuation) as compared to a decrease of approximately $4.1 million in 2016 (due to the overpayment being applied to 2016 estimated taxes) ~~as compared to a decrease of approximately $0.4 million in 2015 (due to a smaller overpayment being applied to 2015 estimated taxes) and~~.

·	Accounts payable and accrued liabilities increased approximately $1.3 million (due to increased construction expenditures) as compared to a decrease of approximately $0.3 million in 2015 (due to the variability in payment dates).

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Investing Activities

Cash used by investing activities during the first nine months of ~~2016~~2017 was approximately ~~$27.9~~$39.3 million, representing an increase of approximately ~~$4.3~~$11.5 million over the corresponding period of ~~2015.~~2016. During the first nine months of 2017, the primary use of capital expenditures was for the hydrogenation/distillation unit and the new advanced reformer unit. During the first nine months of 2016 we purchased equipment for the ~~hydrogenation expansion at TC, the~~hydrogenation/distillation unit, construction of the new reformer unit, ~~and~~ a new cooling tower, ~~both at SHR,~~and the ~~upgrading of~~new custom processing unit; upgraded roads throughout the ~~SHR facility, continuing~~petrochemical facility; continued to ~~improve product storage and other enhancements at SHR, along with the purchase of~~make improvements to storage; purchased the BASF facility; and made various other facility at TC. Some of the expenditures in 2016 were budgeted under our D train expansion. During the first nine months of 2015 we purchased equipment for the D train expansion, tank farm improvements, spare equipment, various facility upgrades at SHR along with the hydrogenation/distillation expansion and improvements at TC.improvements.

Financing Activities

Cash ~~used~~provided by financing activities during the first nine months of ~~2016~~2017 was approximately ~~$3.2~~$5.6 million versus cash used of ~~$5.2~~$3.2 million during the corresponding period of ~~2015.~~2016. During 2017 we made principal payments on our acquisition loan of $7.0 million and our term debt of $1.3 million. We drew $14.0 million on our line of credit to fund ongoing capital projects. During 2016 we drew $3.0 million on our line of credit ~~and~~ made principal payments on our acquisition loan of $5.3 million and our term debt of $1.0 ~~million. During 2015 we made principal payments on our acquisition loan of $5.3~~ million.

Anticipated Cash Needs

We believe that the Company is capable of supporting its operating requirements and capital expenditures through internally generated funds supplemented with borrowings under our ~~credit facility.~~

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ARC.

Results of Operations

Comparison of Three Months Ended September 30, ~~2016~~2017 and ~~2015~~2016

Specialty Petrochemical Segment

	2016			2015			Change			%Change			2017			2016			Change			%Change
	(thousands of dollars)												(thousands of dollars)
Petrochemical Product Sales	$	47,250		$	59,122		$	(11,872	)		(20.1	%)	$	52,440		$	47,250		$	5,190			11.0	%
Processing		2,909			1,364			1,545			113.3	%		1,519			2,909			(1,390	)		(47.8	%)
Gross Revenue	$	50,159		$	60,486		$	(10,327	)		(17.1	%)	$	53,959		$	50,159		$	3,800			7.6	%

Volume of Sales (gallons)
Petrochemical Products		20,665			24,603			(3,938	)		(16.0	%)		22,353			20,665			1,688			8.2	%
Prime Product Sales														16,681			15,818			863			5.5	%

Cost of Sales	$	41,531		$	45,594		$	(4,063	)		(8.9	%)	$	43,424		$	41,531		$	1,893			4.6	%
Gross Margin		17.2	%		24.6	%					(7.4	%)		19.5	%		17.2	%		2.3	%		13.5	%
Total Operating Expense**		16,686			14,460			2,226			15.4	%		15,040			16,686			(1,646	)		(9.9	%)
Natural Gas Expense**		992			956			36			3.8	%		1,106			992			114			11.5	%
Operating Labor Costs**		4,084			3,898			186			4.8	%		4,412			4,084			328			8.0	%
Transportation Costs**		6,701			6,925			(224	)		(3.2	%)		6,051			6,701			(650	)		(9.7	%)
General & Administrative Expense		2,105			2,181			(76	)		(3.5	%)		2,595			2,105			490			23.3	%
Depreciation and Amortization*		1,447			1,079			368			34.1	%		1,584			1,447			137			9.5	%
Capital Expenditures	$	5,411		$	4,857		$	554			11.4	%	$	9,426		$	5,411		$	4,015			74.2	%

*Includes $1,378 and $1,291 for 2017 and ~~$924 for~~ 2016, ~~and 2015,~~ respectively, which is included in operating expense

** Included in cost of sales

Gross Revenue

Gross Revenue ~~decreased~~increased during ~~the~~ third quarter of2017 from third quarter 2016 ~~from 2015~~ by ~~approximately 17.1%~~7.6% primarily due to ~~a decrease in volumes of 16.0% and a decrease~~an increase in the average selling price of ~~4.3%~~1.6% and volume of 8.2% partially offset ~~slightly~~ by ~~an increase~~a decrease in ~~processing.~~processing revenue.

Petrochemical Product Sales

Petrochemical product sales ~~decreased~~increased by ~~20.1%~~11.0% during ~~the~~ third quarter of2017 from third quarter 2016 ~~from 2015~~ due to ~~a decrease~~an increase in the average selling price of ~~4.3%~~1.6% and ~~a decrease~~an increase in volume sold of ~~16.0%~~8.2%. Our average selling price ~~decreased~~increased because of two

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reasons. First, by-product selling prices were significantly higher in the third quarter of 2017 compared to the third quarter of 2016; and second, a large portion of our prime product sales are contracted with pricing formulas which are tied to prior month Natural Gas Liquid (NGL) prices which is our primary feedstock. Feedstock prices ~~began rising~~were higher in third quarter 2017 as compared to third quarter 2016. Prime product volume increased 5.5% in third quarter 2017 as compared to third quarter. Due to the need to produce additional prime products to support the increase in sales volume, our by-product volume increased 17.0%. It should be noted that by-product margins are significantly lower than margins for our prime products. By-product margins in the third quarter ~~but due~~of 2017 were higher compared to ~~the lag associated with our formula pricing, sales price increases are slower to obtain. We also saw a significant decrease in our margin on byproduct sales from the~~ third quarter of ~~2015~~2016 mainly due to higher values for certain components in the ~~third quarter of 2016. Total~~by-products. Foreign sales volume decreased ~~from 2015~~ to 2016 primarily due to one customer’s involuntary shutdown in Canada, one customer using a local supplier, another customer temporarily increasing their efficiency thereby reducing their need for our product, and an oil sands customer requiring less volume. Foreign sales volume increased to 25.7%17.3% of total petrochemical volume from ~~20.7%~~25.7% in third quarter ~~2015.~~2016.

Processing

Processing revenues ~~increased 113.3%~~decreased 47.8% during ~~the~~ third quarter of2017 from 2016 ~~from 2015~~ due to ~~fees associated with~~ a ~~customer who reimburses us for installation expenses plus~~decrease in reimbursements from a ~~markup.~~processing customer.

Cost of Sales

Cost of Sales ~~decreased 8.9%~~increased 4.6% during ~~the~~ third quarter of2017 from 2016 ~~from 2015~~ primarily due to the ~~decrease~~increase in ~~sales~~feedstock cost and volume. Our average feedstock cost per gallon ~~decreased 5.0%~~increased 3.2% over third quarter 2016 primarily due to an approximately 13% increase in the benchmark price of ~~2015 but increased 17.4% over~~Mont Belvieu natural gasoline, which was partially offset by lower penalty payments and other delivery costs. The increase in feedstock costs compressed margins for the ~~second quarter~~spot or non-formula portion of ~~2016.~~ prime product sales. These are sales which do not have pricing formulas tied to feedstock costs. The increase in gross margin percentage from 17.2% to 19.5% was supported by lower operating expenses and an increase in margins for by-products.

Volume processed ~~decreased 15.8%~~increased 7.1% over third quarter ~~of 2015.~~2016. We use natural gasoline as feedstock which is the heavier liquid remaining after ethane, propane and butanes are removed from liquids produced by natural gas wells. The material is a commodity product in the oil/petrochemical markets and generally is readily available. The price of natural gasoline normally correlates approximately 90% with the price of crude oil. We expect our advanced reformer unit which is due online in ~~mid-2017~~first quarter 2018 to enable us to convert the less ~~desirable~~valuable components in our feed into higher value products, thereby allowing us to sell our byproducts at higher prices. The contract pricing formulas used to sell the majority of our prime products typically have a 30 day trailing feed cost basis; and therefore, are slightly favorable during periods of rapidly falling feedstock prices but are unfavorable when prices rise.

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Total Operating Expense

Total Operating Expense ~~increased 15.4%~~decreased 9.9% during ~~the~~ third quarter ~~of 2016~~2017 from ~~2015.~~2016. Natural gas, labor, ~~depreciation~~ and transportation are the largest individual expenses in this category; however, not all of these ~~increased.~~decreased.

The cost of natural gas purchased increased ~~3.8%~~11.5% during ~~2016~~2017 from ~~2015~~2016 due to higher ~~consumption.~~per unit cost and an increase in volume consumed. The average price per MMBTU for ~~the~~ third quarter ~~of 2016~~2017 was ~~$2.93~~$3.22 whereas, for ~~2015~~2016 the per-unit cost was ~~$3.02. However, volume~~$2.93. Volume increased slightly to approximately ~~331,000~~337,000 MMBTU from about ~~324,000 MMBTU~~331,000 MMBTU. However, volume was down from second quarter 2017 which consumed approximately 417,000 MMBTU. The reduction in consumption sequentially was due to ~~potential new product trials in A Train and startup tests in C Train.~~downtime associated with the hurricane.

Labor costs were higher by ~~4.8%~~8.0% during 2017 from 2016 primarily due to ~~cost of living adjustments averaging 3% and a reduction in capitalized maintenance labor.~~

~~Depreciation was higher by 34.1% during~~additional expenses associated with the ~~third quarter of 2016 from 2015 primarily due to D train coming online and depreciation beginning on it late in 2015.~~

storm.

Transportation costs were lower by ~~3.2%~~9.7% primarily due to a decrease in ~~shipments.~~the number of isocontainers and railcars which were shipped. Isocontainers are utilized primarily for shipments overseas.

~~During the~~In addition, in third quarter of 2016 we ~~also~~ saw increases in plant maintenance and expenses associated with installation of a processing unit for which we were reimbursed at cost plus a markup ~~as mentioned above.~~fee. These were minimal during 2017.

General and Administrative Expense

General and Administrative costs for ~~the~~ third quarter of2017 increased from 2016 ~~from 2015 decreased~~ by ~~3.5%~~23.3% primarily due to ~~slight reductions~~an increase in ~~a number~~our property tax accrual because of ~~expenses including travel, subscriptions, accounting fees,~~the expiration of abatements. Group insurance and ~~seminars.~~administrative labor costs also increased.

Depreciation

Depreciation increased ~~34.1%~~9.5% during ~~the~~ third quarter of2017 from 2016 ~~from 2015~~ primarily due to ~~D train being put into service in late 2015.~~2016 capital expenditures increasing our depreciable base.

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Capital Expenditures

Capital Expenditures increased ~~11.4%~~74.2% during ~~the~~ third quarter of2017 from 2016 ~~from 2015~~ primarily due to the new advanced reformer unit project. See additional detail above under ~~“Investing Activities”~~"Investing Activities".

Due to delays caused by the impact of the hurricane and issues with improper welding by the supplier of certain equipment in the reactor section of the new unit, we now expect the advanced reformer unit to come online toward the end of first quarter 2018.

Specialty Wax Segment

	2016			2015			Change			%Change			2017			2016			Change			%Change
	(thousands of dollars)												(thousands of dollars)
Product Sales	$	4,864		$	4,068		$	796			19.6	%	$	5,590		$	4,864		$	726			14.9	%
Processing		2,119			2,384			(265	)		(11.1	%)		1,959			2,119			(160	)		(7.6	%)
Gross Revenue	$	6,983		$	6,452		$	531			8.2	%	$	7,549		$	6,983		$	566			8.1	%

Volume of wax sales (thousand pounds)														8,036			8,248			(212	)		(2.6	%)

Cost of Sales	$	6,708		$	5,309		$	1,399			26.4	%	$	8,216		$	6,708		$	1,508			22.5	%
Gross Margin		4.0	%		17.7	%					(13.7	%)		(8.8	%)		4.0	%		(12.8	%)		(320.0	%)
General & Administrative Expense		1,238			944			294			31.1	%		1,107			1,238			(131	)		(10.6	%)
Depreciation and Amortization*		1,105			1,215			(110	)		(9.1	%)		1,208			1,105			103			9.3	%
Capital Expenditures	$	4,066		$	1,766		$	2,300			130.2	%	$	1,991		$	4,066		$	(2,075	)		(51.0	%)

*Includes $1,187 and $1,082 for 2017 and ~~$1,194 for~~ 2016, ~~and 2015,~~ respectively, which is included in cost of sales

Product Sales

Product sales revenue increased ~~19.6%~~14.9% during third quarter 2017 from third quarter 2016 as we continued to see strong growth in wax sales both domestically and in export. Polyethylene wax sales remained steady during the ~~third quarter~~quarter. However, volumes of ~~2016~~our traditional products were impacted by the storm due to outages at our wax feed suppliers. We continue to make progress in growing sales in our new products for our Hot Melt Adhesives ("HMA") and PVC Lubricant markets. These products are characterized by generally higher margins and growth rates. Sales of these products were down from the ~~third~~second quarter ~~of 2015~~ primarily due to on-purpose PE wax sales which we have started distributing in Latin America for a third party. Polyethylene wax sales saw volume increases of approximately 36.1%; however, due to competitive situations, a soft market,summer slowdown at European customers and ~~to minimize finished product inventories revenue from these sales decreased 0.5%. In order to strive to work down wax inventories we continue to increase sales volumes~~inventory build at one of our ~~low quality wax (which requires significantly less processing and carries a positive gross margin). As we gain more approvals of our new higher quality wax~~distributors. In third quarter 2016, sales for these products ~~we will substitute the low quality wax sales~~were insignificant.

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with these higher value products. We continued to make good progress in our target markets. We shipped several orders of our new Hot Melt Adhesives (“HMA”) product as well as, had independent laboratory results showing that our new product performs as well as the leading product in metallocene based HMA applications (in some parameters our product performed better). Our new powdered PVC lubricant wax has been trialed successfully, and a commercial trial is expected in the fourth quarter. We also saw approximately $215,000 in revenue from B Plant.

Processing

Processing revenues decreased ~~11.1%~~7.6% during ~~the~~ third quarter ~~of 2016~~2017 from ~~the~~ third quarter ~~of 2015~~2016 primarily due to ~~start up delays with~~the impact of the hurricane. The entire facility was down for a ~~couple of projects. One delay was caused by~~full week during the storm, and when you are selling time, it means zero custom processing revenue for that week. Additionally, we experienced start-up difficulties with ~~feedstock supply.~~the hydrogenation unit resulting in negligible processing revenues from that unit. Further, faulty equipment in one of the units in the original plant caused an extended shutdown resulting in further loss of revenues. This unit will be starting up shortly and running on a high value project through the end of the year.

Cost of Sales

Cost of Sales increased ~~26.4%~~22.5% during ~~the~~ third quarter ~~of 2016~~2017 from ~~the~~ third quarter ~~of 2015~~2016 primarily due to increases in labor, freight, ~~utilities~~equipment maintenance, and storage partially driven by the increased on-purpose polyethylene wax distributed in Latin America. Labor increased approximately 13.9% due to increased overtime and addition of personnel as we get set to run more product in B Plant and ensure we have personnel trained and ready to run the new hydrogenation and distillation project when it starts up next quarter. Freight increased approximately 74.6% duenatural gas utilities. These cost increases were primarily attributable to the ~~increase in shipments. Utilities increased approximately 21.1% due to expenses associated with B plant. Storage fees increased approximately 157.8% due to~~start-up of the ~~increase in inventory which is stored offsite in third-party warehouses.~~hydrogenation/distillation unit.

General and Administrative Expense

General and Administrative costs ~~for the~~decreased 10.6% during third quarter of2017 from 2016 ~~from 2015 increased 31.1%~~ primarily due to ~~an increase~~a decrease in ~~sales personnel, security services,~~other compensation expense, accounting fees ~~travel,~~ and ~~property taxes.~~security service expense.

Depreciation

Depreciation ~~decreased 9.1%~~increased 9.3% during ~~the~~ third quarter of2017 from 2016 ~~from 2015~~ primarily due to ~~some~~the hydrogenation/distillation unit coming online.

Table of the assets which were near end of life at purchase becoming fully depreciated. Many of the capital expenditures during the third quarter of 2016 are being recorded to construction in progress for which depreciation will begin when complete.Contents

Capital Expenditures

Capital Expenditures ~~increased 130.2%~~decreased 51.0% during ~~the~~ third quarter ~~of 2016~~2017 from ~~the~~ third quarter ~~of 2015~~2016 primarily due to a decrease in expenditures for construction in progress including the ~~hydrogenation~~hydrogenation/distillation project. The project came online in second and ~~distillation project and various other smaller projects.~~third quarters 2017.

Corporate Segment

	2016 (restated)			2015			Change			%Change			2017			2016			Change			%Change
	(in thousands)												(in thousands)
General & Administrative Expense	$	1,238		$	1,654		$	(416	)		(25.2	%)	$	1,957		$	1,238		$	719			58.1	%
Equity in losses of AMAK		(2,089	)		(2,054	)		35			1.7	%
Equity in earnings (losses) of AMAK														(897	)		(2,089	)		1,192			(57.1	%)
Gain from additional equity issuance by AMAK		3,168			-			3,168			100.0	%		-			3,168			(3,168	)		(100.0	%)

General and Administrative Expenses

General corporate expenses ~~decreased~~increased during third quarter 2017 from third quarter 2016 primarily due to an increase in officer compensation. Officer compensation increased due to the accrual for 2017 executive bonuses and the reversal of certain accrued expenses in the third quarter of 2016, from the third quarter 2015 primarily due to decreases in officer compensation and travel partially offset by increases in post retirement benefits and accounting fees. Officer compensation decreased because of the partial reversal ofincluding the accrual for ~~bonus compensation. Post retirement benefits increased due~~bonuses when it was determined they would not be awarded.

Equity in Losses of AMAK

Equity in losses of AMAK decreased during third quarter 2017 from third quarter 2016. Since the AMAK facility was idle during 2016, they had no sales. They recorded sales in third quarter 2017 which offset some of their expenses.

AMAK Summarized Income Statement

	Three Months Ended September 30,
	2017		2016
	(thousands of dollars)
Sales	$	9,709	$	318

Gross loss		1,307		4,747
General, administrative and other expenses		2,382		2,463
Net loss	$	3,689	$	7,210

AMAK continues to ~~an agreement with~~upgrade leadership and personnel at the ~~former CEO to provide health benefits. Accounting fees increased due~~site while filling all significant personnel vacancies. Sixteen percent more copper concentrate was shipped to the ~~hiring~~port in third quarter 2017 than in second quarter 2017. Zinc concentrate to the port was up 38% quarter on quarter. There was one shipment of lower quality copper and zinc concentrate during the quarter. Although AMAK is not yet fully at target throughputs and notwithstanding ongoing water quality and minor plant reliability issues; throughput rates, concentrate quality and recoveries continue to steadily improve. We reported on initial Guyan exploration results. Exploration continues both at Guyan and the surrounding areas with a ~~new internal audit firm.~~similar geological profile. Exploration results which are expected to extend the life of the copper and zinc mine assets are anticipated later this year.

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~~Equity in Losses of AMAK/Gain from Additional Equity Issuance by AMAK~~

~~Equity in losses of AMAK increased slightly during the third quarter of 2016 from the third quarter of 2015.~~

Three Months Ended
September 30,

2016 2015
(Thousands of Dollars)
Sales $ 318 $ 19,874
Gross loss 4,747 2,711
General, administrative and other 2,463 4,067
Net loss $ 7,210 $ 6,778

In November 2015 the decision was made to temporarily close the mine and to terminate the contract with the operator. This allows AMAK to preserve asset value while the mill and underground assets are returned to their original condition and equipment upgrades are installed. Additionally in November 2015, AMAK received formal approval for new licenses that included an additional 151 square kilometers (km²~~) of territory close to AMAK's prior 44 km~~² ~~mine. The additional territory comprised the Guyan and Qatan exploration licenses covering 151 km~~²~~, and within the Guyan exploration license, a 10 km~~² ~~mining lease which has potential for significant gold recovery.~~

Renovation and refurbishment work is well underway, and zinc and copper production are expected to resume in the fourth quarter of 2016. In addition, processing of the gold-bearing waste dumps from historical mining at the Guyan mining license area has begun and gold extraction is in process. An exploration program for the rest of Guyan mining lease is progressing well, while a systematic program of infill drilling exploration to extend the overall life of the copper and zinc mine has been initiated.

In July 2016 AMAK issued 4.0 million shares to provide additional funds for ongoing exploration work and mine start-up activities. Armico purchased 3.75 million shares at 20 SR per share (USD$5.33 per share) and the remaining 250,000 shares are for future use as employee incentives. As a result of this equity raise, our share of the net assets of AMAK increased approximately $3.2 million which we recognized as a gain (with a corresponding increase in its investment) in accordance with ASC 323-10-40-1.

Comparison of Nine Months Ended September 30, ~~2016~~2017 and ~~2015~~2016

Specialty Petrochemical Segment

	2016			2015			Change			%Change			2017			2016			Change			%Change
	(thousands of dollars)												(thousands of dollars)
Petrochemical Product Sales	$	129,076		$	158,647		$	(29,571	)		(18.6	%)	$	147,339		$	129,076		$	18,263			14.1	%
Processing		6,769			4,409			2,360			53.5	%		5,078			6,769			(1,691	)		(25.0	%)
Gross Revenue	$	135,845		$	163,056		$	(27,211	)		(16.7	%)	$	152,417		$	135,845		$	16,572			12.2	%

Volume of Sales (gallons)
Petrochemical Products		58,018			62,311			(4,293	)		(6.9	%)		60,512			58,018			2,494			4.3	%
Prime Product Sales														46,867			44,018			2,849			6.5	%

Cost of Sales	$	107,067		$	120,771		$	(13,704	)		(11.3	%)	$	122,351		$	107,067		$	15,284			14.3	%
Gross margin		21.2	%		25.9	%					(4.7	%)		19.7	%		21.2	%		(1.5	%)		(6.9	%)
Total Operating Expense**		43,527			40,660			2,867			7.1	%		43,161			43,527			(366	)		(0.8	%)
Natural Gas Expense**		2,405			3,226			(821	)		(25.4	%)		3,545			2,405			1,140			47.4	%
Operating Labor Costs**		11,893			11,988			(95	)		(0.8	%)		11,688			11,893			(205	)		(1.7	%)
Transportation Costs**		17,850			17,348			502			2.9	%		18,314			17,850			464			2.6	%
General & Administrative Expense		6,821			6,713			108			1.6	%		7,914			6,821			1,093			16.0	%
Depreciation and Amortization*		4,211			3,122			1,089			34.9	%		4,684			4,211			473			11.2	%
Capital Expenditures	$	16,812		$	17,876		$	(1,064	)		(6.0	%)	$	27,203		$	16,812		$	10,391			61.8	%

*Includes $4,142 and $3,743 for 2017 and ~~$2,625 for~~ 2016, ~~and 2015,~~ respectively, which is included in operating expense

** Included in cost of sales

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Gross Revenue

Gross Revenue ~~decreased~~increased during the first nine months of ~~2016~~2017 from ~~2015~~2016 by approximately ~~16.7%~~12.2% primarily due to ~~a decrease~~an increase in the average selling price of ~~12.6%~~9.4% and an increase in volume of 4.3% offset by a decrease in ~~volume of 6.9%.~~processing fees.

Petrochemical Product Sales

Petrochemical product sales ~~decreased~~revenue increased by ~~18.6%~~14.1% during the first nine months of ~~2016~~2017 from ~~2015~~2016 due to ~~a decrease~~an increase in the average selling price of ~~12.6%~~9.4% and ~~a 6.9% decrease~~an increase in ~~volume.~~volume of 4.3%. Our average selling price ~~decreased~~increased because aof higher prices for prime products and by-products, driven by higher feedstock costs. A large portion of our prime product sales are contracted with formulas which are tied to Natural Gas Liquid (NGL) prices which is our primary feedstock. NGL prices ~~continued to fall~~were relatively stable during the first ~~quarter~~nine months of 2017 but ~~rose during~~were significantly higher than the second and third quarters reflecting the instability in petroleum prices. Sales volume decreased 6.9 % for the same reasons as mentioned above. We also saw a significant decrease in our margin on byproduct sales from 2015 tofirst nine months of 2016. Foreign sales volume ~~increased~~decreased to ~~22.7%~~19.6% of total petrochemical volume from ~~22.5%~~22.7% in the first nine months of ~~2015.~~2016.

Processing

Processing revenues ~~increased 53.5%~~decreased 25.0% during the first nine months of 2017 from 2016 due to reduced fees associated with a new customer who reimbursed us for installation expenses plus a markup during the first nine months of 2016 ~~from 2015 due to fees~~and outages associated with ~~a new customer who reimburses us for installation expenses plus a markup.~~the hurricane in 2017.

Cost of Sales

Cost of Sales ~~decreased 11.3%~~increased 14.3% during the first nine months of ~~2016~~2017 from ~~2015 partly~~2016 due to the ~~decrease~~increase in NGL ~~prices.~~prices as mentioned above. Our average feedstock cost per gallon ~~decreased 14.8%, and~~increased 17.6%; whereas volume processed ~~decreased 3.0%.~~remained steady. We use natural gasoline as feedstock which is the heavier liquid remaining after ethane, propane and butanes are removed from liquids produced by natural gas wells. The material is a commodity product in the oil/petrochemical markets and generally is readily available. The price of natural gasoline normally correlates approximately 90% with the price of crude oil. The benchmark price of Mont Belvieu natural gasoline increased approximately 21% for the first nine months of 2017 compared to the same period in 2016. The increase in feedstock cost compressed margins for the spot or non-formula portion of prime product sales. These are sales which do not have pricing formulas tied to feedstock costs. This factor contributed to the decline in gross margin percentage from 21.2% to 19.7%. Our advanced reformer unit ~~which is due~~(due online in ~~mid-2017~~first quarter 2018) will allow us to convert many of the ~~less desirable components in our feed~~by-products into higher value products, thereby allowing us to sell our byproducts at higher prices.

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Total Operating Expense

Total Operating Expense ~~increased 7.1%~~decreased 0.8% during the first nine months of ~~2016~~2017 from ~~2015.~~2016. Natural gas, labor, ~~depreciation~~ and transportation are the largest individual expenses in this category; however, not all of these ~~increased.~~decreased.

The cost of natural gas purchased ~~decreased 25.4%~~increased 47.4% during ~~2016~~2017 from ~~2015~~2016 due to ~~a decrease~~an increase in the average per unit cost and ~~lower~~ consumption. The average price per MMBTU for the first nine months of ~~2016~~2017 was ~~$2.44~~$3.32 whereas, for ~~2015~~2016 the per-unit cost was ~~$3.02.~~$2.44. Volume ~~decreased~~consumed increased to approximately ~~989,000~~1,075,000 MMBTU from about ~~1,031,000~~989,000 MMBTU.

Labor costs were lower by ~~0.8%~~1.7% primarily due to ~~lower profit sharing distributions and less overtime incurred.~~maintenance labor being capitalized to construction in progress.

Transportation costs were higher by ~~2.9%~~2.6% primarily due to an increase in the number of railcars in our fleet. We are in the process of upgrading our fleet of leased cars; therefore, as cars come in, others are returned. There is some overlap which caused an increase in the lease amount. In addition, reduced sales to our oil sands customers caused railcars to sit idle which did not allow us to recoup those rental costs.

~~During~~isocontainer shipments during the first nine months of 2017. These shipments increased 112.6% and are generally used for overseas shipments.

In addition, during 2016 we ~~also~~ saw increases in plant maintenance and ~~repairs due to turnarounds on two of our Penhex trains and costs~~expenses associated with installation of ~~the new~~a processing unit for which iswe were reimbursed ~~by the customer~~ at cost plus a ~~markup.~~markup fee. These were minimal during 2017.

General and Administrative Expense

General and Administrative costs for the first ~~half~~nine months of ~~2016~~2017 from ~~2015~~2016 increased by ~~1.6%~~16.0% primarily due to ~~increases~~an increase in our property ~~taxes~~tax accrual because of the expiration of abatements. Group insurance and ~~insurance premiums.~~administrative labor costs also increased.

Depreciation

Depreciation increased ~~34.9%~~11.2% during the first nine months of ~~2016~~2017 from ~~2015~~2016 primarily due to ~~D train being put into service in late 2015.~~2016 capital expenditures increasing our depreciable base.

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Capital Expenditures

Capital Expenditures ~~decreased 6.0%~~increased 61.8% during the first nine months of ~~2016~~2017 from ~~2015~~2016 primarily due to ~~the D train project being completed in late 2015 and~~expenditures related to construction of the new advanced reformer unit. Due to delays caused by the impact of the hurricane and issues with improper welding by the supplier of certain equipment in the reactor section of the new unit, we now expect the advanced reformer unit ~~project getting underway in 2016.~~to come online toward the end of first quarter 2018.

Specialty Wax Segment

	2016			2015			Change			%Change			2017			2016			Change			%Change
	(thousands of dollars)												(thousands of dollars)
Product Sales	$	14,585		$	11,749		$	2,836			24.1	%	$	18,606		$	14,585		$	4,021			27.6	%
Processing		7,766			6,626			1,140			17.2	%		8,142			7,766			376			4.8	%
Gross Revenue	$	22,351		$	18,375		$	3,976			21.6	%	$	26,748		$	22,351		$	4,397			19.7	%

Volume of wax sales (thousand pounds)														28,281			24,126			4,155			17.2	%

Cost of Sales	$	18,880		$	14,908		$	3,972			26.6	%	$	25,219		$	18,880		$	6,339			33.6	%
Gross Margin		15.5	%		18.9	%					(3.4	%)		5.7	%		15.5	%		(9.8	%)		(63.2	%)
General & Administrative Expense		3,582			3,028			554			18.3	%		3,729			3,582			147			4.1	%
Depreciation and Amortization*		2,945			3,522			(577	)		(16.4	%)		3,233			2,945			288			9.8	%
Capital Expenditures	$	11,059		$	5,664		$	5,395			95.3	%	$	12,047		$	11,059		$	988			8.9	%

*Includes $3,169 and $2,877 for 2017 and ~~$3,458 for~~ 2016, ~~and 2015,~~ respectively, which is included in cost of sales

Product Sales

Product sales increased ~~24.1%~~27.6% during the first nine months of ~~2016~~2017 from the first nine months of ~~2015~~2016 primarily due to on-purpose PE wax sales which we ~~have started~~are distributing in Latin America for a third ~~party.~~party as well as, significant growth in our high value waxes. Polyethylene wax sales saw volume increases of approximately ~~42.3%; however, due to competitive situations, a soft market,~~16.9%, and ~~to minimize finished product inventories~~ revenue from these sales ~~only~~ increased ~~4.8%~~20.8%. As mentioned above, ~~in order to strive to work down wax inventories~~ we continue to ~~increase sales volumes~~make good progress in developing high value markets for our by-product polyethylene waxes.

Table of our low quality wax (which requires significantly less processing and carries a positive gross margin). While our penetration of higher quality markets has been slower than anticipated, we have shipped several orders of the new HMA and PVC high quality products with additional key customers granting approvals.Contents

Processing

Processing revenues increased ~~17.2%~~4.8% during the first nine months of ~~2016~~2017 from the first nine months of ~~2015~~2016 due to increased volumes with existing customers and a number of new contracts and small trials. ~~Approximately $1.7~~Processing revenue generated from B Plant was approximately $2.2 million, ~~in processing fees~~from the new distillation unit was ~~recognized in both~~approximately $0.2 million, and from the ~~first half of 2016 and 2015~~new hydrogenation unit was approximately $0.1 million. Excluding the $1.6 million non-use fee that occurred for ~~fees from one of our customers which is paid ratably throughout~~ the ~~year but is recognized annually for accounting purposes. This contract terminated~~last time in the first quarter of ~~2016.~~2016, custom processing revenues were up over 32% over 2016 numbers. This revenue increase occurred despite the start-up difficulties with the hydrogenation unit resulting in negligible processing revenues from that unit. Further, faulty equipment in another unit caused an extended shutdown of this unit resulting in further loss of revenue.

Cost of Sales

Cost of Sales increased ~~26.6%~~33.6% during the first nine months of ~~2016~~2017 from the first nine months of ~~2015~~2016 due to increases in material cost, labor, ~~storage, packaging,~~ freight, ~~utilities, and~~ repairs and maintenance of manufacturing ~~equipment.~~equipment, and natural gas utilities.

Material cost increased approximately ~~133.9%~~69.4% due to material costs associated with ~~higher~~the on-purpose PE wax ~~production as well as, on purpose PE was~~ sales ~~which~~ we distributed into Latin America as noted above and to support the additional sales volume of polyethylene wax sales. Labor increased approximately ~~14.0%~~22.8% due to ~~increases in~~increased overtime and the addition of new personnel ~~as we get set up to run more product~~ in ~~B Plant and ensure we have personnel trained and ready to run~~preparation for the start-up of the new ~~hydrogenation and~~ hydrogenation/distillation ~~project when it starts up next quarter. Storage fees~~project. Freight increased approximately ~~209.4%~~155.7% due to ~~the increase~~a change in inventory which is stored offsite in warehouses. Packaging supplies increased approximately 37.9% also due to the increase in inventory. Freight increased 59.4% in support of the additional volume. Utilities increased 9.9% due to costs associatedshipping terms. We now ship most products with ~~B Plant.~~destination terms. Repairs and maintenance of equipment increased approximately ~~14.9%~~33.8% primarily due to ~~hydroblasting for tank inspections~~the addition of B Plant and ~~repairs, reactor repairs, positioner replacements on equipment,~~the introduction of new custom processing projects. Natural gas utilities increased approximately 84.4% due to an increase in per unit cost as mentioned above and ~~other various repairs. A seven day complete shutdown~~an increase in volume consumed because of B Plant and ~~maintenance turnaround was executed in May 2016.~~the new hydrogenation/distillation unit.

General and Administrative Expense

General and Administrative costs for the first nine months of 2017 from 2016 ~~from 2015~~ increased ~~18.3%~~4.1% primarily due to ~~a profit sharing distribution,~~ an increase in sales personnel, ~~management fees, legal fees, travel, consulting fees,~~property taxes, and property ~~taxes.~~insurance due to the addition of B Plant.

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Depreciation

Depreciation ~~decreased 16.4%~~increased 9.8% during the first nine months of ~~2016~~2017 from ~~2015~~2016 primarily due to ~~some~~addition of the assets which were near end of life at purchase becoming fully depreciated. Many of the capital expenditures during the first nine months of 2016 are being recorded to construction in progress for which depreciation will begin when complete.B Plant.

Capital Expenditures

Capital Expenditures increased ~~95.3%~~8.9% during the first nine months of ~~2016~~2017 from the first nine months of ~~2015~~2016 primarily due to expenditures for construction in progress including the ~~hydrogenation and~~ hydrogenation/distillation project and various other smaller projects. The hydrogenation/distillation project is complete; therefore, going forward we expect capital expenditures to return to a more normal level.

Corporate Segment

	2016 (restated)		2015			Change			%Change			2017			2016		Change			%Change
	(in thousands)											(thousands of dollars)
General & Administrative Expense	$	5,128	$	5,145		$	(17	)		(0.3	%)	$	5,978		$	5,128	$	850			16.6	%
Equity in earnings (losses) of AMAK		2,261		(2,364	)		4,625			(195.6	%)		(5,161	)		2,261		(7,422	)		(328.3	%)
Gain from additional equity issuance by AMAK		3,168		-			3,168						-			3,168		(3,168	)		(100.0	%)

General and Administrative Expenses

General corporate expenses ~~decreased slightly~~increased 16.6% during ~~the~~ first nine months ~~of 2016~~2017 from ~~the~~ first nine months ~~2015~~2016 primarily due to ~~increases in directors’ fees, post retirement expense, consulting fees, and accounting fees offset by decreases~~an increase in officer compensation. Officer compensation ~~travel, and investor relations expenses. Directors’ fees~~ increased because of the ~~addition of one director and a restricted stock grant to directors. Post retirement benefits increased due to an agreement with~~accrual in 2017 for executive bonuses. During 2016 we reversed the former CEO to provide health benefits. Consulting fees increased due to the hiring of compensation consultants to reassess officer compensation and the former CEO being utilized as a consultant. Accounting fees increased due to costs associated with our investment in AMAK and the retention of a new internal audit firm. Officer compensation decreased due to the partial reversal of previously accrued bonus compensation. Investor relations decreased because new consultants are being employed.accrual for bonuses when it was determined they would not be awarded.

Equity in Earnings (Losses) of AMAK/Gain from Additional Equity Issuance by AMAK

Equity in ~~Earnings~~earnings (losses) of AMAK ~~increased~~decreased during ~~the~~ first nine months ~~of 2016~~2017 from ~~the~~ first nine months ~~of 2015~~2016 primarily due to the recognition in 2016 of a gain from a settlement which was reached with the former operator of the ~~AMAK mining facility. During~~facility and a gain on an additional equity issuance by AMAK. In addition, the ~~first nine months of 2016 AMAK reached the settlement which included a reduction~~facility recording no sales in ~~previously accrued operating expenses of approximately $17.4 million. This settlement more than offset AMAK’s first nine months 2016 operating losses as shown in the table below~~second quarter 2017 (please see Note

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17 to the consolidated financial statements for the impact on our statements):

Nine Months Ended
September 30,

2016
(restated)
2015
(Thousands of Dollars)
Sales $ 9,921 $ 38,458
Gross profit (loss) (7,556 ) 35
General, administrative and other 6,986 9,605
Loss from operations (14,542 ) (9,570 )
Gain on settlement with former operator 17,440 -
Net income (loss) $ 2,898 $ (9,570 )

~~In November 2015~~. Also, during 2016 the ~~decision~~facility was ~~made to temporarily close the mine and to terminate the contract with the operator. This allows AMAK to preserve asset value while the mill and underground assets are returned to~~not operating; therefore, their ~~original condition and equipment upgrades are installed. Additionally in November 2015, AMAK received formal approval for new licenses that included an additional 151 square kilometers (km~~²~~) of territory close to AMAK's prior 44 km~~² ~~mine. The additional territory comprised the Guyan and Qatan exploration licenses covering 151 km~~²~~, and within the Guyan exploration license, a 10 km~~² ~~mining lease which has potential for significant gold recovery.~~expenses were less.

AMAK Summarized Income Statement

~~Table~~

	Nine Months Ended September 30,
	2017			2016
	(thousands of dollars)
Sales	$	11,965		$	9,921

Gross loss		(11,515	)		(7,556	)
General, administrative and other expenses		6,942			6,986
Loss from operations		(18,457	)		(14,542	)
Gain on settlement with former operator		-			17,440
Net income (loss)	$	(18,457	)	$	2,898

The team at AMAK continued to upgrade personnel and work on improving operations throughout the quarter. Shipments of ~~Contents~~

~~Renovation~~concentrate to the port continue to show steady improvement – along with quality and refurbishment work is well underway, and zinc and copper production expected to resume late in the fourth quarter of 2016. In addition, processing of the gold-bearing waste dumps from historical miningrecoveries. We reported on initial Guyan exploration results. Exploration continues both at ~~the~~ Guyan ~~mining license area has begun~~ and the ~~gold extraction is in process. An exploration program for the rest of Guyan mining lease is progressing well, while~~surrounding areas with a ~~systematic program of infill drilling exploration to~~similar geological profile. Exploration results which should extend the ~~overall~~ life of the copper and zinc mine ~~has been initiated.~~

In July 2016 AMAK issued 4.0 million shares to provide additional funds for ongoing exploration work and mine start-up activities. Armico purchased 3.75 million shares at 20 SR per share (USD$5.33 per share) and the remaining 250,000 sharesassets are ~~for future use as employee incentives. As a result of~~expected later this equity raise, our share of the net assets of AMAK increased approximately $3.2 million which we recognized as a gain (with a corresponding increase in its investment) in accordance with ASC 323-10-40-1.year.

Guarantee of Saudi Industrial Development Fund ~~(“SIDF”~~("SIDF") Loan to AMAK

As discussed in Note 19 to the consolidated financial statements, as a condition of the Loan from the SIDF in the principal amount of 330.0 million SR (US$88.0 million) to AMAK, we were required to execute a Guarantee of up to 41% of the Loan. The decision to provide a limited corporate guarantee in favor of AMAK was difficult as we considered numerous facts and circumstances. One of the factors considered was that without the US$88.0 million from the SIDF, construction activity on the project would likely have ceased. Another factor considered was that prior to making a firm commitment regarding funding, the SIDF performed its own exhaustive due diligence of the project and obviously reached the conclusion that the project is viable and capable of servicing the debt. Yet another factor considered was our ability to reach agreement with various AMAK Saudi shareholders whereby they agreed to use best efforts to have their personal guarantees stand ahead of and pay required payments to SIDF before our corporate guarantee. Finally, we researched numerous loans made by the SIDF to others and were unable to find a single instance where the SIDF actually called a guarantee or foreclosed on a project. Based on the above, we determined that it was in the best interest of the Company and its shareholders to provide the limited corporate guarantee to facilitate completion of the mining project in a timely manner. We also determined that the stand-in-front agreement in conjunction with the actual value of plant and equipment on the ground should act in concert to minimize any exposure arising from the corporate guarantee. The total amount outstanding to the SIDF at September 30, ~~2016,~~2017, was ~~310.0~~305.0 million Saudi Riyals (US$~~82.7~~81.3 million).

~~Contractual Obligations~~

~~The table below summarizes the following contractual obligations (in thousands) of the Company at September 30, 2016:~~

Payments due by period
Total
Less than
1 year
1-3 years
3-5 years
More than 5 years
Operating Lease Obligations $ 19,977 $ 3,357 $ 5,917 $ 5,160 $ 5,543
Long-Term Debt Obligations 79,000 8,333 16,667 54,000 -
Total $ 98,977 $ 11,690 $ 22,584 $ 59,160 $ 5,543

On October 1, 2014, we entered into an Amended and Restated Credit Agreement with the lenders which from time to time are parties to the Amended and Restated Credit Agreement (collectively, the “Lenders”) and Bank of America, N.A., a national banking association, as Administrative Agent for the Lenders, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Lead Arranger. Refer to Note 10 on page 11 of this Form 10-Q for a detailed discussion.

Critical Accounting Policies and Estimates

~~Our~~Inventories - Finished products and feedstock are recorded at the lower of cost, determined on the first-in, first-out method (FIFO); or market for SHR. For TC, inventory is recorded at the lower of cost or market as follows: (1) raw material cost is calculated using the weighted-average cost method and (2) product inventory cost is calculated using the specific cost method.

Other critical accounting policies are more fully described in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period reported. By their nature, these estimates, assumptions and judgments are subject to an inherent degree of uncertainty. We base our estimates, assumptions and judgments on historical experience, market trends and other factors that are believed to be reasonable under the circumstances. Estimates, assumptions and judgments are reviewed on an ongoing basis and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies have been discussed with the Audit Committee of the Board of Directors. We believe there have been no material

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changes to our critical accounting policies and estimates compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016, except for the change in inventory valuation method from LIFO to FIFO as described in Note 5.

Recent and New Accounting Standards

See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Derivative Instrument Risk

Refer to Note 12 on ~~pages 12 through~~page 13 of this Form 10-Q.

Interest Rate Risk

Refer to Note 12 on ~~pages 12 through~~page 13 of this Form 10-Q.

~~Except as noted above, there~~There have been no material changes in the ~~Company’s~~Company's exposure to market risk from the disclosure included in the ~~Company’s~~Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016.

ITEM 4. CONTROLS AND PROCEDURES.

~~The Company recently completed a review~~

(a)

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) and determined that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to the material weakness in internal control over financial reporting as described below.

Material Weakness in Internal Control over Financial Reporting

As described in Management's Report On Internal Control Over Financial Reporting in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2016, we determined that we did not maintain effective internal control over the accounting for ~~certain transactions at~~our investment in AMAK. Specifically, controls were not appropriately designed, adequately documented and operating effectively related to the accounting for: (1) our equity in earnings of AMAK; and (2) changes in our ownership percentage in AMAK as the result of the sale and asissuance of shares of AMAK to other investors. As a result of ~~issues identified in that review,~~this material weakness, we restated our Board of Directors, on the recommendation of the Audit Committee and in consultation with management and our independent registered public accounting firm, concluded that our previously issued unaudited financial statements for the ~~first six~~three months ended June 30, 2016, and ~~nine months of~~September 30, 2016, ~~should no longer be relied upon because of certain accounting errors~~respectively. This control deficiency did not result in ~~those financial statements. Accordingly, we have restated~~any material adjustments to our ~~previously issued~~consolidated financial statements for those periods. See “Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—AMAK Review and Restatement” and Note 3 of Notes to Consolidated Financial Statements included in “Part I, Item 1 — Financial Statements.”the year ended December 31, 2016.

~~As a result of management’s review of the AMAK accounting issues,~~Although we have ~~identified deficiencies~~made progress in ~~our disclosure~~the remediation of this issue, as indicated below, sufficient time needs to pass before we can conclude that newly implemented controls are operating effectively and ~~procedures and our internal control over financial reporting, which are discussed more fully below. Those deficiencies failed to prevent or detect accounting errors, which led to~~that the ~~restatement described above. The deficiencies, collectively, represent a~~material weakness has been adequately remediated. Notwithstanding the material weakness in our internal control over financial reporting, we have concluded that the interim condensed consolidated financial statements and ~~require corrective~~other financial information included in this Quarterly Report on Form 10-Q, fairly present in all material respects our financial condition, results of operations and ~~remedial actions.~~cash flows as of, and for, the periods presented.

~~Evaluation~~Remediation of ~~Disclosure Controls and Procedures~~Material Weakness in Internal Control over Financial Reporting

During second quarter 2017 we developed and implemented a comprehensive remediation plan. We ~~maintain disclosure controls~~believe the enhanced procedures will remediate the material weakness we have identified and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, consisting of controls and other procedures designed to give reasonable assurance that information we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. At the time that the original filing was filed on November 4, 2016, our management, including our Chief Executive Officer and Chief Financial Officer, concluded thatgenerally strengthen our internal control over financial ~~reporting~~reporting. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and ~~disclosure~~management has concluded, through testing, that these controls are operating effectively. Since, we have not completed the testing and ~~procedures were effective~~evaluation of the operating effectiveness of controls, the previously disclosed material weaknesses remain unremediated as of September 30, ~~2016.~~

~~Subsequent to that evaluation, our management, including our Chief Executive Officer~~2017. Once we complete testing and our ~~Chief Financial Officer, concluded~~evaluation of the effectiveness of the controls by the end of the year, we expect to conclude that ~~our disclosure controls and procedures were not effective as of September 30, 2016, as a result of an identified~~the material ~~weakness in our internal control as discussed below.~~weaknesses have been remediated.

The following control deficiency that constituted a material weakness in our internal control over financial reporting in connection with the preparation of our financial statements as of June 30, 2016 and as of September 30, 2016, was identified:

We did not apply the appropriate level of review and oversight to the accounting and disclosure for significant, infrequently occurring transactions such as unusual gains and additional equity issuances by AMAK, our equity investment.

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~~Remediation Plan~~

In light of this material weakness, in preparing our financial statements as of and for the period ended September 30, 2016, we performed additional analyses and procedures to ensure that our consolidated financial statements included in this Form 10-Q/A have been prepared in accordance with U. S. GAAP.

~~Our management is developing a remediation plan to address the identified material weakness and to enhance our overall control environment. W~~e are strengthening our controls and procedures in relation to the accounting for our investment in AMAK to ensure a more thorough review of AMAK’s activities is conducted when accounting for our investment in AMAK. Additional controls are being implemented to mitigate associated risks and to support the completeness and accuracy of our financial reporting.

~~Our executive management team, together with our Board of Directors, is committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity.~~

There were no significant changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting except as noted above with respect to the identified material weakness regarding oversight of significant, infrequently occurring transactions.

(b)

Changes in internal control. Other than the efforts discussed immediately above in "Remediation of Material Weakness in Internal Control over Financial Reporting", there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

~~None other than~~The Company is periodically named in legal actions arising from normal business activities. The Company evaluates the ~~pending claims~~merits of these actions and, ~~lawsuits as discussed~~if it determines that an unfavorable outcome is probable and can be reasonably estimated, the Company will establish the necessary reserves. We are not currently involved in ~~Note 19~~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 ~~consolidated financial statements.~~future.

ITEM 1A. RISK FACTORS.

~~AMAK’s inability to provide timely financial information~~

In the event that AMAK is unable to provide timely, accurate financial information to us, our ability to file reports with the Securities and Exchange Commission within required deadlines could be affected and our standing on the New York Stock Exchange and in the investment community could suffer.

~~Other than the addition of the above, there~~There have been no material changes from the risk factors previously disclosed in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

ITEM 6. EXHIBITS.

The following documents are filed or incorporated by reference as exhibits to this Report. Exhibits marked with an asterisk (*) are ~~management contracts or~~filed herewith and exhibits marked with a ~~compensatory plan, contract or arrangement.~~double asterisk (**) are furnished herewith.

Exhibit Number	Description
~~3(a)~~10(a)	-~~Certificate of Incorporation of the Company as amended through the Certificate of~~Third Amendment ~~filed with the Delaware Secretary of State on May 22, 2014 (incorporated by reference~~ to ~~Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (file No. 001-33926))~~
~~3(b)~~	-Restated Bylaws of the Company dated August 1, 2014 (incorporated by reference to Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (file No. 001-33926))
10(a)*	-Retirement Awards Program dated January 15, 2008 between Arabian American Development Company and Hatem El Khalidi (incorporated by reference to Exhibit 10(h) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (file No. 001-33926))

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~~Exhibit~~ ~~Number~~	~~Description~~
10(b)*	-~~Arabian American Development Company Stock and Incentive Plan adopted April 3, 2012 (incorporated by reference to Exhibit A to the Company’s Form DEF 14A filed April 25, 2012 (file No. 001-33926))~~
~~10(c)~~	-Articles of Association of Al Masane Al Kobra Mining Company, dated July 10, 2006 (incorporated by reference to Exhibit 10(m) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (file No. 001-33926))
~~10(d)~~	-~~Bylaws of Al Masane Al Kobra Mining Company (incorporated by reference to Exhibit 10(n) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (file No. 001-33926))~~
~~10(e)~~	-Letter Agreement dated August 5, 2009, between Arabian American Development Company and the other Al Masane Al Kobra Company shareholders named therein (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 27, 2009 (file No. 001-33926))
~~10(f)~~	-Limited Guarantee dated October 24, 2010, between Arabian American Development Company and the Saudi Industrial Development Fund (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 27, 2010 (file No. 001-33926))
~~10(g)~~	-Amended and Restated Credit Agreement dated ~~October 1, 2014, between~~as of July 25, 2017, among Texas Oil & Chemical Co. II, Inc. and certain subsidiaries and Bank of America, N.A. as administrative agent (incorporated by reference to Exhibit ~~10.2~~99.2 to the ~~Company’s~~Company's Form 8-K filed on ~~October 3, 2014~~July 27, 2017 (file No. 001-33926))
~~10(h)~~ 10(b)*	-~~Stock Purchase Agreement dated September 19, 2014, between~~Form of Trecora Resources ~~Texas Oil & Chemical Co. II, Inc., SSI Chusei, Inc.~~Stock and ~~Schumann/Steier Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on September 25, 2014 (file No. 001-33926))~~ Incentive Plan Restricted Stock Unit Agreement
~~31.1~~ 10(c)*	Form of Trecora Resources Stock and Incentive Plan Amended and Restated Restricted Stock Unit Agreement
-31.1**	Certification of Chief Executive Officer pursuant to Rule 13A-14(A) of the Securities Exchange Act of 1934
31.2**	-Certification of Chief Financial Officer pursuant to Rule 13A-14(A) of the Securities Exchange Act of 1934
32.1**	-Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	-Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~101.INS~~101.INS*	-XBRL Instance Document
~~101.SCH~~101.SCH*	-XBRL Taxonomy Schema Document
~~101.CAL~~101.CAL*	-XBRL Taxonomy Calculation Linkbase Document
~~101.LAB~~101.LAB*	-XBRL Taxonomy Label Linkbase Document
~~101.PRE~~101.PRE*	-XBRL Taxonomy Extension Presentation Linkbase Document
~~101.DEF~~101.DEF*	-XBRL Taxonomy Extension Definition Linkbase Document

Table of Contents

3432

SIGNATURES

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

DATE: ~~March 9,~~November 8, 2017 TRECORA RESOURCES

(Registrant)

By: /s/Sami Ahmad

Sami Ahmad

Chief Financial Officer

Table of Contents

	September 30, 2016
	(unaudited)
	As Reported		As Restated
	(thousands of dollars)
Consolidated Balance Sheets
Investment in AMAK	$	52,776	$	53,127
Total Assets		283,155		283,506
Deferred Income Taxes		22,817		22,941
Total Liabilities		118,829		118,953
Retained Earnings		109,066		109,293
Total Trecora Resources Stockholders’ Equity		164,037		164,264
Total Equity		164,326		164,553
Total Liabilities and Equity		283,155		283,506

Cash paid	$	2,011
Estimated earnout liability		733
Purchase Price			$	2,744

Fixed assets at FMV
Land		980
Site improvements		30
Buildings		1,350
Production equipment		11,933
				14,293

Bargain purchase gain			$	11,549

	Three Months Ended September 30, 2016 (restated)						Three Months Ended September 30, 2015
					Per Share						Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic Net Income per Share:
Net Income Attributable to Trecora Resources	$	2,799		24,223	$	0.12	$	5,318		24,369	$	0.22

Unvested restricted stock grant				304						148
Dilutive stock options outstanding				394						711

Diluted Net Income per Share:
Net Income Attributable to Trecora Resources	$	2,799		24,921	$	0.11	$	5,318		25,228	$	0.21

	Three Months Ended September 30, 2015
	Petrochemical		Specialty Wax		Corporate			Consolidated
	(in thousands)
Product sales	$	59,122	$	4,068	$	-		$	63,190
Processing fees		1,364		2,384		-			3,748
Net revenues		60,486		6,452		-			66,938
Operating profit (loss) before depreciation and amortization		13,636		1,393		(1,654	)		13,375
Operating profit (loss)		12,557		178		(1,672	)		11,063
Depreciation and amortization		1,079		1,215		18			2,312
Capital expenditures		4,857		1,766					6,623

	Nine Months Ended September 30, 2015
	Petrochemical		Specialty Wax		Corporate			Consolidated
	(in thousands)
Product sales	$	158,647	$	11,749	$	-		$	170,396
Processing fees		4,409		6,626		-			11,035
Net revenues		163,056		18,375		-			181,431
Operating profit (loss) before depreciation and amortization		38,197		3,897		(5,145	)		36,949
Operating profit (loss)		35,075		375		(5,163	)		30,287
Depreciation and amortization		3,122		3,522		18			6,662
Capital expenditures		17,876		5,664					23,540

	September 30, 2016 (restated)
	Petrochemical		Specialty Wax		Corporate		Eliminations			Consolidated
	(in thousands)
Goodwill and intangible assets, net	$	-	$	44,932	$	-	$	-		$	44,932
Total assets		209,319		104,924		100,615		(131,352	)		283,506

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	19,977	$	3,357	$	5,917	$	5,160	$	5,543
Long-Term Debt Obligations		79,000		8,333		16,667		54,000		-
Total	$	98,977	$	11,690	$	22,584	$	59,160	$	5,543